Crypto trading volume will increase 50% next year and grow at 9% compound annual growth rate (CAGR) through 2028, according to ICO advisory firm Satis Group. As a result, exchanges will continue to increase revenue — growing from $2.1 billion in 2017 to well over $3 billion in 2019. But authors say platforms will need to improve their infrastructure in order to pass regulatory hurdles.
“While there is largely a solid market for consumer trading and custody, these products do not always meet the needs of institutional investors, whose solutions must meet higher burdens relative to security and regulatory compliance,” wrote the authors of Sept. 18 report. Satis expects crypto trading volume to surpass corporate debt trading in 2019. It’s also to be on track to be nearly 10% of U.S. equity trading volume.
The firm has offices in New York and San Francisco. In a different report published earlier this month, Satis expects anti-regulatory, privacy coins to make massive price gains over the next 10 years as governments and central banks possibly enact tighter restrictions. These include Bitcoin, Monero (XMR), Zcash (ZEC) and Dash (DASH).
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As of early Wednesday, the cryptocurrency market capitalization stood at $212 billion with Ripple (XRP) making the biggest gain at 16% among top 50 coins. And 24-hour trading volume for the entire market stood at $14.5 billion with Bitcoin (BTC) dominance at 52.7%.
“Exchanges can be broken down by architecture into two main categories: decentralized exchanges (DEX) and centralized exchanges (CEX). Within each, trading support can be bucketed into: fiat exchanges (that accept fiat currency deposits, like USD, KRW, JPY, EUR) and crypto exchanges, which support crypto-to-crypto trading only. Most DEX’s do not allow fiat trading, consequently allowing CEX’s to hold majority of market trading volume share.”
The top three exchanges by 30-day trading volume are Bitmex ($92 billion), Binance ($32 billion) and OKEx ($27 billion). Bitcoins are paired with U.S. dollars (48%) followed by Japanese Yen (27%), Euro (9%) and Korean Won (7%).
The top 20 exchanges account for 75% of global trading. This year, crypto exchange fees could overtake fees for equities trading.
“Despite the prolonged bear market, investment in the ground level foundation continues unabated,” according to the report. “With evolving understanding of the fundamentals of the market, increased regulatory certainty in the US and abroad, and fiscal policies that continue to make alternative assets more attractive, the crypto market’s underlying infrastructure is continuing its expansion.”
Barbara Underwood, the Attorney General of New York, cautioned investors that trading on crypto exchanges has inherent risks. She wrote in Sept. 18 report that various businesses of trading platforms create potential conflicts of interest. Also, such platforms have yet to implement serious efforts to stop abusive trading activity. Finally, Underwood wrote that customer funds are at risk of being lost or stolen.
“Several do not claim to do any independent auditing of their virtual currency holdings at all. That makes it difficult or impossible to confirm whether platforms are responsibly holding their customers’ virtual assets as claimed. Customers are highly exposed in the event of a hack or unauthorized withdrawal.”