In the last post, we explored the landscape of bitcoin markets - exchanges and the evolution of investment vehicles with bitcoin as the underlying asset.
In this article we profile a cross-section of bitcoin exchanges - volume leaders, peer to peer exchanges, derivatives exchanges and exchanges that have opted to be regulated under banking and investment laws.
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| http://bitcointicker.co |
Top Five Exchanges (by Volume)
The top five bitcoin exchanges handle around 85% of daily volumes. All of them have been also classified as “Big Four” at some time by various sources, though in the evolving world of bitcoin, this designation and definition is likely to have many candidates.
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| Source: http://bitcoincharts.com/ |
BTCC
BTCC is the largest exchange by volume handling between 40-50% of transactions and is the dominant exchange for BTC-CNY trading. Formerly known as BTC China and rebranded as BTCC, the exchange was launched in 2011. BTCC is headquartered in Shanghai, China and serves a global customer base.
BTCC is expanding the breadth and scale of their services on mining and trading. BTCC launched 100 nodes in December 2015 across five continents to address the issue of decreasing full nodes. Their trading services now include ProExchange, a spot trading platform that provides 20x leverage and Block Priority, a service that expedites transaction confirmations for BTCC account holders.
Bitfinex
Owned and operated by iFinex (a British Virgin Island company), Hong Kong based Bitfinex, is the largest exchange by BTC-USD volume. Bitfinex’s platform was launched in 2014 and is in beta phase.
Bitfinex’s trading platform is very popular and matches bitcoin lenders with margin traders allowing peer to peer margin liquidity. Bitfinex has become a “go to” source for bitcoin owners to earn passive income by lending to traders. Bitfinex also provides bank level security with over 100% reserves and securing coins in cold storage.
Bitstamp
Launched in 2011, the Bitstamp exchange operates from Slovenia and has offices in UK, USA and Luxembourg. Bitstamp supports trading in US dollars and Euros.
Coinbase
Launched in 2013, US headquartered Coinbase is known for their full portfolio of offerings from wallet, exchange to payment processing. Coinbase launched their US based bitcoin exchange in 2015, becoming the regulated cryptocurrency exchange in the US. Within a year of operation the Coinbase exchange has expanded services to Canada, Europe and Asia. Coinbase US user deposits are FDIC insured and online wallets are insured.
BTC-E
Also launched in 2011, Bulgaria based BTC-E supports trading in multiple currencies and crypto-currencies including the rouble and offshore yuan. BTC-E philosophy can be said to be diametrically opposite to Coinbase. BTC-E provides anonymous trading to users (the exchange does not ask for customer information to sign-up), operating as an online only business and the platform owners have remained anonymous. Although this has been flagged as a red flag, the volumes still signify the popularity of BTC-E.
Peer to Peer Marketplace
A P2P marketplace allows users to buy and sell bitcoins without the exchange acting as intermediary.
LocalBitcoins.com
Finland based LocalBitcoins.com is the leading online peer to peer or (broker-less) OTC bitcoin marketplace. Launched in 2012, LocalBitcoins is among the top 10 exchanges. Its operation can be described as similar to Craigslist. Buyers and sellers use localbitcoins.com hosted wallet (or their own) to transact. Advertised listings are posted on the platform which include location and payment method information. Trades can be initiated and completed through an online only process or by making the exchange offline. The process on the platform offers buyer and seller protection through an escrow mechanism and dispute resolution process. Participants on the platform also rate sellers, a model similar to other peer to peer sharing businesses such as AirBnB. LocalBitcoins.com exchanges are available in 249 countries and over 13,000 cities.
Derivatives Trading
Leveraged trading and investment products designed for capital market and institutional investments have started making frontlines in the bitcoin and cryptocurrency space and have received mixed feedback.
BitMEX
Launched in 2014, Hong Kong based BitMEX (or Bitcoin Merchantile Exchange) is a bitcoin derivatives exchange that offers digital currency futures and options. BitMEX has a small user base primarily from Asia but daily trading volumes have reached $5 million within a year of operation. The latest offering is a leveraged China A50 stock index hybrid futures contract which gives bitcoin traders an option to take short or long positions on the Chinese stock exchange, with up to 25x leverage.
Ledger X
LedgerX describe themselves as an institutional trading and clearing platform. New York headquartered Ledger X was founded in 2014 and aims to be the first US based bitcoin derivatives exchange, currently awaiting regulatory approval from the US Commodity and Futures Trading Commission (CFTC). Ledger X has received an order of temporary registration from the CFTC as a swap execution facility in September 2015.
Coinut
Coinut exchange is owned by Singapore based Coinut and was launched in 2014. Coinut offers exchange traded bitcoin options (vanilla or binary) on the price of bitcoins.
Licensed Exchanges
While different countries take different legal and regulatory approaches towards bitcoins, some exchange businesses have sought licenses applicable to banking and financial market operators. This arises from reasons such as ensuring business continuity in heavily regulated markets, serving legitimate customer interests, retaining access to capital markets and banking systems for investments and attracting institutional investors.
While cryptocurrency specific licensing requirements such as the much debated BitLicense in US are one approach to compliance, these firms based in US have also opted to apply for licenses under the existing banking and financial services regime.
Genesis Trading
Genesis Trading, a subsidiary of the Digital Currency Group became the first fully licensed digital currency-centric broker-dealer in the US, in 2015. Genesis Trading was spun off from the bitcoin trading desk of Singapore based Second Market to become the first FINRA and SEC regulated broker to actively deal with bitcoins. Genesis Trading offers derivatives and OTC trading for private and institutional investors.
itBit
itBit, a bitcoin currency exchange operating in New York received a license to operate as a trust charter under New York Banking Law in May 2015. As a trust company, itBit is licensed to provide custodian services nationwide in the US, an overarching advantage over applying for state specific money transmittal licenses. itBit also has to ensure adequate capital reserves as per NYDFS requirements and client deposits upto $250,000 are FDIC insured through itBit’s banking partner.
At last count there are 46 exchanges operating worldwide specializing in digital/crypto/blockchain currencies. Exchanges continue to launch, grow and fall but the marketplace for bitcoins continues to thrive around the world with investment options available for optimists and pessimists alike.
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