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The biggest challenge for crypto exchanges is global price fragmentation

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For decentralized markets to scale globally, the interoperability between cryptocurrency exchanges must be seamless.
It’s no secret that Coinbase has played an instrumental role in bringing new users into the crypto space. Coinbase’s friendly onboarding process and status as a publicly traded company allow it to appear as a more traditional investment platform to non-crypto savvy investors, leading to greater trust.
Commodities are goods that are fungible. In other words, the market treats goods in their various appearances as effectively equal. When a good or service is commoditized, there is no further differentiation between sellers, and all negotiation is based exclusively on price.
Discussion about trading fees is rooted in a belief that the price of cryptocurrencies is static across all exchanges — a commodity. If Bitcoin (BTC) were a true commodity, trading fees would be the only issue at play and the discussion around Coinbase’s fee structure would be valid.
Market fragmentation occurs when contact and interaction between exchanges are poor. This results in differences in pricing between exchanges and a dearth of liquidity in the market at large.
If the price of Bitcoin is $60,000 and the fee is 0.50% on one exchange, one could pay for a Bitcoin on another exchange at $60,120 with a 0.30% fee. Yes, with hundreds of exchanges in the market, the price gap can get this big at times. This variance has led to a proliferation of arbitrage investing — buying Bitcoin on one exchange at a lower rate, and then reselling the same coins after a transfer to another exchange for a higher price.
The root cause of the issue in the market is a lack of communication or interoperability between exchanges, resulting in a high degree of market fragmentation. However, the current digital infrastructure is substantial enough to support constant exchange interaction. But for markets to scale globally, this interoperability between exchanges must be seamless.

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