Binance has recently published a study analyzing the crypto brokerage sector.
In fact, as institutional trading has spread widely in the cryptocurrency sector, brokers have become a key element in the services provided to these institutional clients.
As a result, the crypto brokerage sector has grown rapidly, so much so that since January 2020, for example, the average monthly growth rate of the total trading volume of brokers on Binance has grown by 339%.
The research was conducted by Binance Research together with the Binance Brokerage team to examine the crypto brokerage industry by looking at various real case studies.
The final report starts with the traditional scenario, where prime brokers offer liquidity provision, trading execution, custody, clearing, settlement, capital introduction, margin trading, derivatives services, and other services, effectively providing a single point of contact for institutional clients.
There are also the core brokers, i.e. brokers of brokers, which allow a greater focus on marketing, client acquisition strategy, client support and liquidity and settlement services.
The results of the research on crypto brokerage
Something similar is also happening in the crypto sector, with the development of prime brokers and core brokers. In addition, classic fintech and FX brokers are showing a desire to be more involved in this new industry as well, following initial attempts to offer clients cryptocurrency trading with CFDs.
On the other hand, institutional investors are showing a persistent demand for trading services, compliance and liquidity to major brokers, although the cryptocurrency market generally offers easier access to trading venues than conventional markets.
However, due to regulatory restrictions, traditional brokers have not opened spot cryptocurrency trading services, but only derivatives, and as a result crypto trading has established itself as the centre of the emerging crypto brokerage industry. For this reason, large cryptocurrency exchanges have launched prime brokerage services to provide institutional investors with custody, block trading, aggregation trading and other services.
In this way, crypto brokerage service providers have enabled brokers to offer services to institutional clients, promoting the expansion of the industry through non-crypto companies that offer the same cryptocurrency trading to their users.
This, according to the research, should further reduce barriers to entry into the sector.