Over 70 Venture Capitalists Scramble for Crypto Exchange Investment in China
In view of the short payback period, more and more Chinese capital groups are flooding into the crypto exchange investment. Statistics show that 58 financing incidents occurred in the field of crypto exchanges from January to August in 2019, with more than 70 capital groups invested in crypto exchanges.
Standing on the top of the crypto pyramid, crypto exchanges are becoming the region attractive to Chinese capital groups. Since May in 2019, the number of crypto exchange financing is increasing month by month. By August, the number of financing projects has reached 19.
Some exchanges have completed two rounds of financing in less than a month. Some capital groups even pitched in personally, for example, Node Capital has recently incubated GOKO exchanges internally.
70,000 Chinese yuan is enough to buy an imitated exchange system, which can be built in 15 working days. The server fee of an ordinary small exchange system is about 2500 yuan a month. And the exchange needs to configure a single server for every coin. Servers can be purchased on Alibaba cloud with 2800 yuan a month. That is to say, building a small exchange which only costs about 100,000 Chinese yuan. As long as the real trading volume reaches 50 million Chinese yuan, an exchange’s profit and loss can be balanced.
But the reality is that now the crypto market is mainly a game between the stock users and the stock funds, while the growth of the incremental funds and the incremental users is still weak.
The top 20 crypto exchanges have occupied 90% of the whole market profits, leaving thousands of small exchanges to split the remaining 10% market profits.
In order to quickly obtain limited users and flow, emerging crypto exchanges were grabbing the opportunity of launching projects which can attract numerous users.
Some crypto exchanges even launched air coins and Ponzi schemes. Though air coins and Ponzi schemes can bring numerous users and funds to the exchanges in the short term, their trading cycle is very short compared with the major crypto. Once the bubble bursts, the user flows will not only lose sharply, but also trigger legal risks.