Poloniex is one of the more well known exchanges and is based in The United States of America. Having been in operation since 2014, the exchange has been able to capture a significant portion of the market and experiences high trading volumes for altcoins.
Up until a year ago, traders interested having access to a large selection of altcoins often used Poloniex. The exchange specializes in crypto to crypto trades and as a result, generally suits more experienced cryptocurrency traders.
Over the last year, the emergence of exchanges such as Binance, Kucoin, and Huobi has seen Poloniex lose some of its market share. However, its recent acquisition by Circle may see the company rebound in 2018.
Poloniex was founded in 2014 by Tristan D’Agosta, and the company was originally based in Wilmington, Delaware, USA. Up until recently there was little information available online regarding ownership of the company, however, the site now lists Poloniex, LLC as being based in Boston, MA, USA.
The platform gained traction as it made its services accessible to traders located anywhere around the world, and also provided support for a large number of digital assets, and was one of the top providers in terms of variety.
Poloniex was the world’s largest Ethereum exchange by average volume in 2017 and often ranked within the top ten cryptocurrency exchanges with regards to overall volume. The exchange is currently averaging approximately $85m worth of daily trading, and sits inside the world’s top twenty exchanges in terms of overall volume.
Poloniex has been able to attract crypto traders by developing advantages over its competitors in the following areas:
The wide range of altcoins made available for trading has proved to be a major attraction for users of the platform. There are currently 99 markets involving 68 coins available on the exchange and trades are tied to the four base currencies of Bitcoin (BTC), Ether (ETH), Tether (USDT), and Monero (XMR).
Poloniex Currency Pairs. Source: Poloniex.com
Poloniex operates as a crypto to crypto exchange and provides an option to store value in USDT (Tether), a stablecoin that represents the US Dollar, with 1 USDT being equal to 1 USD. This is a useful tool that comes in handy as there is no fiat currency support on the exchange.
While the platform is based in the United States, it does not operate any geographical restrictions. This is mostly due to the pure cryptocurrency setup on the platform, and as a result, it hasn’t been required to conform to local banking and finance regulations as there’s no fiat currency being used. This has allowed it to function with greater freedom than exchanges such as Bitfinex which recently closed their exchange to US customers or to fully regulated exchanges such as Coinbase, Gemini, and Kraken.
By offering margin trading, Poloniex is able to dominate the majority of its competition. Users of the platform can utilize a peer-to-peer function to borrow funds and start margin trading.
Poloniex Lending. Source: Poloniex.com
The system efficiently allows traders to secure trading funds, and also take advantage of the lending feature to gain from lending funds out to other traders. This feature is only offered by a few exchanges and is still a major advantage as it attracts a good number of more experienced traders.
Poloniex has also been let down by the existence of the following flaws in its operation:
Deposits must be made in cryptocurrency and there’s no support for bank transfers or funding via wire or credit card transfers. Newer entrants to the market prefer to transfer funds from their bank accounts and Coinbase has attracted a large number of customers by incorporating this feature. In addition, withdrawals on the site are limited to $2,000 a day, which is extremely limiting for experienced traders dealing with large amounts of Bitcoin.
Despite being hacked in 2014, Poloniex doesn’t clearly outlined its security features, the site outlines that the vast majority of customer deposits are stored offline in air-gapped cold storage.
Alongside this, just enough funds are kept online to facilitate active trading, which minimizes risk and exposure to an exchange hack. Two-factor authentication is available to users; however, the lack of detailed explanation regarding the platform’s security protocols is a distinct turn off.
It’s worth noting that the incident in 2014 resulted in 12% of the Bitcoin held at exchange being stolen and the company decided to raise the commissions on all transactions, in order to refund the affected clients, who were eventually partially compensated.
A lack of a decent customer support service has been a major disadvantage for Poloniex for some time. Users of the exchange have been known to complain of extremely long response times when reporting issues to the support team. Queries have gone unanswered for weeks and months, and horror stories have begun to rack up on forums such as Reddit and Bitcointalk.org.
Poloniex Selling Points. Source: Poloniex.com
There are also serious issues with withdrawals taking a long time to process and at best the exchange has just been struggling to deal with a sudden surge in demand. However, other top exchanges have been able to service their customers to a much higher standard.
Poloniex operates a web-based trading platform with a variety of charting features. Moving Averages, Bollinger Bands and MACD are some available technical indicators, whilst the site is suitable for some, there are complaints that the charts are clunky and are not as flexible as those used by Trading View or other exchanges.
