Cryptocurrency Exchange Closure Revisited (Again)

Exchanges serve an essential role in the cryptocurrency ecosystem. It is through exchanges that most people acquire Bitcoin and other cryptocurrencies, often avoiding the blockchain entirely. Because so many customers put their trust and financial resources in exchanges, it is no surprise that they have long been targets of cybercriminal actors. This paper examines 822 cryptocurrency exchanges operational from 2010–2022. We find that 40% of these exchanges subsequently shut down. Using regression and survival analysis, we investigate the factors that could precipitate the closure of exchanges. Consistent with prior work, we find some evidence that experiencing security breaches are associated with closure. However, we find that the strongest effects are connected to how the exchange operates. Exchanges that only trade cryptocurrencies and not fiat face approximately 60% greater odds of shutting down than those that trade both. Trading more coins is negatively associated with failure. Meanwhile, exchanges that permit US customers shut down more quickly, which suggests that the regulatory environment may affect exchange lifetimes.