Op Ed: 3 Reasons Why Crypto Has an Exchange Problem

While the Crypto Winter may be lingering with us into the spring, crypto exchanges are doing just fine. According to CoinMarketCap, there are now 255 major crypto exchanges. That’s a notable increase from a year ago, when there were 208.A booming exchange industry sounds like a positive, but we can do with fewer exchanges for cryptocurrencies to establish themselves as a dominant force in the global financial system.For crypto to truly thrive, the ecosystem needs only five or six exchanges — and certainly no more than a dozen — in the long run. Here’s why.Growing Crypto’s Market Cap Will Be Possible With Fewer ExchangesTo get a sense of crypto’s exchange problem, consider the ratio of crypto exchanges / crypto market cap compared to equities exchanges / total equities market cap.Today’s 255 major crypto exchanges are home to about $175 billion worth of cryptocurrencies (total market cap). Distributed evenly, this amounts to $686 million in cryptocurrencies per exchange. In equity markets, 60 major stock exchanges control $69 trillion in global equities, or roughly $1 trillion in equities per exchange. Thus, the average stock exchange is 1,457 times bigger (in market cap of listed assets) than its average crypto peer.The last 200 years of economic progress shows us that investors, companies and the economy all benefit from there being a few regulated exchanges in each jurisdiction. Indeed, New York City became the financial c...