Eqonex’s announcement said, “Intense market competition and low margins, combined with the significant technological load required to ensure optimal performance, has made running a profitable exchange increasingly challenging, especially in the current environment where crypto exchange volumes have fallen.”
The announcement by Eqonex Ltd. to close its crypto exchange to improve its financial position has highlighted the challenges faced by crypto exchange operators in a business where a race to the bottom on fees affects profitability.
On Monday, the Nasdaq-listed financial services firm announced that it would "streamline its operations" to focus on businesses with the potential to grow revenue and deliver "sustainable" profits in the long run.
The head of communications at Singapore-based crypto exchange Bybit, Igneus Terrenus, had told Forkast in an interview that spot exchanges experience inherent vulnerability during bearish market conditions.
According to a statement from Eqonex, the crypto market now has nearly 300 spot exchanges with interchangeable features.
In Eqonex’s words,
“Intense market competition and low margins, combined with the significant technological load required to ensure optimal performance, has made running a profitable exchange increasingly challenging, especially in the current environment where crypto exchange volumes have fallen.”
It is obvious that the industry is feeling the effects of the bear market. Last week, Singapore-based crypto lender Hodlnaut froze withdrawals and discontinued its token swapping feature, while exchanges such as CoinFlex and Coinbase cut staff.
Vauld, a Singapore-based crypto lending and trading platform, has reduced staff while seeking court protection from potential lawsuits. Also, Three Arrows Capital, a crypto hedge fund, has been ordered to liquidate.
In a most recent annual report, Eqonex's reported that its exchange business generated $203,230 in revenue for the fiscal year that ended in March 2021, with an average daily volume of $15.9 million. The company said institutional clients generated roughly 70% of this daily volume in March.
According to the report, the net loss for the overall business, which includes trading and capital market-related businesses, asset management, and custodial services, increased to US$125.3 million for the fiscal year that ended March 31, 2021, from US$57.7 million the previous year.