As trading volume in crypto consolidates into the platforms of only a few trusted organizations, the top centralized cryptocurrency exchanges have achieved all-time highs for market share this year.
According to statistics collected by UK analytics firm CryptoCompare and published on Monday, April 11, “top-tier” crypto exchanges raised their market share from 89 percent in August 2021 to 96 percent in February 2022.
The firm graded over 150 active centralized exchanges on security, quantity of assets available, regulatory compliance, KYC checks, and other factors, assigning them a letter grade ranging from AA to F, with “top tier” obtaining a B or higher.
A total of 78 exchanges were given a “top tier” rating, with Coinbase, Gemini, Bitstamp, and Binance being the only four to get an AA.
According to the research, top-tier centralized exchanges exchanged $1.5 trillion in February 2022, while “lower-tier” exchanges transacted $62 billion. According to CryptoCompare, this indicator indicates that “both retail and professional traders are moving to reduced risk exchanges.”
Exchange consolidation has occurred as a result of both exchange closures and acquisitions from larger exchanges. Top crypto exchanges looking to expand internationally occasionally buy smaller, already licensed exchanges operating in the target country, as FTX did with the Japanese Liquid Group exchange on February 2nd, 2022.
Since June 2019, 54 exchanges have shuttered owing to being uncompetitive in the market, causing additional user consolidation to top-ranking exchanges, according to the business. Furthermore, 6 Chinese-based exchanges have closed as a result of China’s crypto crackdown, according to the analysts:
“As we have seen, volumes have started to become concentrated amongst the top tier exchanges,”
“and this is a trend which is bound to continue into the future. As the industry matures,”
“we expect there to be an oligopoly of exchanges dominating trading volumes as their”
“traction accelerates and smaller players are left behind.”
The paper outlined some of the issues that the cryptocurrency exchange business would face in the future, highlighting political pressure on exchanges to implement Russian sanctions as one area where greater action may be taken.
“While many exchanges have defied this pressure,” the researchers noted, “the political component is a crucial risk to consider for exchanges’ future.”
The survey also mentioned the growing number of crypto users who choose to keep their funds in their own hands. “The motto of ‘not your keys, not your coins’ is becoming stronger under political pressure on exchanges,” according to the paper, which goes on to say that it’s a “trend that could hamper exchanges’ economic model.”
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