Low-quality crypto exchanges account for 64% of trading volume Low-quality crypto exchanges account for 64% of trading volume
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Low-quality crypto exchanges account for 64% of trading volume

Low-quality crypto exchanges account for 64% of trading volume

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

CryptoCompare’s latest report found that low-quality exchanges dominate the crypto market in terms of volume. Although reputable exchanges such as Binance and Coinbase saw a significant increase in market share this year, investors (or wash traders) still seem to prefer trading through riskier platforms.

Low-quality cryptocurrency exchanges still dominate the market

CryptoCompare‘s monthly review offers excellent insight into the current state of the cryptocurrency market. The data-driven analysis is an asset to those closely monitoring the crypto-sphere.

The company shared its July review with CryptoSlate, where it found that crypto traders preferred small and riskier exchanges over the high-volume, regulated ones. The report also found that some of the industry’s most trustworthy exchanges, ranked AA for their security and performance, saw their trading volume increase by 29 percent from June.

However, AA exchanges such as Coinbase and Poloniex represented only 5 percent, or $31 billion, of total aggregate volume traded on cryptocurrency exchanges in June. Meanwhile, lower quality exchanges—those with D-F ratings—represented 64 percent, or $316 billion, of total trading volume in June.

More frequent and more valuable trades on small exchanges

The report found that lower quality exchanges not only dominate the market in terms of trading volume, but they also have the largest average trade size. LBank, Coinsbit, and CoinBene had the largest average trade sizes relative to other exchanges. These exchanges had average trades of 3.7, 1.6, and 1.1 BTC, respectively.

The volume may stem from the competitive advantage of these exchanges; these more loosely regulated exchanges are better suited for laundering money or obfuscating the origins of illicit funds.

Trades on LBank, which is a D-rated exchange, were, on average, 15 times larger than trades on the AA-ranked Coinbase. The Hong Kong-based exchange also overtook both OKEx and Binance in crypto-to-crypto monthly volumes, trading over $45 billion in June alone.

Charles Hayter, the co-founder and CEO of CryptoCompare, said that the company’s latest review highlights the need for reliable data. With small, unchecked, and underdeveloped exchanges taking more than half of the market, having accurate data will help bring more regulation into the space.

The report also showed that increased regulatory scrutiny did very little to sway exchange volumes. Total monthly volumes on BitMEX were largely unaffected by the CFTC investigation, despite net outflows spiking to record-highs of $73 million.

More positive news for the market was the growth of Grayscale’s Bitcoin trust product in July. The data showed that GBTC had a 6 percent increase in month-on-month trading volume with reported volumes just under $2 billion last month.

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Posted In: Analysis, Exchanges