• Bear Market Valuations

Rational Bits Newsletter #001

In our first newsletter, we share our perspectives on the major exchange players and highlight some supporting industry insights.

There are a core set of honest industry players

We are encouraged to see the positive reception to the report released by Bitwise Asset Management. While we recommend amendments to their methodology (see below), we think the publicity of this report is a step forward in tackling the poor stewardship of information aggregators (i.e., CoinMarketCap, CoinGecko, etc.).

We have seen better stewards of data step forward to filter through the significant noise of inflated trading volume to provide a clearer view into the actual underpinnings of the industry. Some highlights include Messari, OpenMarketCap, and Bitwise's own BTC volume aggregator.

We find these changes encouraging. Bad actors poison the well for everyone.

Improving the Bitwise report

Keeping this succinct, we would recommend two changes to the Bitwise report:

  1. Include Liquid: Excluding the largest regulated Japanese exchange because of their fee policy is a mistake; high-volume traders at included exchanges have similar fees.

  2. Review Binance: Using Bitwise's own research, we have strong reason to believe Binance is inflating their trading volume; we believe this requires a deeper review.

We believe these two adjustments would enhance the report findings substantially.

Our Exchange Industry Insights

After our initial deep dive on the industry, we received questions on which exchanges we would recommend. To answer this question (as of April 2019), we have created a rating methodology to show which exchanges we currently recommend, and why.

NOTE: We approached this from the perspective of a mid-tier BTC, ETH, XRP trader, fiat-currency agnostic.

Challenges with our ratings? Keep reading to get additional details on how we gathered the above data and made these choices.

Over the last year, only two exchanges have gained market share

Per our previous report, only two exchanges in the competitive set have gained in share of trading volume - Binance and Liquid - and we have serious concerns around Binance's reported volume. To account for this, we have corrected Binance's trading volume at a flat 50% percent discount.

We will continue to monitor Binance, and adjust our corrective discount based on continued observation.

We think this is a fascinating way to show how the industry volume is shifting. Bitfinex is a huge point of interest - it has lost a tremendous amount of market share, possibly due to the arrival of more transparent stablecoins that are crowding out Tether.

To us, understanding the volume is the most important metric for predicting the long-term exchange market winner. While our industry analysis leads us to believe Liquid will be an eventual winner, this chart also shows how quickly the tides can turn.

Deep Dive: Trading fees vary by a surprisingly large margin

This caught us by surprise. We anticipated broadly aligned fee structures, but in hindsight, should have expected this (if players can't identify legit volume, fees are likely a secondary consideration). In this table, we consolidated the fee structure for each exchange, and have color-highlighted based on high / low fees at each trading tier.

NOTE: We recommend using the colors as a guide. Its not easy to read.

To call out a couple items we were surprised by:

  • For low-volume traders, Gemini charges an ENORMOUS 1.00% fee - this is more than 20x the lowest fee charged at the same level.

  • Many exchanges have no Maker fee; and only one exchange had no Taker fee (at an extreme volume level).

  • Kraken - with a reputation for low fees - did not live up to its reputation.

  • The Japanese market (Liquid and bitFlyer) appears to be the the most competitive

Questions or comments, you can reach us at or @BearValuations.

Annoyed by screenshots? PDF HERE.


As always, we want to caveat that any opinions expressed in this article are those of the author(s), and are not financial advice. Please take personal responsibility for yourself and your actions.

Our authors trust their own research, and may own positions in assets covered in this article (if applicable). Please do your own research to corroborate our findings. For our full disclaimer, please see HERE.

166 views0 comments

Recent Posts

See All