A mobile version of the platform is also available although there isn’t a specific mobile app, Poloniex also offers a resource section that provides answers to the most common questions and utilizes a ticketing system for traders that need additional assistance.
Poloniex Exchange. Source: Poloniex.com
There is no clear minimum deposit level set by Poloniex and it is possibly to start treading with as little as you want. There is also a maximum leverage ratio of 1 to 2.5 available to users of the platform.
Poloniex currently charges a 0.15% maker fee and a 0.25% taker fee, and maintains an up to date summary of all fees, Poloniex also employs a volume-tiered, maker-taker fee schedule. All users were moved to this model on March 20, 2016 and users should check their Trading Tier Status page to track their progress. Charges on the site are as follows:
Poloniex Fees. Source: Poloniex.com
For lenders, a 15% fee is applied to earned interest.
Every trade occurs between two parties: the maker, whose order exists on the order book prior to the trade, and the taker, who places the order that matches or takes the maker’s order. When trading on an exchange you can buy an asset at the lowest offer provided, or place a bid at another desired price. If you decide to immediately execute your trade, you would effectively be taking away liquidity from the market. Here, you become a “taker”, and pay a slightly higher fee.
Maker Taker Model. Source: Poloniex.com
The maker-taker model encourages market liquidity by rewarding the makers of that liquidity with a fee discount. It also results in a tighter market spread due to the increased incentive for makers to outbid each other. The higher fee that the taker pays is usually offset by the better prices this tighter spread provides.
Acquisition by Circle
Image via circle.com
Despite generating an impressive quantity of trading volume, Poloniex has been plagued by a growing number of issues. There was a general lack of information on the make-up of the organization, with little known about the co-founders, top management, or ownership structure.
There also seemed to be an absence of a physical office which all led to a lack of trust in the exchange as companies such as Coinbase, Kraken and Gemini all operate with far more transparency and credibility.
Public opinion seemed to have reached an all time low and the number of negative online reviews relating to customer support continued to grow over the last twelve months. There were also questions about liquidity as users faced difficulties when trying to withdraw funds. The elongated withdrawal times made it almost impossible for traders to swiftly liquidate funds after trading with money often being frozen while awaiting approval.
This could have proved ruinous for Poloniex but even with all these existing doubts, the exchange was still able to attract a significant amount of trading activity and Poloniex receives around 50 million visits per month to its website. However, the site has clearly lost ground to competitors such as Binance, Huobi, OKEx, and GDAX.
The recent acquisition by Circle could signal a change of fortunes and Circle Internet Financial Ltd. announced that it has acquired Poloniex for a price of $400m in a recent blog post.
The Goldman Sachs-backed company was founded in 2013, and acts as a peer-to-peer payment platform which allows instant transactions via the Circle Pay mobile app. Circle Trade offers crypto liquidity options to its customers, and the company has received approximately $60m in revenue from this service over the last few months.
In their blog post, Circle co-founders Jeremy Allaire and Sean Neville outline their plans for Poloniex, stating:
Firstly and immediately, you can expect Circle to address customer support and scale risk, compliance, and technical operations to bolster the existing product and platform,” they write, adding later that they plan on “maintaining the features and services that have made Poloniex so familiar and relied upon by customers around the world” with a focus on “improving rather than dramatically or rashly altering what already works so well
They went on to state:
In the coming years, we expect to grow the Poloniex platform beyond its current incarnation as an exchange for only crypto assets. We envision a robust multi-sided distributed marketplace that can host tokens which represent everything of value: physical goods, fundraising and equity, real estate, creative productions such as works of art, music and literature, service leases and time-based rentals, credit, futures, and more.
Poloniex remains a extremely well known exchange which is able to generate huge trading volumes. Its advantages have continued to attract traders to the platform while the issues surrounding customer support and withdrawals have seen the exchange lose ground to current industry leaders such as Binance and GDAX.
Going forward much depends on how quickly the new management can turn things around by solving the key issues regarding transparency and the overall level of professionalism found on the exchange. Poloniex still has much to offer and remains a viable option for more experienced traders interested in a wide variety of altcoins and in taking advantage of the margin trading and lending services available on the platform.
There’s a wide range of competition now available to cryptocurrency traders, and other more reliable exchanges are currently in operation so it may be best to look at some other options, however it is also a good idea to keep an eye on Poloniex and gauge how customer sentiment changes over the coming months.
Featured Image via Poloniex and Fotolia