Win $160k in tournament prizes for beginner crypto traders! (Nominex Exchange Review)
New exchanges can compete with giants
The number of exchanges will decrease over the years
Companies not ready for rapid change must leave the market
International consortium of news organizations developing transparency standards.
Every year, up to a dozen new cryptocurrency exchanges and exchangers appear on the market, but only a few can occupy their niche and move from the category of unprofitable to profitable ones. This is because the cryptocurrency sector is highly competitive, and you need to have large resources – time, money, human – to create your own pool of regular customers. How rookie exchanges conquer the crypto market, BeInCrypto spoke with Pavel Shkitin, CEO of the Nominex cryptocurrency exchange.
– Tell us about the main trends in the crypto industry today. How the crypto market has changed over the past 3 years?
P.Sh.: The cryptocurrency market is not stable. It is constantly changing and developing. One trend is replaced by another and entails a change in the entire sector. In 2017, we saw an ICO boom. Billions of dollars were invested in startups that existed only on paper, and 90% of them turned out to be a real scam. ICO has been replaced by a new STO trend – security token offering. It was supposed to become an alternative to ICO, but did not because of the complexity of the investment procedure. And today the market is experiencing something similar with the DeFi boom. That is, I want to say that the crypto market is just being formed, trying different formats of work: some enter, while others do not..
If we talk about the main trends in the cryptocurrency market, then I would highlight several main ones. First, the expansion and change of the user structure. If back in 2017, when I myself was a crypto trader, the market was mainly traded by retail traders. Today, we see institutional investors and entire ETFs actively participating in the cryptocurrency market. Second, I would note the blurring of the lines between traditional stock trading instruments and cryptocurrency trading instruments. Again, a few years ago, traders were exclusively engaged in direct trading: bought at a lower price – sold at a higher price. Today, cryptocurrency exchanges offer margin trading, futures and options trading. We also plan to launch futures trading by the end of the year. That is, crypto traders have the same set of tools as participants in the stock and other markets. Also, I cannot fail to note the penetration of banking products into the crypto market. In 2019, staking programs were launched for the first time, which act by analogy with bank deposits, cryptocurrency deposits, payment cards, and now we are seeing a DeFi boom, which is based on the issuance of cryptocurrency loans. In other words, all banking services are available on the crypto market today..
– How much have crypto exchanges’ approaches to working with clients and projects have changed??
P.Sh.: The approaches have really changed radically. As early as 4-5 years ago, anyone could create an exchange. It was enough to buy ready-made software for exchanging cryptocurrencies, make a website and you’re done. Also, the exchanges that started on the market three to four years ago could freely make transactions with any cryptocurrency, because this sector was not controlled by anyone..
Today, a lot of requirements are imposed on newly created and existing exchanges, which are then projected for buyers. For example, today more exchanges require passing the KYC (know-your-customer) procedure within the framework of the adopted 5th EU directive on combating money laundering. Since we work in the Seychelles jurisdiction, we conduct a gentle KYC procedure and require confirmation of the client’s identity only if he withdraws more than 3 BTC per day.
Also, customer requirements for services have changed. If earlier it was enough for a trader to see numbers and click on buttons, today clients want to see impeccable service, a high degree of asset protection, and a huge selection of analytical tools. That is, new exchanges have no time to swing. They need to go straight to the market with a high quality product. Otherwise it will not work.
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In addition, new exchanges should not only be equal to the giants, but also offer services that others do not offer. I will say by my own example: we constantly hold promotions and tournaments for experienced traders and newbies, actively study the market and implement services that will definitely help our clients. For example, the IntoTheBlock analytical service was recently introduced. Why am I saying all this? In order for young exchanges to survive in the market, they need to be better, faster, more inventive than others, and then there is an option to become a profitable platform.
– Over the past few years, the number of cryptocurrency exchanges has increased significantly and exceeded 500 pieces. How can exchanges find and occupy their niche in the market? How to compete with larger sites?
P.Sh.: Of course, they can and should compete with the giants, offering customers either new services that are not available on other exchanges, or constantly improve the quality of service, whether it be analytical tools or referral programs. For example, we launched the copy trading function. What it is and how it works, I can tell you in a separate article, if it is interesting. But this is a very profitable strategy for beginners..
Also, in order to compete with the whales of the crypto market, you need to be not just an exchange, but to build an entire eco-system, offering services not only to traders, but also to investors, startups, and companies. That is, build a whole network of companies around you.
Also, the sites can “grow” their own traders. That is, choose a pool of interested beginners, teach them the rules of trading and provide ready-made tools and solutions for profitable trading. We have chosen this path and are working on launching a training course for those who have never traded. We do not drag traders from others, but we grow our own.
– Why does every tenth new exchange close after 2-3 years of work? What is the reason?
P.Sh.: For the successful functioning of a project, three components are required: a competent technical team capable of quickly implementing new solutions, an effective marketing department and high-quality customer support. Also, the project needs a leader who is ready for changes and can quickly rebuild the product itself and the work of the entire company according to market trends. Let me give you an example with the notorious Polaroid company. Remember, in the early 90’s it was an innovative and very expensive camera. In a matter of months, they captured the market and stopped developing. They were advised to improve the model: to make it more functional, lightweight, stylish, but the management did not accept any changes. As a result, light “soap dishes” replaced heavy Polaroids, and the company was ruined. So it is on the crypto market: not ready to change – leave!
– What do you see as the main problems of new crypto-exchanges?
P.Sh.: Lack of audience trust in the new crypto exchange is the main problem. Today, new crypto exchanges need to make enormous efforts to gain the trust of users. To get a credit of trust, exchanges need those components that I mentioned above..
– What changes will occur in the crypto exchange market in the next five years? Will the number of exchanges increase, or, conversely, gradually decrease, not withstanding competition. The future belongs to centralized or decentralized exchanges?
P.Sh.: I cannot predict for such a long period, but I will express my opinion. The number of exchanges will gradually begin to decline, which is what is happening at the moment. We see a huge outflow of traders from those exchanges that cannot provide high-quality service or do not provide trading tools necessary for a trader. And I cannot say that this is a bad trend. On the contrary, substandard sites will leave the market. Projects that have their own eco-systems will take the leading positions.
The number of stablecoins will also increase. National governments will eventually adopt CBDC Paper bills and coins may be a thing of the past due to a new financial instrument – central bank digital currency (CBDC). As of … More (central bank digital currencies). However, the state leaders will have to take a step towards decentralization and stop tightly controlling the turnover of cryptocurrencies. But this can be done if the population wants to accept a new means of payment, and this may take years.
Also, cryptocurrencies will be introduced as a means of payment. They will be free to pay for goods and services. Already today we are witnessing tokenization in various areas: tokenized diamonds, tokenized metals, real estate. This new form of buyer-seller relationship will make markets more efficient.
With regard to the development of decentralized and centralized exchanges, then, of course, users would like to trade on decentralized exchanges where the KYC procedure is not required. This logic is quite clear: if a client leaves his data, then there is a risk that they will end up with a fraudster. Nevertheless, decentralized exchanges, cryptocurrencies continue to march across the planet, increasingly becoming a mainstream phenomenon and finding new areas of application. People buy bitcoin, … More cannot yet compete with centralized transactions in terms of speed, and the very integration of different blockchains into a single network is a difficult and painstaking work. Therefore, centralized exchanges will always be in greater demand than decentralized ones..
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