Cryptocurrencies are steadily outperforming traditional modes of payments. Digital currencies such as Bitcoin and Ethereum boomed in 2017, and if you were smart enough to invest your money back then, you’re probably swimming in wealth today.
But crypto is a rapidly evolving market, and it’s never too late. Trading cryptocurrencies is exciting, but if you want to stay profitable no matter what happens, you should consider starting your own crypto exchange business. We’ve rounded up a few tips to help you get started.
#1 What Type of Crypto Exchange Business Do You Want to Run?
First things first — determine the kind of cryptocurrency exchange business you want to engage. There are three types of exchange platforms, namely, centralized, peer-to-peer, and decentralized.
Centralized Exchange (CEX)
In a centralized exchange, you act as an escrow third-party who facilitates the transactions between the traders. This escrow charges a trading fee usually around 0.25%. Going for the centralized exchange route can offer you consistent earnings through the trading fees alone.
Decentralized Peer-to-Peer Exchange (P2P DEX)
P2P exchange connects traders with other traders without central authority overseeing the trade. Transactions can be performed directly, without the need to escrow the funds and cryptocurrencies with a third-party. The advantage of P2P trading is that it matches real-time buyers and sellers almost instantly, guaranteeing much faster trading, and there are no extra fees applied by the escrow party. Think Binance.org DEX style.
Over-the-Counter Exchange (OTC)
An over-the-counter exchange is not as much an exchange as an investment platform, enabling major companies and investment groups to access digital assets in huge quantities. Not many crypto exchanges in the world can provide liquidity for million-dollar investors securely and on schedule. Usually, an OTC exchange acts as an investment broker establishing the deal between large crypto miners and corporations looking to invest. Think Grayscale.co style.
#2 Review Crypto Laws and Regulations
Cryptocurrency has its safe havens like Japan, the USA, Ireland, and Estonia, while it doesn’t sit well with some countries like Russia, Bolivia, Pakistan, and others. Depending on where you plan to incorporate your crypto exchange business, you should first review the laws and regulations in those countries. Even if you’re facilitating a decentralized cryptocurrency exchange, it can help to familiarize yourself with Know Your Customer (KYC) FinTech standards and procedures to prevent money laundering.
#3 Conduct Crypto Market Research
No business undertaking should be launched without first conducting extensive market research. What cryptocurrency trends dominated the year? What is the anticipated price of major cryptocurrencies for the next year? Understanding the market will help you identify which cryptocurrencies you should list on your exchange. Aside from that, look into what features are most-demanded by crypto traders. This will help your crypto exchange to attract more users and gain an edge over the competition.
#4 Partner with a Crypto-Friendly Payment Processor
You need to partner with a third-party payment processor so that your exchange can accept government-issued fiat money, such as the U.S. Dollar and the euro. Choose a trustworthy bank that doesn’t go nuts when you say “Crypto” and that has secure online facilities. This may be more challenging to find in third-world countries where online transactions are rare. The main things to look at are crypto-friendliness and facilitating fast deposit and withdrawal transactions for your business and customers. Nowadays, no one in their right mind wants to wait five business days just to process funds.
#5 Identify the Features You Want on Your Exchange
Ensure that your exchange has three usability basics covered: safe, fast, and simple to use. The features that you incorporate into your platform will encourage traders to use your exchange.
These can include:
- Visually pleasing and simple to use user interface (UI/UX).
- Secure storage of cryptocurrency.
- Multi-language support if you’re going worldwide.
- KYC/AML verification.
- Multi-layered security protocols (SSL/HTTPS, 2FA Authentication, Data Encryption, etc.).
Your partner blockchain development company can help you integrate these features into your exchange platform. You should consider sitting down with the technical team to go through each element — experienced blockchain software engineers may have tech suggestions that can help fortify your platform while keeping it easy to use.
#6 Work with a Cryptocurrency Exchange Software Developer
The choice of development for your crypto exchange platform will define how fast you can go to conquer the market. Spending a few years developing your blockchain software in-house while the market is rapidly moving forward might have you running against the wind. It’s a sensible approach to save yourself the hassle and speed up your time-to-market by partnering with a cryptocurrency exchange developer for the tech headstart. Since the core features (UI/UX, cloud server infrastructure, trade engine, etc.) are good to go, you can save yourself years of development and thousands of dollars because you don’t have to start from scratch. Partner with a reputable crypto-exchange software development company like Openware, which can tailor their software to your specific business needs and ideas.
#7 Promote Your Crypto Exchange Business
How are people going to find you unless you make some noise? You need to promote your new crypto exchange business using innovative and proven marketing strategies such as search engine optimization (SEO), email marketing, social media marketing on platforms like Instagram, Facebook, and Twitter, pay-per-click advertising with Google and Bing (PPC), and much more. Consider hiring a marketing team to handle this area of business development if you want to focus on other aspects of your business.
Who You’ll Need on Your Team
Think about the whales dragging your project ahead with their energy and experience. You need a CEO (Chief Executive Officer) to overview the project, a CFO (Chief Financial Officer) to manage all things financial, and a CTO (Chief Technical Officer) to take care of the technical IT part. If you plan to be all of that at the same time, you will spread too thin and probably go nuts over a year.
#2 Customer Support
While hiring a customer support team is usually done at the end of setting up a crypto exchange business, this is one step that you should take seriously. Having a responsive customer support team can help bring success to your door. They will be the ones at the front lines, dealing with customer complaints and other technical issues — usually 24/7.
#3 Legal Counsel
We can’t stress enough the importance of proper legal counseling in financial projects. Ensure that you don’t violate any regulations in your jurisdiction and in foreign jurisdictions your customers are trading. Since cryptocurrency laws are continually evolving, you need an in-house or outsourced legal team to keep your operations in check. They will ensure that your business adheres to SEC and CFTC rules, or else you will be at risk of money laundering accusations.
#3 Marketing Team
Before launching your crypto exchange business, you need to have a proper marketing strategy to attract more customers. While self-managing the marketing aspect is possible, it’s best to leave it in digital marketing specialists’ hands since online is where your potential customers are. Decide whether your funds are enough to build an in-house marketing team or if it’s more cost-efficient to outsource the work to an agency. A CMO (Chief Marketing Officer) is an excellent addition to the leaderboard of any business.
The cryptocurrency business is a relatively new form of online business we expect to grow over the coming years, especially with the changes brought by the COVID-19 pandemic. The guide above provides a great starting point to help you launch a successful cryptocurrency exchange business. But ultimately, how you decide to go about your operations is up to you.
If you’re interested in diving into the billion-dollar industry of cryptocurrency trading, Openware has the cryptocurrency exchange software and solutions to help get your platform running in no time. It’s a good idea to start with an obligation-free technical consultation to address your specific business needs and how your crypto exchange platform can shape up.