As the cryptocurrency industry continues to mature, the race for which exchanges will win and lose in the long run is on. The droves of users that flocked to onboard onto crypto exchanges have turned into dribbles–at the same time, regulations on crypto exchanges are heating up in many parts of the world.
While it’s nearly impossible to tell exactly which factors are affecting exchanges in what way, there are a few factors that can be measured in order to tell how a cryptocurrency exchange is faring–namely, profit.
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So, here we have a tale of two exchanges: Binance and Bithumb. The former reported $446 million in profits in 2018 and $66 million in profits in just the first quarter of this year; the latter saw $180 million in losses over the course of 2018, although a 17 percent rise in sales revenues was reported at the same time.
When we look at these two exchanges–and others in the industry–what are they doing right? And what are they doing wrong?
Crypto Holdings Are Partly to Blame
According to a report from the Korea Times, the primary reason for Bithumb’s losses was not the fault of the exchange itself, but because of the bear market that plagued crypto throughout last year.
However, the story is actually more complicated than that. The exchange’s operating expenses nearly doubled from $59.8 million in 2017 to $119 million in 2018; other expenses rose explosively from $3.6 million in 2017 to $334.8 in 2018.
When taking all of this into consideration, the $180 million in losses doesn’t actually seem so bad–but the losses were heavy enough that Bithumb announced earlier this year that it would be cutting its staffing levels by as much as 50 percent, from 310 employees to roughly 150.
But high expenses weren’t the only cause for Bithumb’s losses. The losses can also be partially attributed to a $19 million hack that took place in March of this year–the third hack in the exchange’s history.
Bithumb is being hacked, at its EOS cold storage level!!! Over 3million EOS has been transferred out ???
Detail to be reported, confirmed by security firm who’s auditing for Bithumb
— Dovey Wan ? ? (@DoveyWan) March 30, 2019
But if a hack strikes or the regulatory tide takes a turn for the worse, things could change. And as long as regulations are heavier in certain parts of the world, jurisdiction-specific exchanges–like Bithumb–are likely to survive in the longer term, too.