Cryptocurrency trading platforms are one of the most important elements of the cryptocurrency industry, due to the smooth flow of cryptocurrency exchanges.
In a report published today by the "Cryptowisser" platform specialized in tracking cryptocurrency data, it stated that the digital currency trading platforms that collapsed in the year 2020 amounted to 75 trading platforms, and the collapse here differs from one platform to the other. Did not achieve a trading volume that would allow it to continue ...
The report gives an overview of the volatile and competing cryptocurrency exchange industry.
There was a 56% increase in the number of cryptocurrency exchange platforms collapsing, compared to last year with no signs of stopping there.
As the cryptocurrency industry continues to show impressive growth, the cryptocurrency industry faces saturation and growing legal regulations that are trying to legalize it.
According to the report, cryptocurrency trading platforms are collapsing due to voluntary shutdown, piracy or fraud and their shutdowns by regulators.
Competition is one of the most important reasons present in the collapse of trading platforms and their inability to continue:
Cryptowisser explains that there are basically three competitors responsible for the collapse of the central cryptocurrency trading platforms, and they are:
Decentralized trading platforms, crypto derivatives trading platforms and traditional trading platforms.
Decentralized Trading Platforms Push Central Trading Platforms From Competition:
Decentralized trading platforms usually have servers spread all over the world, which makes them less vulnerable to hacker attacks, and usually offer lower fees (sometimes no fees at all).
Decentralized trading platforms have the ability to handle larger trading volumes and are often more attractive than centralized trading platforms.
Cryptocurrency derivative trading platforms are growing and increasing competition:
Another group of trading platforms that have witnessed impressive growth are the cryptocurrency derivatives trading platforms.
A derivative is an instrument that is priced based on the value of another asset (usually stocks, bonds, commodities, etc.).
It is clear that derivative trading platforms are getting stronger in the crypto market, and this is likely to be at the expense of some central trading platforms.
Unencrypted alternatives platforms are becoming more and more available:
As cryptocurrencies become more user-friendly and less exclusive, non-cryptocurrency exchange platforms are also growing.
Although there is currently no conclusive data showing how many users centralized trading platforms check out for these non-crypto alternatives, it is reasonable to think that they are - at least to some degree - a contributing factor to the mass death of centralized trading platforms.
Legal regulations and their role in making the task of trading platforms more difficult:
As the industry grows, the need to regulate it increases more.
A Dutch platform called “NLexch” was closed a few weeks ago (September 1, 2020) and an explanation for its shutdown is given as follows:
The Central Bank of the Netherlands required that every company operating in the field of digital currencies must register with the central bank.
Registration is mandatory, and companies that fail to comply will be forced to close their operations in the country.
The fees charged for the whole process are quite high.
Therefore, the cost of providing the required level of safety, support and technology is not economically viable.
In addition to the aforementioned reasons and their contribution to increasing competition on central trading platforms, the old and already existing trading platforms that expand their activity contribute in turn to the intensity of competition, especially for new platforms.
In conclusion:
In order for a central digital currency trading platform to flourish, it must provide an addition that is not present in the already existing platforms and provides features and advantages at competitive prices, and pay great attention to the security aspect, which is one of the most important pillars in the cryptocurrency trading platforms.
Great article