CRYPTOCURRENCY EXCHANGE PROFITABILITY
The whole crypto revolution started with a desire for decentralization, however crypto profits are relatively centralized in the hands of a few big companies, mainly crypto exchanges.
Unlike institutional or retail investors, cryptocurrency exchanges managed to stay afloat and even profit during the decline of the crypto market. This is because they stimulate the activity of traders and charge money for their services.
The main source of income for cryptocurrency exchanges comes from trading commissions on transactions made by exchange users. There is always a buyer and a seller, so the exchange will always collect trade fees from both of them. One exception is if that order is sent for external execution, then the exchange earns only one side of the transaction.
According to public data for the year 2021, Binance generated more than $1.8 billion of trading revenues from the beginning of that year. Binance’s 28.6 million users generated a peak 24-hour trading volume of $76 billion and its trading commissions varied from 0% to 0.50%. In 2017, they had 1.5 million users and it kept growing every year. In 2018 it was 13.3 million; 2019 it was 16.5 million; 2020 it was 21.5 million; and 2021 28.6 million.
Besides trading fees, users also have to pay withdrawal fees and that amount depends on many factors: the type of crypto being withdrawn, the amount, method and the chain used for transfer.
Coinbase, another large cryptocurrency exchange, for the first quarter of 2022 reported a revenue of $1.16 billion with trading volume of $309 billion. Besides transactions fees, Coinbase charge traders fees for ACH deposits, PayPal transactions, and even credit card deposits. They are consistently growing with annual revenues for 2019 of $0.53 billion; 2020 $1.27 billion; and 2021 $7.83 billion.
Kraken is the third biggest crypto exchange in the world and a largest exchange based on Euro trading volume. A huge part of their revenues comes from the transactions fee it takes from each trade. They had revenues of $1.36 B with a valuation of $10B and growth rate of 327%.
Crypto market is still in its infancy and above stated facts testify to enormous growth potential in this industry.