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.

Gold Has Entered All-Time High Territory, Goldman Sachs Still Hates It

Colin Muller

After a powerful gold (XAU) runup in the age of COVID-19, the precious metal has re-entered its all-time-high zone. According to a leaked slide deck, infamous investment firm Goldman Sachs is still quite cold on gold (as it is on Bitcoin).

Goldman’s presentation came a couple of days ago (May 27), with a focus on gold, Bitcoin, and general inflation.

In short, they are generally not enthralled with the shiny, somewhat useful metal as an investment over time; only in specific circumstances did GS find that gold outperformed dollar inflation, with other asset classes like equities and real estate reliably beating it.

Goldman Sachs did note, however, that while gold generally does not offer “reliable downside protection,” in certain select circumstances—giving the example of the 1973 crisis caused by the Middle Eastern oil embargo—gold can provide “tremendous downside protection” (i.e., a hedge against other falling assets).

Looking at the charts, though, we may be seeing one of gold’s exceptional periods. The shiny metal has been reliably uptrending throughout 2019, and the onset of the covid-financial-crisis has done nothing but push it higher.

back at the highsXAU chart by TradingView

It has in fact entered the general zone of its previous all-time-high, set down in 2011. A rejection around here is entirely possible; but given the exceptional circumstances in the global economy at the moment, a break of this level cannot be discounted entirely.

The views and opinions expressed here do not reflect those of and do not constitute financial advice. Always do your own research.

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