New research from Hacken System’s Crypto Exchange Ranks (CER) shows that traditional banks like JPMorgan and Bank of America dwarf the nascent cryptocurrency exchange industry.
Uptown Top Ranking
Cryptocurrency exchanges resemble the banks of the industry, functioning as intermediaries in between traders, financiers, projects and other stakeholders. But the metric used to compare exchanges (daily trade volumes) is open to abuse and control. New research from Hacken System’s Crypto Exchange Ranks (CER) suggests a more precise ranking technique.
In the widespread bull market of 2017, crypto exchanges appeared to have become substantial players in international finance. Billions of dollars of day-to-day traded volume sustained investors confidence that they had bought into something big. However centralized crypto exchanges display the polar reverse of the transparency that we hold so dear in Bitcoin.
These impenetrable black boxes of power, completely hide the way they run, store client assets, and make revenue. The preferred approach for ranking exchanges became the (frequently self-reported) daily trade volumes, which positions apparent issues.
Methods such as wash-trading permit exchanges to control this metric, allowing unverified brand-new exchanges to emerge at the top of the CoinMarketCap rankings. So how can we grade the exchanges’ real sustainability and liquidity?
All Aboard, The Blockchain
The solution, according to Hacken, remains in the blockchain itself. As an immutable ledger we can count on the information recorded.
Therefore, the only trustworthy data about the exchanges available now lives in their cold and hot wallet balances. This info may not be falsified and can be easily verified. Likewise, anyone can observe the wallets of a specific exchange and track all their changes and motions.
This also compares to customer deposits in standard banks, reflecting the level of liabilities for each. Regardless of the billions of dollars in reported trade volumes, exchanges fall far behind banks when considering this metric.
Don’t Believe The Hype
Hacken compared data from the 5 largest US and UK banks, 5 local banks in emerging countries, and the 5 largest crypto-exchanges (according to wallet balances).
The wallet balances of the exchanges are not even noticeable in the chart compared to the leading five US and UK banks. Even taking these banks out of the equation, and just considering the 5 local banks in emerging nations paints a sobering picture.
On average the crypto-trading platforms drag behind regional bank deposits by an element of 15. And their wallet balances hold over 1000 times less than the leading 5 global banks.
These figures may look depressing compared to the billion dollar volumes we have actually been fed in the past. However for cryptocurrencies to grow (and there is still a great deal of that needed to accomplish a genuinely worldwide scale), it is very important to have accurate data to count on.
Possibly now we can put the buzz behind us, and focus on the measured and sustainable development of the market.
What do you think about these findings? Share your thoughts below!
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