Here we are discussing about Why are crypto exchange platforms regarded as being profitable?. So without wasting time let’s see.
By now, it’s glaring that any crypto-related business will surely boom! The reason behind this is quite straightforward! Cryptocurrency is the future of money, and several business owners and entrepreneurs are beginning to seize this opportunity to build their business empires and widen their networks.
One of the most profitable crypto-related businesses is owning an exchange platform. Although there are several factors to be considered as well as options to put in place before one can own an exchange platform, it still doesn’t change the fact that it’s quite profitable.
According to the survey carried out by Boomerang, the top ten crypto exchange platforms in the world record at least $3 million daily. This is to tell how profiting this business can get. If you have been wondering how these platforms generate their profits, you have come to the right place, be sure to read to the very end. It’s interesting how one exchange platform could be worth more than a billion-dollar when valued.
Also Read – Simple Definition of Bitcoin | How it Works?
How do crypto-exchange platforms make profits?
Peradventure, you are new to the world of crypto, and you are wondering how these exchange platforms make their money/generate revenue; here are some of the means they adopt.
- Withdrawal fee:
There’s always a commission you pay to the exchange platform on every successfully processed withdrawal transaction. However, you should note that withdrawal fees are not the same on every exchange platform; they vary. Also, you should note that the price of the crypto you want to withdraw does not influence the withdrawal fee.
For example, ethereum price will not increase the withdrawal fee of ethereum; there are no correlations. On most platforms, you either pay a stipulated amount as the withdrawal fee or are allowed to pay a known percentage from the crypto you are withdrawing.
- Trading commission:
This is, however, the most common avenue of generating profits for exchange platforms. Trade commissions are brokers’ fees or service charges paid to the exchange platform for acting as the intermediary between the buyer and the seller. So, it’s safe to say exchange platforms in this sense are escrows. For most cryptocurrency platforms with peer-to-peer transactions enabled, this feature is the real deal for revenue generation.
For example, for a $1 million trade volume, a commission of about $1,000 is incurred since the standard commission on the exchange platform is about 0.1%. Hence, exchange platforms recording billions of dollars trading volume per day are likely to record millions of profits as commission asides from other commissions earned on deposits and withdrawals.
Commission on crypto listing:
Most of these exchange platforms charge crypto owners before listing their projects. So, if you have a crypto project you are working on or would like to make public, putting it up on an exchange platform means you’d be paying a listing fee. The exchange platform will serve as an avenue to advertise your project and also help increase its chances of being adopted.
An exchange platform may charge a particular percentage raised by the ICO (Initial Coin Offering), STO (Security Token Offering, or the IEO (Initial Exchange Offering). However, the amount might depend on the project fundamentals and usually is about hundreds of thousands of USD.
- Deposit fee:
Similar to withdrawal fees, many exchange platforms charge transaction fees. Be sure to note that both withdrawal and deposit fees are transaction fees. So, deposits fees are incurred when you transfer your token to another participant/wallet. When making deposits, you are most likely buying the crypto from that exchange platform, and it’s regarded as purchasing.
So, since you are buying from the exchange platform, you’d have to pay the deposit fee. If you are trading on margin, you might need to pay additional charges.
Are crypto exchange platforms making huge profits?
The simplest answer is yes! They are making handsome profits, and as explained earlier, certain factors need to be put in place before you can operate a crypto exchange platform. Some of them range from credibility to being 100% trustworthy. Most crypto traders will not trade on your platform if they do not find it credible.
So, before thinking about the profits, think of the processes involved. The Ethereum blockchain, for example, is one of the few networks that generate revenues for exchange platforms. Ethereum’s price, however, is currently pocket-friendly, but its transaction fee is not so encouraging.
Nonetheless, millions of transactions are still processed on the network. So, as long as transactions read “successful,” exchange platforms will continue to generate revenues, irrespective of the blockchain.