Why there are no price war on exchanges!

[EdouardLiu_0626]

The TraFi firms has been competing head to head for decades, dragging the fee rate for brokers down to even FREE.

But the fee rate of CoinBase is still high above 1% for retail users, even for Binance, the fee rate is above 0.1%, while the additional cost for one transaction is almost zero.

I am wondering why no star-up is messing up the market with price war, or those giants not wanting to beat Binance by lowering their rates.

 

[Ale88]

I am wondering why no star-up is messing up the market with price war, or those giants not wanting to beat Binance by lowering their rates.

So you're saying that you would trust a brand new exchange just because it has lower fees instead of others that have been on the market for years and years? And talking about Binance for example there are a ton of other things to do besides buying crypto. If you want to compete with the big guys I don't see the fees as something so relevant.

[Rruchi man]

I am wondering why no star-up is messing up the market with price war, or those giants not wanting to beat Binance by lowering their rates.

Good question OP!

If multiple exchanges start springing up to mess the market by lowering rates, the possibility of having dubious exchanges in the mix is inevitable. We will have more occurrences of cryptocurrency theft and loss. More persons will unfortunately follow more blindly after lower rates and fall victims rather than reputation of the exchange which is the first criteria to consider when choosing an exchange to use.

Just as you must be careful selling your crypto on p2p to people who promise higher ridiculous rates, you must be careful as well of exchanges that promise lower fees.

[pooya87]

Why do you call it "price" war when it is "commission" war?

dragging the fee rate for brokers down to even FREE.

Nobody offers services for free. They always have some other way of making money from you using their services otherwise why run the business in first place if it is for free! Take the Chinese exchanges for example, they were offering 0 fee trades for some time and their volumes were unreasonably high. Later we found out that they were laundering money which led to the Chinese government shutting them down a couple of years ago.

[Kakmakr]

I think the operating expenses for an exchange have very small margins for changes to their fee structure. Let's take Coinbase as an example ..... they got a lot of negative comments in their early days, when their support could not keep up with the volume of users that registered on the site.

So they invested a lot of money into their Support staff and also auditing team, because they became fully KYC/AML compliant. I also think they have a full-time job to keep hackers out and they are paying millions in insurance to cover them, if those hackers manage to get pass their security. 

Will a new Startup be able to offer the same kind of security and support at a lower fee rate?

[avikz]

I am wondering why no star-up is messing up the market with price war, or those giants not wanting to beat Binance by lowering their rates.

 

You have found a gap in the market but do you think this gap is creating enough space to enter into this market? I guess no! There are several other factors that are considered by the traders before they jump into an exchange. With the rise of kyc/aml monitoring among the centralized exchanges, defi non custodial exchanges are becoming a predominant player in the crypto market and I foresee this practice will slowly take over the entire crypto market where you do not have send money to exchange accounts before start trading.

So a solution is already here. But why Coinbase or Binance still managing to churn out volumes? It's called endowment effect. Go ahead and  search google for a little business lesson.

[slackovic]

You have found a gap in the market but do you think this gap is creating enough space to enter into this market? I guess no! There are several other factors that are considered by the traders before they jump into an exchange. With the rise of kyc/aml monitoring among the centralized exchanges, defi non custodial exchanges are becoming a predominant player in the crypto market and I foresee this practice will slowly take over the entire crypto market where you do not have send money to exchange accounts before start trading.

No KYC procedure is definitely an advantage for DEXes, but I'm really curious what will happen if tomorrow EU parliament votes yes for the law that will forbid anonymous crypto transactions. Maybe then DEXes will have to enforce KYC rules too. I know that you can trade on a DEX by directly interacting with a smart contract, but how many people know how to do that?

So a solution is already here. But why Coinbase or Binance still managing to churn out volumes? It's called endowment effect. Go ahead and  search google for a little business lesson.

As for the original question, I think that high volume traders like security. We all saw what happened when Binance was hacked and none of their customer lost their money. I like that security and I'm willing to pay a little higher trading fee if I know that my money is safe.

[so98nn]

That’s because Binance ecosystem has grown to enormous levels now. They can have the few structures balanced out with other income sources from the exchanger. Not all the start up exchanger are able to tackle the fees because in the initial days that’s what becomes their income source. If they lower it then how can we expect them run smoothly and give us all the services.

I think it’s more or less part of the business management. At the end of day it’s all about how much money is accumulated and how much expenses needs to be done.

Fees is one of the component to run this business.