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Author Topic: How much liquidity do you need , to run a crypto exchange ?  (Read 127 times)
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December 01, 2017, 08:06:31 PM
 #1

How much cash do I need to run a crypto exchange. Coinbase has gotten multiples of 100s millions in FIAT VC funding. So they can cover withdraws.

But what if you are a small startup ( maybe ICO ) who wants to provide exchange services. If lots of people start withdrawing FIAT from you ... you can't keep up, unless you are taking as much FIAT deposits as they are being withdrawn ... any thoughts ?
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December 01, 2017, 08:17:13 PM
 #2

How much cash do I need to run a crypto exchange. Coinbase has gotten multiples of 100s millions in FIAT VC funding. So they can cover withdraws.

But what if you are a small startup ( maybe ICO ) who wants to provide exchange services. If lots of people start withdrawing FIAT from you ... you can't keep up, unless you are taking as much FIAT deposits as they are being withdrawn ... any thoughts ?
It would depend upon the market cap at which you aim on. If you are looking for daily volume at about $1k. So this way you must have a Fiat liquidity of at least $1K. Moreover it also depends upon the total amount of BTC you aim to hold at the beginning. Generally new startups even with a lot of buzz dont get investments more than 70-100 BTC in total unless you cater any big shark. So if you aim to hold such amount of BTC atleast 7-8% of the amount. Generally no more than 7-8% are going to ask for their money immediately.

  

 
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December 01, 2017, 09:13:29 PM
 #3

You need A LOT of liquidity if you plan to start a crypto exchange. You must realize there are a lot of big HODLers still in crypto who are just waiting for the "right time" to cash out. Now, what happens when one of them (let alone multiple) cashes out on your exchange? If you offer USD withdrawls you can bet that you are going to go bankrupt unless you have very substantial liquidity, I am talking about $10,000,000+ just to start!



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December 01, 2017, 10:06:34 PM
 #4

I was going to say a few hundred million myself but okay maybe you could get by with less than that. But if you want to compete with the big boys and not be a smaller exchange to start then probably a few hundred million is necessary. I cant imagine you could compete with Bittrex, Binance, Poloniex, and others with any less than that.

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December 01, 2017, 10:20:00 PM
 #5

How much cash do I need to run a crypto exchange. Coinbase has gotten multiples of 100s millions in FIAT VC funding. So they can cover withdraws.

But what if you are a small startup ( maybe ICO ) who wants to provide exchange services. If lots of people start withdrawing FIAT from you ... you can't keep up, unless you are taking as much FIAT deposits as they are being withdrawn ... any thoughts ?
I think you would need more than 200 million dollars in order to run your own crypto exchange in order to run your exchange properly if you will offer fiat withdrawals but if not then you will still need more than 2000 BTC in order to do it. You can also try to develop your exchange more and program it so that the buyer and seller will just exchange balance and the only thing you would need to worry about is fees. Just have at least 0.25% of every transaction done as fee for exchanging and also have a decent amount of fee on withdrawal.

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December 01, 2017, 10:30:09 PM
 #6

How much cash do I need to run a crypto exchange. Coinbase has gotten multiples of 100s millions in FIAT VC funding. So they can cover withdraws.

But what if you are a small startup ( maybe ICO ) who wants to provide exchange services. If lots of people start withdrawing FIAT from you ... you can't keep up, unless you are taking as much FIAT deposits as they are being withdrawn ... any thoughts ?

If you are running a pure exchange, you just need capital to cover your set up costs and day to day operations, if you are not earning much. You don't have to worry about fiat withdrawals, because they are matched against buyers orders. So only when people deposit fiat and buy bitcoins, will the sellers get fiat to withdraw.


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Hydrogen
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December 02, 2017, 10:23:20 PM
 #7

Most will say a lot of money. Enough to cover the worst case scenario in terms of withdrawal.

I think it is possible to run an exchange with less liquidity. Maximum deposit and the overall amount of currency being traded across the exchange would need to be limited to implement this. But it is possible.

Imagine a scenario where a person owns 0.1 BTC. They might run an exchange with a maximum btc deposit of 0.001 btc and cap the number of users to 100 to avoid more funds being traded across the forum than they have on hand. There are scenarios where a big bank wouldn't be required to run an exchange although I'm not certain how profitable they would be with small deposit sizes if exchanges are still charging 1% trading commissions and 5% withdrawal fees.

jefbigbob70
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February 22, 2018, 06:24:15 AM
 #8

It is possible to make an exchange without the withdrawal of the fiat currency, then you will not need large capital.
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