According to the chief strategy officer of crypto exchange Bitrue, most of the crypto exchanges are going through difficult times while others are not. It’s not equally distributed and depends on many other factors, but what is universal is the need to adapt.
He claims that CEXs are there to provide professional access to crypto and proof of staking, list the best cryptocurrency projects, and play a market maker. Beyond that, the best exchanges have great volume, liquidity, and integration with payments between digital and real economies. This may all sound obvious, but it is often forgotten.
In terms of adaptability, exchanges are evolving and changing in several ways, including the number of available pairs, services, lending, geographical reach, and segmentation. Sometimes these changes are investor-led; other times, they are technology- or market-based. Exchanges will continue to develop to diversify their offerings as all advanced businesses do.
“What they need to do to adapt comes down to analysis, research, investment, vision, external risk management, strategy, continued improvements, and development.”
On the new features that the CEX will introduce in the near future, the CSO said the available ones so far are card payments, insurance, and lending. Those were simplistic in many respects, as many external companies existed to facilitate these developments operationally.
More exciting, forward-looking opportunities exist across wealth management, payment services, trade finance, business lending, consulting, GameFi, logistics, Web3, etc. Additionally, if the crypto ecosystem develops more than loyalty schemes, major exchanges and businesses could jump aboard in leaps and bounds.
Impacts of regulatory scrutiny on crypto exchanges
There are two schools of thought here. The distinction is important, as there will likely be a divergence in an exchange’s approach. Some see regulation as an attempt at controlling the technology, while the crypto ecosystem was designed to be decentralized and not controlled. On the other hand, some see regulation as an inevitable outcome of past attempts to address consumer protection and ensure specific standards are met. Where regulation creeps beyond, there is likely to be a pushback.
Whatever happens, CEXs will continue to develop — but through different approaches, and this is where they will stand out. The ability to innovate is still there — or will be — if forthcoming regulations are anything to go by. We must determine how to smooth out increasing costs to ensure innovation continues.
The CSO added that market-wise, the word consolidation comes to mind. Not all exchanges are well positioned for medium to long-term growth, so you’re likely to see 10-15 global players, 10-15 significant international CEXs, and then, beyond that, a number of regional, national, and coin-specific specialists.
How new trading strategies can change the way investors approach crypto trading
The CSO also added that he is fascinated by the sheer volume of investment and trading strategies that are out there across asset classes: from PE to hedge funds, from real assets to crypto. Additionally, on crypto, we have spot, futures, ETFs, staking pools, stablecoins, the evolution of inflation-linked stablecoins, synthetics, Bitcoin as a standalone, meme “investments,” systematic strategies, algorithmic strategies, and pairs, to name a few.
“Many more investments and trading strategies will develop within crypto, and we’ve only begun to scratch the surface. For CEXs and investors, that’s exciting. Regulators, on the other hand, are concerned with the non-vanilla aspects of cryptocurrency trading styles. Whatever the case is, I advise being mindful of the risks involved.”
Role of AI in exchange’s operations and user experience
The CSO noted that As a technology, AI is far more dangerous than cryptography, Web3, and digital currencies. It’s so incredible how freely we run with it that it’s scary. Crypto has had its own issues, which are well-documented, but it is not a risk to the miss-displacement of workers, wealth transfer, bias, and exclusion.
“Crypto is about decentralizing things in a new economy. AI is the opposite, as it’s about control.”
However, from an operational perspective, AI could be useful, but once it’s taken the reins, which for a CEX like Bitrue is billions and billions in trades each day, you’re entirely at its mercy. So AI could present unique trading options and operational changes, but we should exercise caution. The exchange’s goal is to focus on UX, and as users are humans, the exchange prefers to keep the user experience designed and improved by humans.
