How profitable are exchanges?

[mrkavasaki]

We have learned  nothing from the Mtgox disaster?
All Centralized Exchanger can be fucking hacked

It is very important to use only dezentralized exchanger like http://bithalo.org/
http://blackhalo.info/

[redskins49]

I think exchanges have a very high level of compliance costs as they need to verify the identity of everyone who opens an account, but everyone who opens an account may not actually do any trading or actually make a deposit.

I think that most exchanges barely break even.

[Harley997]

We have learned  nothing from the Mtgox disaster?
All Centralized Exchanger can be fucking hacked

It is very important to use only dezentralized exchanger like http://bithalo.org/
http://blackhalo.info/

This is not true, at least IMO. I would argue that exchanges can earn a fair rate of return for their owners and provide a safe place to trade bitcoin for their customers. I also think that the exchanges should provide incentives to their customers to not hold massive amounts of bitcoin on the exchange, as having massive amounts of bitcoin makes the exchanges a target for hackers.

[sandykho47]

The profit is very big

Example (BTC-E) :

24 hour volume : 1771 BTC
fee : 0,2%

24 hour fee : 1771 * 0,2% = 3.542

1 BTC = 615 USD
1 month fee : 3.542 * 30 * 615 USD = 65349 USD


Sorry, if my calculation is wrong 

[JorgeStolfi]

The profit is very big
Example (BTC-E) :
1 month fee : 3.542 * 30 * 615 USD = 65349 USD

I see no mistake in the calculation; but that is the revenue, not profit.  Considering that they have to pay salaries an other expenses, the profit from fees may be ratehr modest.

But they also make money from withdrawal fees; and the may be trading against their clients, with the advantage of knowing the orders of all traders before each trader knows those of other traders. (AFAIK this is illegal in stock exchanges, but there are no regulations for bitcoin exchanges, so why wouldn't they do it?)

[Golph]

The most profitable exchanges are the one that run away with all the money (mtg).

[DannyElfman]

The profit is very big
Example (BTC-E) :
1 month fee : 3.542 * 30 * 615 USD = 65349 USD

I see no mistake in the calculation; but that is the revenue, not profit.  Considering that they have to pay salaries an other expenses, the profit from fees may be ratehr modest.

I agree, I think that much of most exchanges' revenue is paid on salaries of their employees. I think that most exchanges need to have a lot of AML employees to verify their customers' identities and to monitor accounts for suspicious activity. 

[JorgeStolfi]

I think that most exchanges need to have a lot of AML employees to verify their customers' identities and to monitor accounts for suspicious activity. 

That may not be a big item in the budget of that particular exchange, I suppose. 

Are there companies that offer customer identity verification services for other businesses?

[Leina]

Don't forget owners who operate an exchange that turn scammer will have a permanent marker on their forehead.

[BIGbangTheory]

I think that most exchanges need to have a lot of AML employees to verify their customers' identities and to monitor accounts for suspicious activity. 

That may not be a big item in the budget of that particular exchange, I suppose. 

Are there companies that offer customer identity verification services for other businesses?

There probably are but the exchanges still need to pay for this if they outsource it or if they do it in house.

[JorgeStolfi]

Don't forget owners who operate an exchange that turn scammer will have a permanent marker on their forehead.

In the case of BTC-e, it is not known whether the owners have foreheads. 

[blumangroup]

Don't forget owners who operate an exchange that turn scammer will have a permanent marker on their forehead.

In the case of BTC-e, it is not known whether the owners have foreheads. 

He was referring to the movie where the special forces team go into Germany and capture Naizis, they kill most of them, but they usually let one go, but before they do they use a knife to draw the nazi sign on their forehead, giving them a permanent scar

[JorgeStolfi]

Don't forget owners who operate an exchange that turn scammer will have a permanent marker on their forehead.

In the case of BTC-e, it is not known whether the owners have foreheads. 

He was referring to the movie where the special forces team go into Germany and capture Naizis, they kill most of them, but they usually let one go, but before they do they use a knife to draw the nazi sign on their forehead, giving them a permanent scar

Oh.  But, as far as I know, that hasn't happened to a singe one of the many exchange-owners-turned-thieves.  AFAIK, the only such case where justice may be done was in China, where the police arrested the culprits.  Have there been any others?

And, last time I checked, no one knew who the owners of BTC-e were.  That may complicate the revenge plans a bit.

[MarketTime]

Don't forget owners who operate an exchange that turn scammer will have a permanent marker on their forehead.

How do people find out who they are?

[JorgeStolfi]

PS. I must point out that I am not a trader, so figuring out ways in which exchange owners could cheat on their clients is merely a curious puzzle for me.  Exchange owners have much stronger motivations, so they surely will find much "better "solutions to that puzzle.

One way to find such solutions in to read the laws and SEC regulations that apply to the operation of ordinary stock exchanges.  Every practice that is prohibited by them must be a proven way to unfairly take money from customers; so one can bet that the bitcoin exchange owners are doing it.

Hey, this is copy-paste of a post of mine!  A robot trying to bump his post count?

[SHA255]

The profit is very big

Example (BTC-E) :

24 hour volume : 1771 BTC
fee : 0,2%

24 hour fee : 1771 * 0,2% = 3.542

1 BTC = 615 USD
1 month fee : 3.542 * 30 * 615 USD = 65349 USD


Sorry, if my calculation is wrong 

You forgot to include expense like their employees and servers and hosting.

[Possum577]

Is it possible to see the difference between the bid and the offer for an order? That spread is going to the exchange. And their overhead is rather low and the transaction volume is high, so I'd guess there's plenty of profit for them. The benefit to us is that we need the service and the spread is very small per transaction...they make profit on the volume.

I haven't dealt much with the BTC exchanges so I don't know what data a user can actually see.

[21pilot]

I haven't dealt much with the BTC exchanges so I don't know what data a user can actually see.

most exchanges offer information about the trade volume (and the trade volume for different time frames -> a day, a week, a month...)

[blumangroup]

I haven't dealt much with the BTC exchanges so I don't know what data a user can actually see.

most exchanges offer information about the trade volume (and the trade volume for different time frames -> a day, a week, a month...)

I would speculate that exchanges could potentially sell this kind of data to subscribers some time in the future in a similar manner that exchanges like the NYSE and nasdaq sell their exchange data.

[21pilot]

I haven't dealt much with the BTC exchanges so I don't know what data a user can actually see.

most exchanges offer information about the trade volume (and the trade volume for different time frames -> a day, a week, a month...)

I would speculate that exchanges could potentially sell this kind of data to subscribers some time in the future in a similar manner that exchanges like the NYSE and nasdaq sell their exchange data.

this could indeed be an additional stream of income for current/future exchanges.

At least for the exchange bitfinex there is a large website dedicated to all kinds of data:
bfxdata.com