Business Benefits of Starting a Crypto Exchange
The global market for cryptocurrency is expected to jump from $1.6 trillion in 2024 to over $5 trillion by 2030 (Source: Statista). With millions of new investors entering the market each year, crypto exchanges have emerged as the primary mechanism for buying, selling, and trading digital assets.
Creating your own crypto exchange will allow you to capitalize on this exciting and growing ecosystem. As overall adoption continues to increase, from institutional investors, retail traders, and innovators, your exchange will have the opportunity to claim its own space in the constantly growing market.
In this blog, we will illustrate how starting a crypto exchange can be a game-changing business venture, what new revenue channels it can create, and the various business benefits that make such an endeavour worthwhile within the economy.
Revenue Streams of a Crypto Exchange:
Starting a cryptocurrency exchange is most compelling for the multiplicity of revenue channels. Here are some of the most common and lucrative revenue streams:
Trading Fees
The exchange receives a small percentage each time a user sells or buys a cryptocurrency, known as the transaction or trading fee. While trading fees can be as little as 0.1%–0.5%, with high volumes of trading, these fees can quickly generate millions of dollars in revenue.
2. Withdrawal and Deposit Fees
Exchanges will either charge a fixed fee or a percentage fee for deposits and withdrawals that typically relate to fiat currency. This helps exchanges maintain a steady stream of revenue outside of trading.
3. Token Listing Fees
New crypto projects typically pay exchanges significant money to list their token because listing a token on a well-known exchange adds visibility and trust to the project. These listing fees can range from tens of thousands to hundreds of thousands of dollars.
4. Margin Trading and Lending
Exchanges can give users the ability to margin trade and take out loans to trade at higher leverage. The exchange earns revenue from margin trading fees and interest on loaned funds.
5. Staking and yield services
Some exchanges allow users to stake in return for rewards in exchange for locking up their crypto. The platform allows users to earn extra income while keeping some of the staking rewards as commission.
6. Launchpad and IEO services
By providing Initial Exchange Offerings (IEOs) and token launchpads, exchanges can charge the project team for coordinating fundraising activities, supporting token sales, and promotion.
7. API and White-label Solutions
A lot of exchanges license their API or bring their white-labels exchange solutions to startup projects, creating additional revenue through subscription fees and providing technical support.
Business Benefits of Starting a Crypto Exchange:
Explosive Market Growth and Demand
The global cryptocurrency market is expected to rise from $1.6 trillion in 2024 to over $5 trillion by 2030 (Source: Statista). Millions of new investors enter the market each year, and crypto exchanges are quickly becoming the most common way to buy, sell, and trade digital assets.
By launching your own crypto exchange, you will be able to participate in this exciting and growing ecosystem. As adoption accelerates by institutional investors, retail traders, and innovators, your exchange will be able to chase its share of the growing market.
Benefits:
Access to a global and growing audience of crypto traders.Demand is driven by DeFi, NFTs, the metaverse, and blockchain applications.Ability to accommodate beginners and professional investors.
2. Global Business Opportunity
Unlike most local businesses, a crypto exchange will have a potential worldwide audience. Because all digital currencies are borderless, your exchange can operate a 24/7/365 model.
Benefits of global market reach:
Attract traders from multiple countries.Take advantage of time zones: For example, traders will trade all the time using the same source or location if there are favorable crypto exchange tax regulations in that country.Growth Opportunities in emerging crypto markets (i.e., Africa, Southeast Asia, Latin America).
3. High Liquidity & Network Effects
Liquidity, the ability to execute transactions easily, is crucial for any exchange. It creates a network effect when the platform grows and the user base multiplies in size, because experience improves and creates value for all users, more users mean a better experience and bring in more users.
Why does this matter?
Liquidity builds trust with traders.Liquidity affords faster execution and more price competitiveness.Liquidity can bring partnerships with other exchanges and/or institutional clients.
4. Competitive Edge with Niche Targeting
The crypto exchange industry is competitive, but there are ways to look at different niches that can provide you with a huge competitive advantage. For example, instead of trying to compete to be the next Binance, you could consider:
Specific regions (e.g., crypto exchange for Middle East markets).Specific types of assets (e.g., NFT marketplace + exchange).Low-fee or privacy exchange.
5. Brand Authority and Trust Building
Focusing on an audience, rather than being vague or generic, will help the business develop brand loyalty.
By operating a secure and transparent, and easy-to-use crypto exchange, you can position your brand as a trusted leader in the space. By adhering to compliance requirements, high-security standards, and a good customer service experience, traders will be attracted to your exchange for a very long time, often as a permanent solution for their trading needs. This is also likely to attract institutional clients as they want the same thing.
Benefits of strong brand authority:
Better retention.More referrals and organic growth.Ability to expand to other fintech or blockchain-related services.
6. Early Mover Advantage in Emerging Markets
A lot of countries are still in the early stages of global cryptocurrency adoption. When you build an exchange, if you are first to market before the competition, you will dominate the space.
For example:
India is growing rapidly for crypto adoption, to the tune of 1.4 billion people, despite continuing regulation changes.Strong markets in Africa (i.e., Nigeria, Kenya) have consistently remained leaders in peer-to-peer bitcoin trading volume.
7. Scalability and Future-Proofing
A crypto exchange business is very scalable. Once you build the platform, you can go out and add features and services at a very low marginal cost.
Future-proofing opportunities:
You can add DeFi products (lending, borrowing, yield farming).Add metaverse tokens and Web3 integrations.Expand to tokenize real-world assets.
8. Opportunities for Strategic Partnerships
Having an exchange opens many doors to work with the blockchain, wallets, payments, fintech, and other crypto projects. They all want to build with you, and it will increase the value, extend the reach, and broaden the features of your platform.
9. Long-Term Profit Potential
While crypto price fluctuations are volatile, the necessity for exchanges is a constant. Traders will always need a place to buy/sell/hedge their trade positions, whether the market is bullish or bearish. This business model is much more robust because an exchange is not challenged by speculation.
Conclusion:
Whether you want to build your cryptocurrency exchange from scratch or leverage a white label crypto exchange software solution, you can do so knowing both are viable and scalable ways to reliably onboard customers across the globe!
With their evolving technologies, security, and compliance required by regulators, you are now able to capitalize on this emerging market, create multiple revenue streams, and establish your company in the future of finance.
Business Benefits of Starting a Crypto Exchange was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.