CCData’s April 2024 Exchange Benchmark: Unveiling the Top-Tier Crypto Exchanges

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As a researcher with a background in digital asset markets, I find the latest Exchange Benchmark report from CCData to be an invaluable resource for understanding the evolving landscape of cryptocurrency exchanges. The comprehensive evaluation of over 100 exchanges across multiple categories offers valuable insights into the risks and quality of these platforms.

CCData, a well-known source of market data and analysis for digital assets, has recently unveiled the newest version (April 2024) of its much-awaited Exchange Benchmark report. This extensive research, recognized as a go-to resource for assessing risk in cryptocurrency trading platforms, sheds light on the dynamic nature of the digital asset sector.

Since its debut in 2019, The Exchange Benchmark has experienced substantial growth and improvements to its approach. It now evaluates over 100 exchanges under eight major categories: Security, Legal/Regulation, KYC/Risk Assessment, Team/Exchange Reputation, Data Accessibility, Asset Variety/Quality, Market Liquidity, and Transparency. This comprehensive report encompasses both centralized exchanges, featuring spot and derivatives markets, as well as decentralized exchanges (DEXs), for which a distinct set of metrics is employed: Security, Community Engagement, Transparency, Governance Structure, Market Efficiency, User Interface/Experience, and Incentive Mechanisms.

One notable finding from the April 2024 review is the persisting supremacy of Coinbase, holding onto the number one spot for a second consecutive Exchange Ranking. The company’s robust performance can be linked to its exceptional ratings in the Legal/Regulation and Security categories. These sectors have undergone significant improvements to maximize risk management and accountability.

Among the 98 exchange evaluations conducted, 17 exchanges attained Top-Tier rankings (BB+ or better), with Coinbase and Bitstamp standing out as the sole exchanges surpassing an 80-point score. Kraken and Bybit also shone, earning AA ratings due to their scores exceeding 75 points. The report underscores several factors contributing to these elite ratings: enhanced Market Quality, newly acquired VASP licenses, and the expanding usage of off-exchange settlement solutions.

In the realm of derivatives trading, 10 out of the 27 exchanges attained Top-Tier ranking. Among these elite platforms, OKX and Bybit stood out with AA grades and scores of 82.5 and 81.2 respectively. Both exchanges received perfect marks in the Derivatives Market Quality category, sharing this distinction with Binance, albeit the latter was held back due to a significant negative incident stemming from their CFTC settlement.

In the April 2024 report, it was noted that there was a substantial rise in the number of due diligence questionnaire submissions. Approximately half of the top-tier exchanges operating in both spot and derivatives markets completed and submitted these questionnaires. This upward trend signifies a strengthening dedication to transparency among prominent exchanges as they strive to adhere to the more rigorous Exchange Benchmark evaluation process.

As a crypto investor, I’ve come across some interesting data from VASPnet. Based on their records, about two-thirds of the exchanges (68 out of 103) have obtained a VASP License, while the remaining 26 are registered as Money Service Businesses. It’s noteworthy that over 95% of the Top-Tier exchanges have regulatory oversight, whereas only about 60% of the Lower-Tier exchanges can claim the same.

The report provides insight into the increasing adoption of Off-Exchange Settlement solutions, a risk reduction measure that enables users to replicate assets on exchanges for native trading while keeping their funds securely stored in regulated custodians’ cold wallets. At present, 18 exchanges provide access to this feature, with nine of them attaining Top-Tier ranking.

As a crypto investor, I’ve noticed that the bar has been raised higher for exchange benchmarks lately. Nevertheless, I’m encouraged by the overall improvement in exchange performance. The top grade has remained a B in the past two evaluations. However, it’s disheartening to see a 43% decrease in the number of AA-graded exchanges since the last assessment. This indicates that the leading exchanges have upped their game and are setting new standards for excellence in the crypto market.

As an analyst, I’ve observed a striking growth in monthly trading volume at top-tier centralized exchanges. The surge reached an impressive 775% increase from approximately $250 billion in October 2023 to around $2.17 trillion in April 2024. In comparison, lower-tier exchanges experienced a significant yet less pronounced growth of 313%. This trend underscores the burgeoning market need for advanced risk management and optimal market liquidity solutions.

The report highlights the necessity of evaluating potential risks from trading partners, considering the significant surge in centralized exchange transactions. These volumes have increased by a remarkable 345% since the previous benchmark, peaking at an unprecedented monthly value exceeding $3 trillion by the end of March.

As a researcher studying the market quality across various exchanges, I discovered that AA and A ranked platforms accounted for approximately 78% of the Daily Average Volumes among all the evaluated exchanges during the observation period. Furthermore, Top-Tier exchanges represented more than 85% of the total trading volume. These findings highlight the significance traders and investors place on high volume and liquidity, as well as other critical factors such as stringent regulations, superior infrastructure, and optimal market quality.

In the concluding section, the report explores essential elements of bid-ask spreads and market depth, singling out Binance and OKX as leading platforms for preserving narrow spreads and substantial liquidity on significant trading pairs.

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2024-05-02 21:05