Trans-Fee Mining Exchanges Have Poor Traffic to Volume Ratios, yet Their Market Share Is Rising

Cryptocurrency exchanges using the trans-fee mining (TFM) revenue model have, according to available data, poor traffic to volume ratios, meaning a small number of traders see large amounts of crypto change hands on their platforms. Despite using incentivized trading schemes to generate 'fake volume' these exchanges have grown their market share.

According to CryptoCompare’s January 2019 Exchange Review, cryptocurrency exchanges using the controversial mining model have grown to represent 15% of the crypto ecosystem’s trading volume, up from 12%. In January alone they traded $25 billion worth of crypto in the first month of the year.

The number one trans-fee mining exchange was CoinBene, which by itself traded $10 billion. It was followed by ZBG, which traded $6 billion, and by EXX, which traded $5.5 billion. These platforms’ trading volumes have grown, although overall crypto exchange traffic went down.

Per the report, traffic notably dropped 13.5% in January, with spot trading volumes accompanying it with a 12.4% drop. The total amount of unique visitors cryptocurrency exchanges received in January was 10.4 million, down from 12 million in December.

Crypto exchanges' volumes and traffic in January of 2019Source: CryptoCompare Research

While their trading volumes are high (red for TFM exchanges), the amount of traffic their platforms see is noticeably low. Traders on these platforms are incentivized by the revenue model to trade large amounts, in order to be rewarded in tokens.

The controversial revenue model was initially introduced by FCoin, which managed to see an over $5 billion daily trading volume at the time thanks to it. Some called it a “disguised ICO” over its nature. Its incentives may be questionable, as CryptoCompare’s report puts it, grouping it to zero-fee exchanges:

Transaction fee mining exchanges rebate 100% of transition fees in the form of their own exchange tokens. This might give traders an incentive to trade more to receive more tokens which often have valuable features such as voting rights on the platform or a dividend. Both of the above can lead to wash trading.

Although these crypto exchanges have large trading volumes, this doesn’t mean their order books are secure. CryptoCompare analysis from October showed that on TFM exchanges it would take a very small amount of their daily trading volume to see prices drop 10% on their platform.

Specifically, an analysis of CoinBene’s order books showed it would take just 0.3% of its trading volume to see the price of a crypto drop 10% on it. In comparison, it would take over 30% of the daily trading volume exchanges like Kraken and Bitstamp see to see prices drop 10% showing much greater stability in the more established and trusted exchanges.

Bitcoin Suisse Starts Letting Clients Trade Gold, Silver and Platinum

Swiss crypto broker Bitcoin Suisse has started letting its users trade gold, silver, and platinum against the top two cryptocurrencies bitcoin and ether, as well as against fiat currencies.

According to an announcement the firm published, its clients can now trade gold, silver, and platinum 24/7 with immediate cash settlement. Bitcoin Suisse touts clients now have a greater choice of strong assets to build up a diversified portfolio using its platform, providing them with options in times of high market volatility.

Bitcoin Suisse rolled out its 24/7 trading of fiat currencies late last month, and added in its recent announcement that with precious metals users have access to assets that have been long used in investment strategies. Bitcoin Suisse’s head of trading and liquidity, Stefan Lütolf, added:

Recent developments have boosted the demand for scarce, highly valuable assets such as gold and Bitcoin. Bitcoin may not be Gold 2.0, yet. In the meantime, we want to give our clients the maximum choice possible.

The precious metals trading pairs are being offered to all of Bitcoin Suisse’s clients, with a minimum purchase requirement of 100 CHF (around $103), and with no custody fees for up to 100,000 CHF ($103,000).

Gold, silver, and platinum can be traded n the platform against BTC and ETH, and against major fiat currencies like the CHF, USD, GBP, EUR, and DKK. Precious metals trades are settled immediately for fiat currencies with a two-day lapse. The firm’s statement reads:

Even with increased access in recent years, the possibility of combining precious metal investments with so-called “digital gold” (Bitcoin) remains difficult. Now Bitcoin Suisse is helping to change this.

It’s worth noting that with cryptocurrency exchange Vaultoro users could already trade the flagship cryptocurrency for physical gold. The gold users buy using Vaultoro is then stored in the client’s name in high-security vaults in Switzerland.

Featured image by Dmitry Demidko on Unsplash