Major Crypto Exchange in Korea Shuts Down: 2018 Was a Nightmare for Most
The shutdown of Coinnest on April 18, one of the major crypto exchanges in South Korea, showcased the intense brutality of the 16-month bear market, which came crashing down as soon as bitcoin achieved an all-time high at a price of $20,000.
While not many major crypto exchanges have closed their operations in the past year, most exchanges — with the exception of some platforms considered to have real daily volumes by Bitwise Asset Management — have struggled to maintain a stable inflow of revenue.
The bear market was particularly difficult for small exchanges that are known to strategically inflate their volumes to appeal to users on leading market data platforms like CoinMarketCap.
Profit margins sharply dropped due to an overall drop in daily volumes for smaller exchanges such as Korbit in South Korea, creating a difficult environment to survive in.
Cryptocurrency exchanges generate the overwhelming majority of their revenues through fees that occur when trades are executed. When daily volumes of crypto assets drop, exchanges suffer a dip in revenue.
Profits or net losses recorded by top four crypto exchanges in South Korea in 2018Why crypto exchanges suffered during the bear market, especially in South Korea
According to a report from The Block, Binance generated a quarterly profit of around $71 million from January to March 2019, nearing the annual operating profit of Upbit, South Koreas largest crypto exchange.
Upbit is the only exchange among the top five cryptocurrency exchanges in South Koreas local crypto exchange market to record a profit in 2018.
Bithumb recorded a net loss of $175 million, and other leading platforms like Coinone and Korbit also recorded relatively large losses in 2018 to the tune of tens of millions of dollars.
Although a Bithumb representative told MK, a mainstream media outlet in South Korea, that the business of the exchange remains solid, a $175 million loss could have been critical for the exchange if it had not reportedly secured around $190 million in new funding:
"Even during a phase in which the cryptocurrency market is struggling, Bithumb is sustaining a solid business with unique services and global market dominance. Bithumb will put in all efforts in protecting user funds.
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