Smaller Exchanges Could Fall Due to Confusing ‘Web of Relationships’, Report Warns
Smaller crypto exchanges could be vulnerable to collapse during this crypto bear market, given seemingly unsustainable yields offered to users, and a confusing “webs of relationships” between companies in the space, a new report from the crypto data provider Kaiko has found.
According to Kaiko, exchanges are currently under stress for several reasons, including the decline in trading volumes that always comes during crypto bear markets.
As an example of the financial stress even larger exchanges are under because of this, Kaiko pointed to Coinbase, which has said it is laying off 18% of its workforce, and Bybit which is cutting its workforce by 30%.
On the other hand, some exchanges are also using the current market downturn to add more people to their teams and be better prepared for the next bull market. Among these are Binance, which said it is hiring for 2,000 positions, and Kraken, which is looking to add 500 people.
The warning from Kaiko followed news from earlier this week of a bailout of the crypto broker Voyager by Alameda Ventures, the venture capital arm of the major crypto trading firm Alameda Research, the parent company of the popular crypto exchange FTX.
But although some exchanges are still hiring, the reality is that many could soon find themselves in a tough situation, Kaiko warned.
One specific area of concern, according to the report, is the staking and yield-earning opportunities many exchanges have incorporated into their platforms.
For instance, it said that “a small Japanese exchange” offers up to 5% annual percentage yield (APY) on bitcoin (BTC), ethereum (ETH), and XRP deposits. The promise comes with terms and conditions that openly tell users that “lent cryptocurrencies are not managed as segregated
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