Australia / Industry Insights
Cryptocurrency Exchanges Have Experienced Significant Volatility

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by William McGregor
Oct 14 2018

Cryptocurrency exchanges in Australia have experienced super volatility over the past five years. Rapid and dramatic changes in the price of Bitcoin, which rose to over $26,000 in December 2017, has seen industry revenue fluctuate massively. Bitcoin, the most traded coin in Australia by volume, was introduced in 2009 and the first local cryptocurrency exchanges emerged in 2012-13. It is widely accepted that an unknown person or group using the name Satoshi Nakamoto invented bitcoin.

“From its conception, the Cryptocurrency Exchanges industry has experienced periods of sporadic investment inflow, then excessive periods of investment withdrawal, contributing to the industry’s current level of volatility,” says IBISWorld Senior Industry Analyst William McGregor.

Cryptocurrency is a digital asset that represents a platform for exchange and uses cryptography to secure and verify transactions. The underlying technology typically uses a digital, decentralised ledger system through a peer-to-peer network rather than a centralised exchange. New units of cryptocurrency are produced through ‘mining’, which involves participants computing and solving problems to verify transactions and eventually add them to the blockchain or the ledger, which contains a record of all transactions that have ever occurred.

The Cryptocurrency Exchanges industry is expected to grow over the next five years, albeit at a slower pace than the past five years, as the technology behind cryptocurrencies continues to mature and become more established. The regulation surrounding cryptocurrency is likely to become increasingly complex as the technology becomes more widely accepted.

While cryptocurrencies do not threaten established business processes, the underlying technology could have significant implications. Blockchain technology allows for information to be distributed but not copied. In theory, because every member in the peer-to-peer system has a record of a transaction, it would be very difficult to manipulate transaction data. Blockchain technology developed by cryptocurrency companies is gaining widespread adoption in banking, finance, and security. This technology could enable banks to lower transaction costs and increase their processing times, creating a competitive advantage.

While the Cryptocurrency Exchanges industry has been extremely volatile over the past five years, blockchain technology has created a new arena of competition for financial firms. Cryptocurrencies are still in their infancy, and the complexity of this technology will make regulation increasingly necessary as businesses across the economy explore cryptocurrency as an asset and investment option.

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