Total Market Upside
Crypto exchanges are emerging as some of the biggest gainers of the cryptocurrency boom as the top 10 exchanges are generating as much $3 million in fees a day, or heading for more than $1 billion per year.
“The exchanges and transaction processors are the biggest winners in the space because they’re allowing people to transact and participate in this burgeoning sector,” said Gil Luria, an equity analyst at D.A. Davidson & Co, who reviewed the methodology for the revenue estimates. “There’s a big business there and it would not surprise me if they’re making hundreds of millions of dollars in revenue and possibly even billions a year.”
One of the best ways to get involved in the crypto market is by owning an exchange, which has the highest touchpoint to all new users and multiple streams of revenue. It is also a great way to bet on the crypto market as a whole while being insulated from market volatility. As long as there is volume and users on your exchange, you will be able to generate money daily from multiple sources.
But don’t spend time trying to tinker with the intricacy of starting your own exchange, Shift Markets solves that problem for you.
Commission per trade
Charging a commission per trade is one of the most common ways that exchanges make money. The fees may seem small on a per transaction basis, but they really add up especially when the volume is high. For example, Binance and OKEx are handling the largest volume of trading totaling about $1.7 billion daily. Binance charges a fee of 0.2% and OKEx charges a fee of 0.07%. Other exchanges such as Bitfinex, Huobi, and Bithumb process between $600 million and $1.4 billion of trading volume daily and charge fees around 0.3%.
Depending on the volume that your exchange handles, you have the choice to create your own fee structure per trade or even implement your own Loyalty Token.
Driving value towards your exchange — keep people in your infrastructure and fundraise.
In a typical trade, transaction fees are deducted from the product you are receiving in a transaction. With our latest release, we have introduced the concept of a Loyalty Token. This new feature allows exchange operators to offer a parallel fee structure to its customers. This token model is similar to Binance Coin (BNB), where the use of BNB is to pay for transaction fees enabling users to get a 50% discount compared with the prevailing rate for other cryptos.
Administrators of the exchange now have the ability to assign a specific coin, as your designated Loyalty Token. This allows exchanges to promote that coin by offering discounted transaction fees to customers who use this structure.
By owning a Loyalty Token, you can keep your users in your infrastructure and platform by incentivizing them with benefits if they use your token. Integrating your own loyalty token or even creating your own crypto token is service that Shift can provide.
You can dictate the prices on your exchange and take advantageous positions.
For cryptocurrencies, liquidity is an essential metric as to how quickly a particular cryptocurrency can be traded in a certain market without compromising the value. Traders typically do not want to invest in tokens with low volume given the chance that there will be no movement in prices, or conversely too much volatility. That’s when market makers come in and make it easier for traders by providing liquidity and stabilized spreads. As an exchange owner, you can dictate the prices on your exchange and potentially take positions that would be advantageous to you. You are also able to create markets for cryptocurrencies that you believe in, or that need the liquidity. This is why many ICOs are beginning to start their own exchanges.
Publicized listing fees; high-end exchanges charge millions for each listing, low-end exchanges charge around 50k.
The majority of crypto exchanges charge a listing fee for ICOs and tokens. The listing fee varies per exchange, however, it is normally correlated with the size and popularity of the exchange.
Smaller exchanges typically have listing fees from 1 to 5 BTC.
Medium sized exchanges can range from 10 to 50 BTC per listing.
Top tier exchanges with the largest trading volumes will charge between $1 million to $2.5 million for a listing.
As an operator of your own crypto exchange, you can determine the listing fees for tokens that want to access more liquidity through your exchange. As the size and number of users on your exchange grows, your ability to increase listing fees will increase as well.
At the end of the day, there are many ways that you can make money by owning your own crypto exchange and bet on the crypto market as a whole while being insulated from market volatility. If you’d like to learn more about how to start your own crypto exchange, schedule a time to speak with one of our professionals and demo our turnkey white-label crypto exchange solution.