In late December, cryptocurrency exchanges may expect no less than $4 billion in yearly revenues. The figure may be double that of 2017, according to a report by Sanford C. Bernstein & Co. The study also indicated that information about the decline in interest in cryptocurrency trading was greatly exaggerated. DeCenter spoke with experts from digital asset exchanges and identified the major development trends for the near future. What awaits traders in 2019?
Trends of 2018 on Crypto Exchanges
A report titled “Crypto Trading—The Next Big Thing Is Here?” contains the crypto exchange income forecast for the remainder of the year. Along with the probability of exchange revenue rising to $4 billion—the estimate based only on transaction fees—compared with $1.8 billion for 2017, the analysts expect new institutional investors to enter the market, those who had previously bypassed the cryptocurrency industry.
Cryptocurrency platforms earned about $2 billion in transaction fees. This amount is 8% of the earnings of traditional exchanges. Bloomberg journalists conclude that in the context of the segments, only the global cash equities business outperformed trading in crypto.
“Coinbase Inc.—a U.S. exchange backed by traditional banks, exchanges, and venture capital—may end up with an ‘unassailable competitive position’ unless Wall Street becomes more engaged,” say the analysts at Sanford C. Bernstein & Co.
The development of cryptocurrency exchanges and the demand for assets is growing, as users are becoming much smarter and more rational in their actions with their assets. This was stated by the representative of the Deex decentralized crypto exchange Peter Grubber.
“The passive attitude of users to cryptocurrencies is changing. People are beginning to think, choose their position on trade, and participate in the process of buying and selling. We collected data and found that at least 80% of people who are passionate about trading are not limited to one platform,” says Grubber and adds that trading tactics have become very popular.
“In addition to traders becoming more engaged and skilled, cryptocurrency exchanges themselves also demonstrate more professionalism. The platforms have begun to take a more serious approach toward security and pay attention to their interface and design. The problems regarding the execution of transactions have not yet been resolved, though,” says Xena Exchange Operations Director Konstantin Plavnik.
“The crypto market is very young, and it is still developing. Exchanges have become much better, but most of the sites are still too simple, have limited functionality, and do not allow traders to realize all the ideas that they have. Unfortunately, almost 50% of the total daily volume of crypto trading accounts for one contract. Now the offer is severely limited, ”says Plavnik.
Development of Decentralized Exchanges
The choice of a trading platform for the user is still one of the most fundamental issues. Today, two types of exchanges are actively functioning, centralized (CEX) and decentralized (DEX). In the near future, hybrid platforms (HEX) should appear. The highest number of questions, however, is related to the development of decentralized exchanges.
Representatives and supporters of DEX are confident that the future lies precisely with these exchanges. Peter Grubber of Deex says that decentralized platforms are a whole direction that will be actively developed. After all, it is DEX platforms that eliminate the shortcomings that are present on the centralized exchanges, such as the presence of third parties, security issues, and the speed of currency conversion.
“Perhaps the only disadvantage of DEX is that they are difficult to develop. Decentralized platforms store user data much more reliably. These exchanges are more convenient for people,” adds Grubber.
There is an opinion that different exchanges are fighting for clients. Konstantin Plavnik from the centralized Xena Exchange believes that the platforms do not compete for traders since the centralized and decentralized exchanges have different functionalities, which means different users.
“DEX and CEX are not competitors. And I think that it makes no sense to decentralize the exchange. It makes sense to decentralize the storage of client funds. In classical economics, the assets of customers and the savings of a company are stored separately, and this is normal. DEX are rather not even exchanges but decentralized, high-loaded services for exchange. They will definitely develop and get their audience. Moreover, this audience will not overlap with the audience of other platforms,” as Plavnik comments and adds that all types of exchanges will develop at an accelerated pace and attract their users.
The Eternal Problem of Lost Passwords
A constant trend, despite the increasing proficiency of traders, is the loss of confidential data. The exchanges receive daily messages that a regular user has forgotten the password from the cryptocurrency wallet or the crypto platform itself. The representative of the EXMO centralized exchange Maria Stankevich said that the problem of freezing or loss of assets remains open not only because of hacker attacks but also because of human inattention.
“All the problems with the theft of funds are often associated with the actions of the users themselves. Despite the large number of mailings, messages, and warnings about the need for two-factor authentication, people neglect security. Clients use the same password for the e-mail address and the account on the exchange. According to our statistics, only 15% of users have enabled 2FA. People trade in big money but still do not protect their funds. In most cases, the same password that was recorded, for example, on the phone, is lost, and the user loses access to the exchange,” says Stankevich.
Peter Grubber from Deex agrees with this opinion. Engaged in trading and earnings, exchange customers do not pay attention to the recommendations of the representatives.
“Users still lose passwords and do not understand that their security is critical. Despite the educational process that we are conducting for our clients, data still gets lost. Unfortunately, no one is immune from this. If people want to safeguard their holdings, they will, and vice versa,” says Grubber.
Prospects for 2019
All the interviewed representatives have confirmed the trend of increased interest for crypto trading on the part of traders. Major players have begun to enter the market, ones who are pushing the industry forward with their investments. In addition to the whales, knowledgeable users have appeared in the industry, those who are regularly studying the trading of digital assets and their specifics, which differ from fiat investments.
People have begun to get involved in the process, look for new ways of transactions, analyze more, and compare indicators. Such a move toward smart trades will give impetus not only to the development of a particular exchange but also to the industry as a whole, as the experts are sure.