It’s been 14 years since the first cryptocurrency came into existence, and crypto adoption is still in its infancy. Hundreds of exchanges have come and gone, but traders continue to search for an all-in-one exchange that stands true to the reputation of DeFi. Institutional or retail, investors continue to trade with their funds scattered across multiple exchanges.
Reason? There are many. From risk management to increased exposure to a higher number of cryptocurrencies, there’s a whole list of reasons to use multiple exchanges.
However, using different exchanges kills efficiency by dividing your attention. Imagine having to switch between different tabs or apps when you are required to close a position within seconds. It may lead to losses or impact your profits. Whether you are a seasoned trader or a beginner, the cons of having to use multiple exchanges are self-explanatory. But without delving deeper into the cons, let us discuss the key reasons traders use multiple exchanges.
Top Reasons Investors Use Multiple Exchanges
Risk Minimization: Bear run or bull run, a sudden price reversal is always expected in a volatile market like crypto. It is during such reversals that the risk of market manipulation peaks. Investors divide their funds across multiple exchanges to minimize the impact of such manipulations.
Buying More Altcoins: Besides Bitcoin and Ethereum, there are 23,000+ cryptocurrencies in circulation. Every bull run, some new altcoin offers exponential returns. However, you can’t find every new altcoin on top exchanges. That’s why investors use multiple exchanges for increased exposure.
In a nutshell, increased exposure and risk minimization are two key pull factors that tempt investors to swing from one exchange to another. This makes me think, “What if we have an exchange that offers everything that a trader needs to navigate through DeFi seamlessly?”
So,
What Are The Features We Need In An Exchange?
The next logical question is, “What features must an exchange possess for it to serve as the ultimate gateway to DeFi?” As an investor, I can list hundreds of features, but here are some pathbreaking ones that could blur the line between TradFi and DeFi:
- Zero or Negligible DeFi: A 0.1% gas fee might sound like dust, but in the long term, it could leave a hole in your pocket, affecting your gains significantly. We need more decentralized exchanges that facilitate derivatives trading with zero or negligible gas fees.
- Capital Efficiency: Existing DeFi exchanges lack cross-margining and multi-collateral support. It translates into poor capital efficiency, and liquidity is a direct casualty. We need DeFi DEXs that support cross-margining and multi-collateral support, allowing market makers to add deeper liquidity. Remember, liquidity is the backbone of DeFi.
- Better Risk Management: Imagine trading multiple markets with a single collateral. That’s what we call portfolio-margining, something that all existing DEXs lack. It keeps a check on your risk potential, safeguarding your capital against fluctuations. Portfolio margining does exist in TradFi, but the outcomes are not pleasing. Here’s an example
So, we need to take a cue from TradFi problems and solve them in DeFi.
But the bigger question is, how close are we to the above expectations transforming into reality?
I started digging some dirt to find any upcoming exchanges that suffice the requirements of an average DeFi trader. Thankfully, there are a handful of exchanges working towards the mass adoption of DeFi. Some of the most promising upcoming DEXs, including Syndr, plan to onboard 100M+ users to DeFi.
That’s more than two times the existing number. But for that to happen, they have to deliver on the lines of the aforementioned expectations. Be it zero gas fees or portfolio margining, Syndr has started off well.
Amidst the crazy hype around Layer 2 scaling solutions, Syndr goes one step ahead to build its own Layer 3, marrying customization and scalability to offer a CEX-like experience to investors. But can it capitalize on the increasing attention of investors towards DeFi? Finger crosses.
Are you also looking for a more efficient alternative to your existing exchange? Let’s discuss your challenges.