As the ICO market begins to wind down due to a combination of increased regulatory pressure and collapsing profitability, “blockchain entrepreneurs” are now reportedly focused on launching their own cryptocurrency exchanges.
According to a recent (and rare) report by CoinMarketCap, the world’s most popular site for crypto prices, the number of new exchange listing requests has outstripped the requests for new cryptocurrency listings.
While this sudden surge is likely driven by individuals and groups looking to enjoy similar successes (and profits) of many incumbent exchanges like Binance and Coinbase, the reality is that running such an enterprise is far more difficult than many are seemingly led to believe.
Have you ever wondered what data CoinMarketCap looks at behind the scenes? In our 2018 Edition of “According to CoinMarketCap”, we share some never-before-seen data, and our views about the market in the long run. Read it here: https://t.co/LyfHGek7ni pic.twitter.com/dgAk1s5aMQ
— CoinMarketCap (@CoinMarketCap) November 29, 2018
“With ICOs being ever harder to raise, many have turned to starting exchanges as a way to experiment and build profitability instead. While this might be a good plan for the most part, exchange economics are very tough; judging from the number of listing requests alone, just sheer competitive pressures will make it difficult to operate an exchange on a break-even basis,” states CoinMarketCap in the report.
While exact numbers are not provided by CoinMarketCap, they do give a chart showing the relative ratio of requests, indicating that new exchange requests are roughly 30-40% higher than requests for new coin listings. The data does reveal that the site has listed 764 digital assets this year, suggesting the site may have north of 1,000 new exchange requests this year alone.
This, of course, marks yet another unhealthy trend in the industry as regulations surrounding these exchanges are currently missing but will undoubtedly be more stringent than future regulations for cryptocurrencies. Additionally, the hundreds of new entrants will overwhelmingly fail while robbing capital and development hours from the top exchanges.
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.