Crypto-Exchange Trends for 2020 and the Next Decade
Next year, we're likely to see a range of crypto-exchanges diversifying into new services and functionality. Many of the big exchanges will be more like large ecosystems than standalone trading platforms by the end of the next decade.
And ever since Mt. Gox emerged in 2010, they've been evolving, adding services, trading pairs and functionality. Unsurprisingly, this process of evolution is going to continue in 2020, with the major exchanges announcing a range of new features and platforms intended to diversify their services and attract new customers.
And over the course of the decade, we might see the major exchanges behaving more like ecosystems, while consolidation within the market will mean that perhaps only a few big exchanges remain.
2019: DEX is still the future
So what did industry observers get right when predicting exchange trends for 2019? Their biggest prediction was that decentralized exchanges (DEXs) would take off, with numerous launches being planned for the year.
They were certainly right that a number of DEXs would be launched in 2019. Binance, Huobi, Apollo, McAfee, DeversiFi, ICON, and CoinEx all launched decentralized or semi decentralized exchanges, anticipating a growing demand for trading platforms that let users retain full control of their crypto.
However, despite increasing in number, decentralized exchanges are still relatively minor in terms of volume.
“We all know DEX is the future but I don’t think in 2020 the technology will be advanced enough to support a DEX that is as easy-to-use as a [centralized exchange]. But almost all exchanges are exploring this field,” Michael Gan, CEO of KuCoin, says.
2020: diversification, institutionals and newcomers
For next year, we're likely to see a range of crypto-exchanges diversifying into new services and functionality. This is what CEX.io's communications officer, Peter Ivanov, tells Cryptonews.com about the UK-based exchange's plans for 2020.
"We’ve got a few projects in scope for 2020," he says. This includes CEX.io Direct, a tool which lets websites "embed a fiat-to-crypto payment gateway” directly in their platforms, and it also includes a margin trading service based on contracts for difference, an aggregator platform for liquidity, a custody service, and an over-the-counter (OTC) trading desk for corporate customers.
Paolo Ardoino, CTO of Bitfinex, also suggests that exchanges will be increasingly diversifying in 2020.
Speaking to Cryptonews.com, he reveals that, in 2020, Bitfinex will witness the “launch of security token exchanges, prediction markets, and options on cryptocurrencies."
Something similar could be said for the Malta-based OKEx. Its head of operations, Andy Cheung, informs Cryptonews.com that the exchange will “continue to evolve our trading services and expand our offering for customers. Our users can expect to see more listings, including initial exchange offerings on OK Jumpstart.”
On top of this, OKEx aims to launch the testnet for its proprietary blockchain, OKChain, in early 2020. The new year will also see it launch its own decentralized exchange, OKDex.
Moving away from CEX.io, Bitfinex and OKEx, it's clear that other exchanges are diversifying. Binance is launching an open blockchain development platform called Venus, while they have already launched their futures platform.
Likewise, Huobi is set to launch perpetual contracts (a type of futures contract) in Q1 2020, while inside sources within Coinbase have suggested that the exchange is in talks to launch its own insurance company. Elsewhere, Bithumb will launch an 'exchange-as-a-service' platform by the end of Q1 2020.
For the most part, such diversification will be part of an attempt to offer a range of trading options that will attract institutional investors and corporate clients, the kind which generally bring the bigger bucks.
Both Ardoino and Cheung expect that more institutional investors will be joining exchanges in 2020.
“If we are to achieve our aim of greater levels of adoption in crypto we need more institutional investors entering the space," according to Ardoino.
However, retail clients will not be forgotten too.
“We’re in the midst of an outreach campaign in South Africa and parts of Europe such as Russia and Turkey to spread our mission and build the OKEx community globally,” says Cheung.
Moreover, Michael Gan claims that KuCoin will focus on newcomers as the exchange expects that in 2020 and the following years, many people will buy crypto for the first time. Therefore, the platform aims to offer simplified trading platforms and other services - “the whole industry will move towards the same direction.”
Security in 2020
One thing that will repeatedly crop up among exchanges in 2020 will be efforts to improve security measures. At a time when exchanges are still being hacked (witness Cryptopia, DragonEx, Bithumb, Binance, BiTrue, Bitpoint, and Upbit), cybersecurity enhancements are absolutely necessary.
"We aim at introducing new security measures as soon as possible, as they can become obsolete in 6 months," says Peter Ivanov.
Much the same goes for other exchanges and crypto-related companies. Binance made a song and dance in the wake of its hack about how it "will continue to fight" for stronger security measures in the future.
More generally, Paolo Ardoino also expects that exchanges will introduce a range of new measures and policies that will make the whole ecosystem more secure.
“We are seeing a greater focus on crypto-custody services,” he says. “This goes into the direction of traditional finance where exchanges and custodians are different entities Diversification of responsibilities will be inevitable in the future, to be able to serve institutional investors.”
Meanwhile, in October, OKEx introduced a global Self-Regulated Organization (SRO).
“The SRO will work towards standardizing security practices and policies, which we consider critical to the growth and mainstream adoption of cryptocurrency as an asset class,” Cheung explains.
Crypto exchanges in the next decade
Taking a longer view of crypto-exchanges, Peter Ivanov suspects that many of the big exchanges will be more like large ecosystems than standalone trading platforms by the end of the next decade. He also predicts that the coming decade will be increasingly defined by growing integration between exchanges and the traditional financial system, bringing crypto ever closer to the mainstream.
This is a view shared by Bitfinex and Paolo Ardoino, who also expects to see a consolidation of the exchange market over the course of the decade.
“In 2029 we’ll see only a few top-tier cryptocurrency exchanges that remain,” he predicts. “These exchanges will be fully regulated and be on a par with traditional financial exchanges. In effect, cryptocurrency exchanges will evolve into hybrid digital asset platforms that offer a variety of products, including STOs and equities. These platforms will compete with established exchanges such as the Nasdaq.”
The CTO also predicts that retail traders will instead trade cryptocurrencies on peer-to-peer networks based upon the Lightning Network technology.
KuCoin’s Gan also forecasts that two types of exchanges will appear.
“Some would be more like traditional financial institutions, they offer a small range of digital assets and professional services. Some others would be more like internet giants which will offer various services and have many operational campaigns to drive traffic,” he said, adding that “KuCoin would be more like the latter one.”
Meanwhile, OKEx’s Cheung believes that DeFi (decentralized finance) would be one of the major themes in the coming five to ten years. Also, according to him, more non-traditional banking institutes could embrace the decentralized platform to tap into the traditional banking world.
“On the other hand, existing banking giants could further turn into emerging technologies to hold their forts,” he predicts.
However, Gan reminds that the crypto industry is changing really fast: “We, to be honest, do not plan for a whole year, the longest we can foresee is half a year.”
Check our Crypto 2020 series for more predictions: