Cryptocurrency "black" March, exchanges may be the only winners

Source: Scallion Blockchain

March 2020 has been a very volatile and panic-filled month for Bitcoin holders, but of all market participants, exchanges have profited the most from the uncertainty.

The March 12 sell-off caused a spike in trading volume

The main source of income for cryptocurrency exchanges comes from transaction fees, so whenever trading volume goes up, their revenue will increase.

On March 12, Bitcoin fell 37%. Despite the gloomy situation in the cryptocurrency market, one notable phenomenon was the sharp increase in Bitcoin trading volume. For example, Bitfinex's trading volume exploded by nearly 1,000%.

(Source: Cointelegraph, bitcoinity.org, Coinmarketcap)

In addition, there is a clear correlation between price movements and trading volume. According to the table below, all exchanges in the figure have a negative correlation between Bitcoin trading volume and Bitcoin price. In other words, in a bear market, Bitcoin trading volume will be higher.

Bitfinex’s Bitcoin trading volume showed the highest correlation. In addition, its March trading volume had the largest volatility, with a high standard deviation of 230%.

(Source: Cointelegraph, bitcoinity.org, Coinmarketcap)

As long as the price of Bitcoin fluctuates, exchanges can make money

Although exchanges have made a lot of money and volume has performed well during the days when Bitcoin's price was in free fall, especially on March 12, exchanges are still all about volatility, regardless of whether Bitcoin's price is up or down. The correlation between volume and the absolute value of price changes is even stronger.

(Source: Cointelegraph, bitcoinity.org, Coinmarketcap)

Compared with offshore exchanges such as Bitfinex and Bitstamp, domestic exchanges such as Coinbase and Kraken have less volatility in trading volume and less profit during the bear market. Based on the data, it is impossible to determine whether the surge in trading volume during the sell-off caused the sell-off or followed the sell-off.

(Source: Cointelegraph, bitcoinity.org, Coinmarketcap)

The transaction volume of South Korea's top exchanges UPbit and Bithumb has dropped significantly in the past two years

Among the many exchanges that have benefited from the bear market, there are still exceptions, namely South Korean exchanges. According to reports, as the demand for crypto in the South Korean market has fallen sharply over the past 24 months, the trading volume of the country’s two largest exchanges, UPbit and Bithumb, has fallen by 70% and 63% respectively since 2018.

Separately, according to the Financial Supervisory Service (FSS) electronic bulletin system, UPbit’s parent company Dunamu’s annual profit fell 93% year-on-year ($7.4 million). At its peak in 2017 and 2018, Bithumb processed about 1.2 million BTC transactions per month, equivalent to $7.2 billion. However, during the peak of prices and volatility in 2019 and 2020, Bithumb processed about 300,000 BTC transactions per month. This indicates that the platform’s monthly Bitcoin trading volume fell 75% from 2017 to 2018. Similarly, UPbit’s monthly Bitcoin trading volume also fell from 1.35 million in 2017 to around 250,000 in 2020. Over the past two years, UPbit’s monthly average trading volume has been 200,000 BTC.

Translated from: cointelegraph (https://cointelegraph.com/news/crypto-exchanges-made-a-killing-during-the-ides-of-march)