Where do so many bitcoin exchanges get the money to stay open?

[VitoH]

There's so many bitcoin exchanges that have been open for months, if not years, that make so little in fees that they could barely afford to pay a single employee for a month.

What am I missing here? A lot of exchanges charge around 0.2-0.5% per trade, which, to even make $50k off of in a year, the exchange would need to do 10 million in trade volume. This instantly excludes all but the top exchanges. What about the majority of the other exchanges? I could see one computer software engineer alone setting up his/her own exchange with some hard work, but managing one with all the needed security, customer support requests, just seems implausible to do alone. I must be missing something.

[1713585905]

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[gentlemand]

I know what you mean. I guess a lot are hoping to gain a major foothold. It's a fairly changeable market. Gox was the daddy once upon a time, then Bitstamp, then China went mad and now Bitfinex is the top USD exchange.

They know their customers' balances and when orders are placed. There are no laws from stopping them from controlling what happens on the exchange to their own advantage. I'm sure that's a nice little earner for a few of them. You could also arrange a 'hack' at a certain point if you feel like topping up your balance.

[worldinacoin]

Even the largest crashed, you have to be very careful in choosing exchanges, best to distribute among a few exchanges.

[CoinBateman]

Its a very good thing that there are many exchanges out there. Obviously some serve very specific markets, and have the backing from domestic banks and the government making it easier for those in that respective region to use that exchange over others.

For a very able person, running an exchange is still a very difficult task however, and given the nature of the business, only those most confident with security should even attempt to run their own.

I can't think of any exchange that hasn't had security issues at some point in the lifetime, and to make matters worse, its a constant cat and mouse game.

In terms of surviving though, unless you do serve a very large client base, it doesn't cost a-lot even if you're not making any profit to run one. I suspect some exchanges like Yobit, EmpoEx, Bleutrade et al, are probably in this category.

One thing that I do love about markets in general though is that the survival of the fittest will weed out those that simply cannot afford to continue operating, or deem it too difficult. We all like to joke about places like Bitfinex (Particularly after the fiasco of August 2014, and August 2015 flash crashes) but the fact they have survived to this day is a testament to them adapting and serving a market that clearly require such a platform.

[OBAViJEST]

Trading fees add up! 

[lissandra]

Most of these exchanges get outside funding usually, or a group of investors.

Its usually not a indiviual thing, and they trade on the outbound fees to stay afloat with the cost.

[n2004al]

There's so many bitcoin exchanges that have been open for months, if not years, that make so little in fees that they could barely afford to pay a single employee for a month.

What am I missing here? A lot of exchanges charge around 0.2-0.5% per trade, which, to even make $50k off of in a year, the exchange would need to do 10 million in trade volume. This instantly excludes all but the top exchanges. What about the majority of the other exchanges? I could see one computer software engineer alone setting up his/her own exchange with some hard work, but managing one with all the needed security, customer support requests, just seems implausible to do alone. I must be missing something.

It's easy. They play with the money of the customers. I want bitcoin and you want dollar. I put my bitcoin in the system and you put your dollars in the system. When the money "meet' each other the do the change and the owner of the exchange take his part without doing nothing. Naturally they have some reserves in the main currency but all the other are money of the customers.

[HarHarHar9965]

I think the big whales might be in control of such exchanges and therefore, have control over the market too with their fake crashes, etc. And a single man handling a whole exchange, as realistic as it may sound, might actually exist. You never know how hard people actually really work on such projects, I've met a man who has a team of 2 and handles such a venture

[TinEye]

well after you settled everything with your exchange you do not need many people working on it, because the code is done, maitanance and small upograde can be done by the owner who built the whole site pretty easily, so there is no cost in this regard, they can also earn with leverage and fees, not only trading fees but any fee

also i'm sure that many employees which work there have other jobs, and perhaps they are only helping for small amount of hours a day, so do not counts it as a full pay wage
and I also have a feeling that they are good traders themselves, so maybe they trade on their own exchange with zero fees of course

[countryfree]

I believe most exchanges have had a negative cash flow for most of their existence, but that's the case of many companies offering new services or technologies. Launching a start-up is tough, especially if they've written their business plan when BTC was over $1,000. I guess they've started with little capital though. They were miners and the first BTC they've sold were those they've mined.

[oblivi]

a lot of early adopters have a lot of money to invest on infrastructure and marketing which results in a lot of people using their exchange which results in lots of fees per transaction = making a lot of money.
I have no idea how new people start new exchanges without being already well off.

[MinerHQ]

These companies need a money to start the online site but after that if they get more traders then they will pay the fee for each transaction that will be big money for them. If they fail to attract many people then those will close.

[johnyj]

Because there are just too many fiat money out there, bitcoin is just a fun game in the eyes of rich people

Some rich kids with a pocket change could open an exchange and set a 100k bitcoin buy wall and forget about it and go for his vacation

[RealBitcoin]

There's so many bitcoin exchanges that have been open for months, if not years, that make so little in fees that they could barely afford to pay a single employee for a month.

