The cryptocurrency exchange software revolution has been instrumental in making cryptocurrency and blockchain technology a household name. While blockchain technology and many types of cryptocurrency have been in circulation, they could not see the light of the day being adopted as mainstream instruments of transaction.
Cryptocurrency exchanges, however, brought the technology and its manifestation to common people has made millionaires who have solely relied on the price fluctuations and their capacity to predict them.
The way cryptocurrency exchanges work is quite simple and straightforward and is similar to the way Forex works. Users who possess a particular crypto asset can trade it for another crypto asset at a predetermined market value. The price is influenced by factors like the demand, supply, and the practical applications of the crypto asset.
A cryptocurrency exchange software is also a lucrative means of business. Investing in a cryptocurrency exchange is one of the best businesses that you can consider right now, taking into account the wide spectrum of profits that a cryptocurrency exchange offers.
Let us look at the different avenues available for making money using a cryptocurrency exchange.
After all, a cryptocurrency exchange is a business, and no business is complete without a business model that includes profits. There has to be a healthy balance in terms of both time and quantity between your investment and your returns.
What makes a cryptocurrency exchange a perfect avenue for crypto business is that it promises returns at every level, both when you are new in the market and when you become a seasoned brand when it comes to crypto exchanges.
Commissions on trade
This type of profit is not something new. In fact, even stock exchanges have been known to charge commissions on trades. It is, in essence, a fee that you collect from either party for facilitating the trade between the buyer and the seller. To put it more precisely, it is the payment that you receive to make both the parties known to each other because of your efforts.
The usual commissions that a cryptocurrency exchange charges are expressed in terms of percentage. There have been instances of crypto exchanges charging commissions that are as low as 0.01%. If the commission percentage is low, it only makes common sense to think that these percentages necessitate humongous trading volumes.
Let put this into a practical perspective. A trade that is worth about $1 million would only earn a commission of $1000. $1000 seems like an abysmal amount for any business, but most cryptocurrency exchanges do not trade in millions but in hundreds of billions. Therefore, it is quite possible and rather practical that the commissions earned by these exchanges are in the order of $10 million or more.
The game of volumes needs its time to master. However, once you have established a good trade volume on your exchange, the magnitude of profitability needs no further explanation. The growing adoption of cryptocurrency built by people and by governments will increase the cryptocurrency exchange profits. For example, recently, the Supreme Court of India ruled out the judgment that held cryptocurrency exchange business is illegal. This song a massive spike in the number of trades by Indians on globally renowned exchanges.
Fees charged for listing
There is no question on the reliability of commissions, but a relatively new exchange that does not have considerable trading volume might not find it easy to completely rely on these commissions, at least during the initial phase of its operation.
To diversify the possibilities, these exchanges can introduce services of listing tokens and coins on their exchanges to drive their initial impulse of revenue. The cryptocurrency exchange can organize Initial Coin Offerings (ICOs), Security Token Offerings (STOs), and Initial Exchange Offerings (IEOs), where the exchange operator can, in addition to charging a listing fee, can also charge a percentage of the funds collected. These funds alone can amount to hundreds, and sometimes, even thousands of dollars depending on the project and its marketability. The listing fee can sometimes be in the range of about 1 to 10 bitcoins, which, in today’s exchange rate, translates to somewhere in the vicinity of $10,000-$100,000.
The method described above is not just confined to paper because there have been multiple instances of cryptocurrency exchanges that have relatively low volumes have earned billions of dollars. Just like any other market, the demand and supply keep flipping their priorities based on quality. There have been instances of top cryptocurrency exchanges fiercely competing with each other to list high-potential coins and tokens. This has even led to the practice of crypto exchanges artificially increasing their reported trade volumes on listing sites like CoinMarketCap, known by the fancy term ‘wash trading’.
The name sounds like a superpower, doesn’t it? When it comes to creating one of the most important attributes based on which the quality of exchange is judged, it is undoubtedly a superpower. One of the most amazing revenue streams for a cryptocurrency exchange is market-making, which is nothing more than producing liquidity for a given financial instrument.
It involves buying and selling a digital asset on your own exchange and a slightly less desirable price than what is listed on other exchanges. You can then go ahead and place a trade on a different exchange, which can offset your previous trade. The difference in the prices is your profit. As you might have inferred by now, the entire process can be automated, and it makes better sense to capitalize on this avenue when it comes to markets that have a massive difference between the bidding price and the asking price.
Similarly, you can also syndicate new trading pairs by using existing instruments. Let’s take a simple example. If you would like to facilitate a trading pair BTC/CHF as it cannot be found anywhere else, you can build an automated system that combines BTC/USD and USD/CHF, displaying it on your exchange as a standalone trading pair.
On the surface, it is bound to be a welcomed move for people in Switzerland as they see their currency being listed. This solution is modular enough to be deployed for any currency pair.
Cryptocurrency exchanges can be expected to be platforms buzzing with activity and touching, from a community of crypto enthusiasts and investors. There is no better place for any crypto business to market itself than a cryptocurrency exchange.
Cryptocurrency exchanges can charge an amount from these businesses to put up their banners and advertisements on the cryptocurrency exchange interface. This presents an amazing opportunity for crypto businesses and entrepreneurs because they do not have many avenues to advertise their business.
Mainstream advising platforms like Facebook and Google have their restrictions on advertising anything related to crypto and blockchain. Since the opportunities are limited, it is quite possible that a cryptocurrency exchange with a considerable trading volume and traffic will attract crypto businesses to advertise on your platform.
You can either charge a flat fee for a specific stretch of time or also charge on a performance basis based on the number of clicks or the number of impressions. It serves as a lucrative revenue opportunity for cryptocurrency exchanges. In addition to the commissions on trade, it is another avenue where the traffic and the number of visits can translate into profit for you. The best part is that you can make a profit irrespective of whether or not your exchange visitors make a trade.
Collecting Funds from Fundraising Programs
Another way in which digital currency exchange software can make money has been slowly gaining prominence. Instead of waiting for a token or a coin to approach an exchange and get them listed, the exchange can serve as a repository for traders and investors to buy tokens even before they get listed on an exchange. It is quite similar in its functionality to Aki Saturday, and the contributors can receive tokens in exchange for digital assets like bitcoin or ether.
The revenue in this method lights in the percentage of funds that the exchange can collect on behalf of the fundraising company as a fee. Depending on the project or the product, the total amount raised is bound to vary, and based on this amount, the exchanges can even receive a large payout.
It is quite evident that the cryptocurrency exchange is a lucrative business opportunity. If you are a crypto entrepreneur, it should be one of the avenues that you should consider with utmost enthusiasm, backed by the reason that cryptocurrency exchange is a slow but sure profit-making business.
Building an exchange from scratch, however, would be quite a cumbersome and daunting process. Instead of investing your time and money in cryptocurrency exchange developers and designers, you can consider using a white label cryptocurrency exchange. These white label crypto exchanges are extremely easy to customize and can be made available in a short period of time. You can also be assured that you do not have any glitches and bugs that might interfere with the basic functionality of your crypto exchange.
If you are one of those aspiring entrepreneurs, all you need to do is get in touch with a blockchain development company that specializes in white-label crypto exchanges. They will take care to deliver the exchange to you so that you can make your profit from all the avenues listed above!
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