How profitable it is to run a cryptoexchange and some thoughts on charts
Have you ever wondered how profitable it is to run a cryptoexchange? I'm sure that we cannot get exact numbers out from cryptoexchanges, but here's one measure to gauge it.
On January 26, we got reports from Coincheck, a major Japanese exchange, that about 500 million USD worth of XEM tokens were stolen in a massive hack. The hack, according to Coincheck themselves, affected approximately 260,000 users.
Props to Coincheck, who has been all over this case and push out updates via their blog
But now, the question - how profitable it is to run a cryptoexchange? Well, apparently quite a bit - as by an announcment on Sunday by Coincheck, they will be covering for 425 million USD worth of damages to their users. Usually, when a hack this size happens, the money will never be seen, the exchange would close doors and Earth would keep rotating as it would be forgotten fast. But this time, Coincheck makes a good respectable move and refunds users out of their own pocket. Considering the usual outcome, getting paid back almost all the lost amount will take that frown off many faces. And this move will make one think, how much more money has Coincheck socked away?
Via coincheck.com
FSA, the Japanese Financial Services Agency said they will be looking for ways to punish and fine Coincheck nevertheless, as they feel Coincheck hadn't complied with all regulations and didnt contribute enough to the security of their services. Apparently, Coincheck used "hot wallets", instead of more secure "cold wallets", citing shortage of staff and technical issues.
Sources:
Major cryptos seem to be makign a stand. Many of them are mimicking their recent patterns.
BITCOIN. Bitcoin is a replica of its previous consolidation swing. Considering that this pattern plays out, we will be hitting 14000 soon and there it's decision time.
ETHEREUM. Eth is somehting else. While it also keeps mimicking a recent pattern, this one is a continuation pattern. Ethereum network boost better speeds and lower tx fees than BTC, but it has seen it's fair share of the troubles too. Last month, CryptoKitties gave the price of Ether a massive boost, but it also congested the network. Now we have more innovative games and applications coming out on the Ethereum network, which will hopefully keep the price supported.
LITECOIN. Litecoin rocks a similar bullish pattern, a simple consolidation channel / bullflag. While the flag is far from being perfect and the consolidation pattern is just a downtrend on smaller timeframes, Litecoin seems to have gotten hold of itself and faces its challenges already quite soon
Whether this will be another fizzled out attempt or will we have a markets-wide breakout, is to be seen. Maybe we need a proper old-fashioned flush first ;) But the first month of the year is almost over, now it's time to make some money by getting the price moving.
Cheers everyone!
Oh, @furious-one, you're so cool, how can i show my appreciation to you? Well, if you insist - send some PEPITO tokens to BTS: furious-one on the Bitshares DEX ;)
https://wallet.bitshares.org/#/market/PEPITO_BTS
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Without a doubt, cryptoexchanges are wildly profitable. Bitcoin is seeing 200K plus transactions a day. If you assume Coinbase has a very conservative 10% of the market, you get 20k x 7 = $140,000 in just BTC fees (not including the cut they take in the trading price or the other transactions). To your point though, the lack of regulation is most worrying in that there's no official backing or support for our deposits. Hopefully, some will start to insure their exchanges with their profits.
What's even more infuriating - there's no regualtion to back our investments, yet every tax agency on earth wants our crypto earnings
When the government realizes they can make money from people's crypto gains without them providing ANYTHING to secure our investments in crypto....
Government are just too greedy most of the time.
Great post. @liotap posted earlier re Coincheck. Thank you for bringing this to a much greater audience!
https://steemit.com/finance/@liotap/accountability-japan-leading-the-way-thank-you
@furious-one, two things initially come to mind... first, you'll never see wall street or any government do such which sets a whole new standard; and second, for Coincheck to adsorb such a loss speaks to the support in Japan for crypto. Which gets to your key point -- how profitable is it to run a cryptoexchange!
Good on Coincheck for paying their customers back.
Binance for example processes at least 2 billion dollars worth of trades a day according to coinmarketcap.
If you take $2B USD and charge people even 0.01% for trades, that's 20 million dollars a day in revenue!
@furious-one, IMO top exchanges make more than whales.
20 million dollars a day is just a stupidly high number.
Followed!
House always wins haha, I think there were an article of Coinbase making over 2-million a day while ago?
Yeah i read about it few days ago and i was wondering that we were thinking our bitcoin is safe but for the kind of great hack and fraud,no one is safe anymore because strengthen ones storage for bitcoin ain't a yardstick to safety. But though a new safety measure i read on a post that a new offline storage for bitcoin is out called,COLD STORAGE which is,trading of bitcoin takes place online.which yes i think its safer but I asked a question that'if trading goes offline,meaning you have to have a cold storage to be in a transaction because you definitely cant trade with a storage like blockchain or paxful thats online and if alot ain't in patronage of this new app,it wont be subscribe to..thanks @furious-one for making this enlightened post and sure we are still hoping on the balance market on the various crypto currencies especially bitcoin and steem.
Volume = money
Fee's on every trade, the exchanges have it pretty good.
You do bring up a REALLY good point about security though.
Exchanges are big targets and need to be secure, otherwise they will have no customers, and no funds!
While everyone is freaking out with FUD and FOMO, real traders are quietly pulling in a lot of money. Curious to see what the next couple months brings, now that mass media has had it's initial freak-out session... Thanks for posting this info! :)
When you compare it to the casino, they are the house and the house always win. with the volume of trades they are getting everyday and the wide spreads on cryptocurrencies they surely make a lot of money. That 425 million dollars they can surely recover within a month...
Definitely. I hear big banks have even funds specifically for that, when they mess up.
Wow. Talk about huge profits!
If only I have lots of money I would run a cryptoexchange because I'm pretty sure the profit is great.