What am I missing here? A lot of exchanges charge around 0.2-0.5% per trade, which, to even make $50k off of in a year, the exchange would need to do 10 million in trade volume. This instantly excludes all but the top exchanges. What about the majority of the other exchanges? I could see one computer software engineer alone setting up his/her own exchange with some hard work, but managing one with all the needed security, customer support requests, just seems implausible to do alone. I must be missing something.

Well think again, operating a few hosted SERVERS and a domain costs less than 200-300$/year for a startup exchange.

Yet you see whales trading there 10 btc in every small exchange, so thats like 0.05 whale trade, and I bet they earn atleast 30 btc/year, even if you have a few guys trading.

Not to mention they put a few more ads on the page, and its resolved.


You dont need millions of $ to operate an altcoin exchange. Just look at yobit, its a low budget exchange, yet whales there trade 10-20 btc.

[botany]

They must be paying employees out of their equity capital.
It is not uncommon for businesses to take a long time before they break even.

[n2004al]

I believe most exchanges have had a negative cash flow for most of their existence,

I don't believe this. It is a non sense. If this would be true then why those would exist? The major groups behind those can operate with lose without having any profit or the miners which wanted to change their coins cannot go in lost for to much time. In the begining maybe yes but then where is the sense? If they will continue to lose continuously money why remain open?

[coinpr0n]

I wouldn't be surprised if a couple of exchanges are running on fractional reserves. Proving their solvency is an important step for me.

[HeroCat]

Some Bitcoin exchanges work more for fun, not for profit. Owners just like to be in BTC world 

[RealBitcoin]

Some Bitcoin exchanges work more for fun, not for profit. Owners just like to be in BTC world 

Many exchanges work to scam people. For example there are rumors that a well known exchange is rigging their orderbooks, and then scamming newbie traders with their own ICO shitcoins.

So if they get only 0.5% from trading comissions, they load the big bucks from their internal scams. And then once and a while a "hacking" scam happens, and they outright steal half of the money of their customers, then they apologize and say that "we will uppgrade our security".

Eventually if all things get too hot, then they pull their exit scam by disguising another "hacking" or "ddos" and running with all the money.

Then next time you see the site is down, domain sold, e-mail address closed, and the owner run to some carribean island with all the stolen money he robbed from newbies.

[johnyj]

They must be paying employees out of their equity capital.
It is not uncommon for businesses to take a long time before they break even.

Exactly, in today's business environment where everything is over-produced, if you can't afford to continuously lose money for 5 years, you won't be able to get enough large market share so that you can have a chance to take customer from those established ones

[btccashacc]

Big volume of bitcoin is give Big fee in trading
and he take profit from that way

[gentlemand]

Big volume of bitcoin is give Big fee in trading
and he take profit from that way

I assume the OP is referencing all the piddly exchanges out there, and there's no shortage of them.

[techgeek]

The whole big fee with exchange thing wont change though. But maybe gemini will run things differently?

OR else how would the exchange stay afloat, it needs a certain amount of fees to cover overhead costs and then also provide fiat or bitcoin when people want it as well.

[n2004al]

Some Bitcoin exchanges work more for fun, not for profit. Owners just like to be in BTC world 

Hahaha. You make me laugh. Very funny. You tell that some people invest money in a business only for fun? I don't know if you are joking or you believe in this but this sentence it is very strange. I can't believe this never.

[randy8777]

The whole big fee with exchange thing wont change though. But maybe gemini will run things differently?

OR else how would the exchange stay afloat, it needs a certain amount of fees to cover overhead costs and then also provide fiat or bitcoin when people want it as well.

can't think of a reason of why gemini would run its exchange without fee. maybe only at the very beginning as a promotion for joining people. i find a fee between 0.1-0.2% reasonable and fair. 

[RealBitcoin]

Well even the smallest exchange has a daily volume of 50 BTC.

So that is a 0.2% fee on 50 BTC, so basically the exchange is earning at least 0.1 BTC/day, which is pretty good.

[acquafredda]

I wouldn't be surprised if a couple of exchanges are running on fractional reserves. Proving their solvency is an important step for me.

No man! I'm sorry but I think that most of them use that system. The have this option and I think they use it.

Please refer to this thread: it is always good to know this kind of things.

 

https://bitcointalk.org/index.php?topic=945881.0

[NoRespect]

Some Bitcoin exchanges work more for fun, not for profit. Owners just like to be in BTC world 

hahaha,,that's right if you want to profit, playing trading, not exchanger 

[Q7]

Maybe you underestimated the trade volume. Sometimes just by sitting in front of the computer and looking at the screen you can just see how fast the numbers run every minute. Plus the money parked in exchangers could be used for other things. That's why insolvency is one issue.