I know a lot of people might not agree with the statement I am about to make but there is good news on the centralized exchange or CEX front! For a while now this area has been dominated by the likes of Binance, Coinbase, and even Gemini to a point. Well, now we have a new entrant into the space DriveWealth. DriveWealth has served as a behind-the-scenes player for companies like Revolut and Block's Cash app allowing their users to buy fractionalized stock shares. They are now moving to the front though since they recently acquired Crypto-Systems allowing them to offer Bitcoin and Ethereum trading to partners as soon as April.
Something about this company that already made me a huge fan was what the CEO said about crypto trading right now. He stated that "it's unsustainable" and pointed to not only the large base fee that people face from Coinbase (they can be up to 4.5%) but also they collect on the spread as well. Fees are a huge issue faced by customers who are trying to get into crypto and this is where I believe centralized exchanges have carved out their role. They serve as a great onramp for people new to the space who they can trust and then once they get their crypto they can participate in DEX and other DeFi opportunities that do not deal with near the fees.
As it stands Binance is really pretty much a nonfactor in the US and both Coinbase and Gemini have sizeable barriers for entry. The reason for this is well because they can there is not a ton of competition in this space right now that would lead to fees being driven down. Robinhood is the closest thing I can think of to a feeless centralized exchange however as it currently stands 99.999% of people cannot move their crypto off of the exchange! While they are rolling out the ability to the test group right now is still very very small.
Due to the rules and regulations in place, I would imagine it is pretty difficult for any company to get started in being a centralized exchange as even Coinbase still randomly will run into trouble. This is why I am ecstatic to see a large backer like SoftBank back a company. Robinhood has shown that you do not need high fees to generate a huge amount of cash and I hope that we will see additional companies join in. The more companies that join in the more competition that occurs and the quicker trading fees will fall. This will lead to better experiences for users wanting to branch out into the space and further help lead to much quicker adoption.
As it stands with only having a few companies that do this if and when bad news about them breaks it causes a huge onramp for people to be put out of service. Additional companies fix this issue and I believe will help lead to further penetration into the mostly untapped market in the United States. I know a ton of people will say well this is why we have decentralized exchanges or DEXs but to people starting out trying to navigate this world is hard, to say the least. Gas fees are something that really does not exist in the current banking/finance world. There are some exceptions like credit card fees but even then the fee is going to be a flat addition and not fluctuate as transaction fees do in crypto. I am extremely happy to see further competition in the centralized exchange front to help serve more people and help people break free of the current banking bonds!
Please know I am not a financial advisor I am just someone who picked up on a trend and wanted to express it! Makes sure you always do your own research and never invest money you cannot afford to lose! If you enjoyed this article and would like to further support me below are a couple of referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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