Cryptocurrency exchanges are like nuclear-powered money printers, with three core businesses: trading, investment banking, and banking.
In the securities industry, these three businesses cannot operate together, and market concentration is insufficient; however, in the cryptocurrency space, exchanges can simultaneously conduct all three businesses, and the market concentration is very high, leading to the creation of money-absorbing tools like Binance, OKX, and Bybit.
1. Trading business: The trading business is familiar to everyone, involving buying and selling in the secondary market, with the platform earning commission income from it. For exchanges, they prefer you to trade frequently; the more you trade, the more they profit.
The majority of the exchange's income from fees comes from the contract section, which has the highest proportion of gamblers; you can also see the exchange's policies or activities favoring frequent trading, such as recruiting KOLs, various holiday events, copy trading, and promotions for fee rebates.
But in the high-frequency trading market, buying and selling is a zero-sum game. After being cut by the platform, you are then cut again by institutions and individuals with superior strategies. Frequent trading basically leads to increasing losses. There may be a few geniuses who gain considerable wealth through short-term trading, but most people cannot overcome the probabilistic disadvantages.
Therefore, you and the exchange are not aligned in interests, but rather competitors. The exchange considers and formulates rules from its own interests; if you follow its rules, your wealth is highly likely to be transferred away.
2. Investment banking: In the stock market, investment banks help companies go public and underwrite newly issued securities; they charge a certain percentage of high fees. In the cryptocurrency space, underwriting fees are presented in the form of coin fees or a certain percentage of free tokens for exchanges.
Project parties need to make money, and exchanges need to make money, which leads to a strong motive to inflate the valuation of new projects, ultimately dumping them on unsuspecting investors. This is also the reason why most new coins experience a continuous decline after launch.
Good things are not easily obtained; when you can own an 'asset' with little barrier, there is a high probability that there is little profit to be made.
Retail investors and exchanges stand on opposing sides of interests. In this game, the one most likely to get hurt in the end is you.
3. Banking: This involves accepting idle deposits and then lending them out for profit. You provide your idle funds to the platform to earn interest, and the platform lends them at a markup to gamblers for profit.
In a bull market, interest rates for loans can soar by dozens of percentage points, and even loan sharks would probably wish to open an exchange in their next life.
However, this part of the business has a small profit share and essentially serves the trading business, facilitating gamblers to increase leverage.
The platform is not a benevolent entity; lending also puts it in opposition to the gamblers. Increasing leverage and borrowing will only make most people lose faster.
In this feast of wealth harvesting, exchanges set the stage while groups like project parties, media, and KOLs cooperate in the performance, all of which have conflicting interests with retail investors. They create the illusion of wealth through propaganda, secret information, and impressive services, which will only subtly and slowly transfer your wealth away.
So how can ordinary people increase their chances of making money?
1. Don't engage in games led by your competitors: avoid frequent trading, don't buy junk, don't use leverage, and block sources of information that entice you to gamble.
2. Be upstream in the profit distribution chain of the market, acting as a competitor to the gamblers: become a KOL, infiltrate project parties, provide tools and services that are in demand, etc.
