The world’s largest crypto brokerage Coinbase is reportedly close to finalizing a $500 million funding round at a valuation of $8 billion, and Binance has started to become more active in the investment sector, funding blockchain startups internationally.
While major cryptocurrency exchanges like Coinbase, Binance, and BitMEX are seeing their businesses flourish with lucrative business models and high profit margins, minor exchanges are struggling in the bear market.
This week, the UK’s oldest exchange, Coinfloor, has slashed the number of its employees after recording a decline in its revenues as a consequence of the drop in daily trading volume of major cryptocurrencies and the emergence of many cryptocurrency exchanges in the local market.
Hard to Deal With Competition
As CCN reported, on Sept. 6, Coinbase integrated the British pound sterling into its exchange, officially expanding into the UK cryptocurrency market.
Coinbase entered the local cryptocurrency exchange market of the UK, which has stagnated over the years due to the lack of infrastructure and user demand, by eliminating exchange rates and appealing to local users that have been awaiting a reliable cryptocurrency exchange in the region.
Coinbase UK CEO Zeeshan Feroz told CCN in an interview:
“We have been working to introduce Faster Payments for as long as we’ve been operating in the UK. Customers not only benefit from increased speed, but reduced cost as well. By no longer having to convert funds from Pound Sterling to Euros and vice versa to add and remove funds, there will be no more exchange rates. This will make crypto easily accessible to most people in the UK.”
This week, possibly due to the increase in competition in the UK market fueled by the entrance of Coinbase and, reportedly, Bithumb, Obi Nwosu, chief executive at Coinfloor, announced that it is reducing its employee count in the weeks to come.
The significance of Coinfloor’s cut of its employee count cannot be dismissed, particularly because of the strategic partners and investors the UK based exchange has secured over the years.
TransferWise founder Taavet Hinrikus, venture capital firm Passion Capital, and Adam Knight, a former managing director at Goldman Sachs and Credit Suisse, invested in and supported the exchange since its launch.
Yet, despite the involvement of high profile investors and venture capital firms, Coinfloor has not been able to face stiff competition and is undergoing restructuring.
“Coinfloor is currently undergoing a business restructure to focus on our competitive advantages in the marketplace and to best serve our clients. As part of this restructure, we are making some staff changes and redundancies,” Coinfloor CEO Obi Nwosu said.
Possibly a Good Sign
Perhaps the establishment of large-scale exchanges and companies in the cryptocurrency sector is beneficial for the long-term growth of the cryptocurrency market, as it allows the strengthening of infrastructure.
In South Korea, for instance, cryptocurrency exchange backed by the country’s biggest commercial banks, Internet conglomerates, and technology corporations including Upbit, Gopax, and Korbit have imposed dominance over the local market throughout the past two years.
The fact that even an exchange in the magnitude of Coinfloor cannot sustain high-cost operations demonstrates that, for startups to compete in the market, they need strong infrastructure and backing from major investors and conglomerates.