Mar 30, 2023
3 min read

The Future of Exchanges during Crypto Winter

ChainUp, one of Sumsub’s partners, shares their insights on the crypto crisis, and whether it’s worth opening a crypto exchange now.

The latest crypto winter started in 2022, with the failure of TerraUSD and Luna stablecoins, and continued with the collapse of FTX, Silvergate Capital, SVB, and USDC depeg. All this has caused a lot of panic in the crypto community, and more than $70 billion has been wiped off the cryptocurrency market.

Although the market has managed to partly recover, the crypto world has stuck to a wait-and-see approach ever since, and crypto startups are reluctant to enter the market.

We’ve asked our partners from ChainUp whether it’s worth opening a new crypto exchange now, how long the crisis may last, and what existing crypto exchanges need to do to survive.

About ChainUp:

Headquartered in Singapore, ChainUp provides a complete suite of blockchain technology solutions for businesses, covering both infrastructure development and ecosystem support. ChainUp seeks to empower companies with blockchain technology, as well as support crypto, custody and digital banking businesses worldwide. 

How long will the crisis last?

The economy is still recovering from the pandemic, and so too is the crypto market, so there’s some volatility. It may take a few years for the market to fully recover. 

News of the Fed dollar rate hike may cause some instability in the crypto market as well. But it’s important to note that the market may calm down and recover once the Fed’s interest rate hike policy stabilizes later this year.

At the same time, the long-term potential of the industry remains optimistic, as more individuals are recognizing the advantages of blockchain technology and cryptocurrency.

What should crypto exchanges do now to survive?

To survive the crisis, crypto exchanges need to take several steps, including: 

  • learning new technologies
  • reducing expenditure
  • reviewing their project portfolio to get rid of unprofitable ones and focus on the most successful initiatives
  • preparing cash flow 

It’s essential for exchanges to stay up-to-date with the latest trends and innovations in the industry to provide the best possible service to their customers. They should also establish strong partnerships with other industry players and focus on compliance and risk management to ensure the security of their operations to success in the next crypto cycle (bull market).

The crypto market is volatile, but the current bear market may take longer than expected. Crypto exchanges should also avoid taking unnecessary risks, such as investing in untested technologies or cryptocurrencies.

Suggested read: How to Ensure Security When Using Blockchain

Exchanges should also be cautious when dealing with regulatory and legal issues, and ensure that they are following all applicable laws and regulations. 

So when the next cycle comes, they will definitely be in a winning position.

Is it worth opening a new crypto exchange now?

Based on observations of past cycles, many successful exchanges/projects were incubated and grown during this period of the cycle.

We therefore believe that now it is a good time to consider opening a new crypto exchange, but startups need to be well-prepared and fully understand the challenges and risks involved.

​​The current market environment enables new exchanges to focus on polishing their product. It’s important for new exchanges to focus on:

  • building a strong team
  • developing innovative solutions
  • establishing partnerships with other industry players 
  • building compliance and risk management systems to ensure the security of their operations

The key to success in the crypto exchange industry is to be proactive, innovative, and customer-focused, while staying up-to-date with the latest trends and technologies in the industry. 

By integrating internal resources and optimizing procedures with ChainUp’s solutions, crypto businesses can improve their security and compliance. Moreover, ChainUp’s experience in developing innovative solutions can help crypto exchanges keep up with the latest trends and innovations in the industry.

So, is there a point in waiting until the end of the crisis to start a crypto business?

Now is definitely a good time. If a startup has a product which is ready to be released, there is no point in waiting. It may take just one night for the next cycle to arrive, so it’s better to start early.

Our prediction is that the crisis will last for a few years, but there is always a chance that unexpected events may finish it overnight, or tomorrow—and only the most prepared crypto businesses will win. By staying up-to-date with the latest trends and innovations in the industry, exchanges can position themselves for success in the future.

The primary thing exchanges need to do to succeed today

The key to success in the crypto market today is compliance with regulations, which are expected to tighten around the world.

Since the crypto market is growing, it attracts more and more attention from regulators. Therefore, those crypto businesses which obtain the needed licenses first will be first to gain the trust of their customers.

Suggested read: AML Cryptocurrency Regulations Around the World

BlockchainCryptoFinancial InstitutionsPartners columnRisk Management