Looking beyond the bull run: how exchanges can succeed in 2025

Anthony Yeung, Global Head of Strategic Development at CoinCover, discusses the key challenges facing the crypto sector in 2025 and the steps that exchanges can take to secure long-term customer engagement.

2024 was a landmark year for the crypto sector. We saw the launch of various crypto ETFs, Bitcoin reach a record high and consumer adoption continued to grow year-on-year. In Europe, 14% of adults now own crypto; a figure that rises to 27% in the US and even higher in other countries. The price of Bitcoin itself was one of the most asked questions to Amazon’s Alexa last year, highlighting the rising mainstream interest in digital assets.

However, this growth also highlights one of the key challenges facing exchanges in 2025: ensuring long-term user engagement in an environment historically marked by rapid price changes and speculative behaviour.

The volatile nature of the crypto market is well known. Prices can soar during bull runs, attracting waves of new participants, but they can also fall just as quickly. This can deter long-term engagement, especially for new, less experienced retail investors. While the current bull run has brought new users into the crypto space, exchanges must confront the reality that inexperienced investors tend to react badly when prices fall as dramatically as they rose. Once the market shifts, these investors have traditionally quickly withdrawn their funds, never to return, leaving exchanges scrambling to maintain their user base.

For exchanges, the key to growth lies in crafting a value proposition that extends beyond the allure of quick profits. They must create an environment that encourages users to see the value in remaining active in the long-run, and this starts with a visible commitment to security.

Knowing when something smells phishy

One of the most important trends that investors should be aware of is the correlation between new market entrants and a rise in malicious activity. While many people are drawn to the market by the prospect of lucrative returns, they should also be aware of the risks, and particularly, the threat of phishing scams.

It’s estimated that 2024 saw a 67% increase in the number of ‘wallet drainer’ attacks, in which scammers get victims to consent to malicious transactions that allow cyber criminals to quickly siphon crypto assets. Instances like this not only lead to sizeable financial losses, but are also incredibly emotionally distressing for victims.

It’s not just phishing scams; the threat of hacks is also greater than ever. According to the 2024 Chainalysis Crypto Crime Report, the number of individual hacking incidents increased from 282 in 2023 to 303 in 2024. This is worrying news for centralised platforms like exchanges, who were biggest targets for hackers in both Q2 and Q3 last year.

As a result of these challenges, our own research found that security risks are the second largest barrier to crypto adoption, with over a third of consumers citing improved security protections as the biggest factor that would give them more confidence to invest in crypto.

Safety first

The security of an exchange’s assets is the key to building long-term confidence and engagement, as a counter to market volatility. Lessons from high-profile incidents over the past year like the WazirX hack show how quickly an exchange’s name can be in the headlines for all the wrong reasons.

For exchanges, the message is clear. Security is no longer a nice-to-have, but a crucial competitive differentiator towards attracting and retaining customers.

While cyber criminals will continue to exist, users need assurance that their assets are protected against the threat of hacks and scams – and that if the worst does happen, they will be able to recover the value of their funds. Exchanges that invest in advanced threat detection, transaction monitoring tools to identify malicious activity, and recovery systems can set themselves apart in an increasingly competitive landscape.

The crypto bear market will return sooner or later. When it does, exchanges will need to convince users to remain active instead of withdrawing their funds as soon as they feel the value of their assets decreasing.

Demonstrating a commitment to security is a win-win for everyone involved. Robust security is not just a protective measure, but a compelling reason for investors to stick with an exchange in the long run.