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Leading centralized exchanges extend market share in 2022

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As crypto trading volume consolidates into the platforms of only a few trusted organisations, the top centralised cryptocurrency exchanges have set all-time highs in terms of market share this year.

According to data provided on Monday by the United Kingdom analytics business CryptoCompare, these so-called “top-tier” crypto exchanges boosted their market share from 89% in August 2021 to 96% in February 2022.

The firm graded over 150 active centralised exchanges on security, number of assets offered, regulatory compliance, Know Your Customer checks, and other factors, assigning them a letter grade ranging from AA to F, with “top tier” obtaining a B or higher.

There were 78 exchanges that obtained a “top tier” rating, with Coinbase, Gemini, Bitstamp, and Binance being the only four to receive an AA rating.

According to the research, top-tier exchanges transacted $1.5 trillion in February 2022, while “lower-tier” exchanges only moved $62 billion. According to CryptoCompare, “both retail and professional traders are flocking to reduced risk exchanges.”

Exchange consolidation has occurred as a result of exchange closures as well as purchases from larger exchanges. Top crypto exchanges looking to expand internationally occasionally buy already licenced smaller exchanges operating in the target country, as FTX did with the Japanese Liquid Group exchange on February 2, 2022.

Market uncompetitiveness

Since June 2019, 54 exchanges have shuttered due to market uncompetitiveness, causing additional user consolidation to top-ranked exchanges, according to the business. Six Chinese-based exchanges have also closed as a result of China’s crypto crackdown. according to analysts:

“As we’ve seen, volume has begun to concentrate among the top tier exchanges, and this tendency is set to continue. We predict an oligopoly of exchanges to dominate trade volumes as the market evolves, as their traction grows and weaker firms go away.”

The paper outlined some of the issues that the cryptocurrency exchange business would face in the next years, highlighting political pressure on exchanges to implement Russian sanctions as one area where additional action may be taken.

“While many exchanges have defied this pressure,” the researchers noted, “this political factor is a crucial risk to consider for exchanges’ future.”

The survey also mentioned the growing number of crypto users who prefer to keep their funds in their own hands. “The motto of ‘not your keys, not your coins’ is becoming stronger under political pressure on exchanges,” the paper says, before going on to say that it’s a “trend that might stymie exchanges’ economic model.”

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