The answer, largely unchanged across cycles, is that a small number of offshore exchanges capture a disproportionate share of flow. That concentration is not a regulatory footnote — it is a defining structural feature of crypto bubbles, one that recurs regardless of which asset class happens to be inflating at the time.
Few Venues, Outsized Flow
Global crypto trading volume has for years been dominated by a small handful of platforms. Binance alone has consistently represented the largest share of global spot trading volume, with analytics firms such as CCData and Kaiko repeatedly placing its share well above its nearest competitors combined. When one venue intermediates such a disproportionate share of activity, it becomes simultaneously the market's primary price-discovery mechanism, its largest custodian of client assets, and — as the collapse of FTX demonstrated in November 2022 — a potential single point of systemic failure.
The China angle matters because offshore exchanges have functioned, intentionally or not, as a pressure valve for capital that cannot move through traditional banking channels. Stablecoins such as USDT, traded overwhelmingly through a concentrated set of exchanges, have been cited by researchers and law enforcement agencies as a channel for moving value across borders outside formal banking systems. None of this requires any single exchange to be complicit; it only requires that trading volume, liquidity, and custody stay concentrated enough that flows through a few venues can move markets and evade scrutiny at the same time.
The parallel to today's exchange structure is direct. When trading, custody, and liquidity concentrate in one or two venues, apparent market depth can be illusory. A platform-specific problem — a hack, an insolvency, a regulatory action, or simply a collapse in user trust — becomes a market-wide problem almost instantly, because there is no redundancy built into the system. Readers comparing the two episodes directly may find ICO Bubble (2017) vs NFT Bubble (2021) useful for tracing how concentration risk evolved across crypto's speculative cycles.
Market-structure data compiled by exchanges and research firms has consistently shown that the top three centralized exchanges account for a majority of global spot crypto volume — a concentration level that would draw antitrust scrutiny in most traditional financial markets.
Why It Matters
Exchange concentration risk sits uneasily alongside crypto's founding promise of disintermediation. The original case for Bitcoin and its successors rested on removing trusted intermediaries from financial transactions. Instead, the market has repeatedly rebuilt intermediary chokepoints — first with exchanges such as Mt. Gox, which controlled a large share of early Bitcoin trading before its 2014 collapse, then with FTX, and now with a handful of offshore venues processing most global volume. Anyone tracking crypto market data or cycle positioning at coinhours.com will recognize this pattern: liquidity concentration tends to peak alongside speculative enthusiasm, then becomes the mechanism through which losses transmit across the system once sentiment reverses.
China's renewed anti-corruption rhetoric is a reminder that offshore exchanges serve purposes well beyond retail speculation — they also function as capital-flow infrastructure for actors operating outside formal banking systems. That dual role raises the stakes of concentration. A venue that is simultaneously a speculative trading hub and an informal capital-flight channel carries regulatory exposure that a purely domestic, diversified exchange market would not.
The Pattern Across Bubbles
Every major bubble catalogued across Bubblepedia's bubble encyclopedia features a moment when participants argued that structural flaws — concentrated custody, illiquid secondary markets, reliance on a handful of intermediaries — did not matter because prices kept rising. The NFT bubble's reliance on OpenSea, the 2017 ICO boom's reliance on a small set of exchanges for token listings, and the continued dominance of a few venues in spot and derivatives crypto trading today all reflect the same underlying dynamic: concentration is tolerated during the ascent and exposed during the descent.
Readers tracking current exchange-concentration indicators and other live risk signals can consult Bubble Watch, and the historical timeline for how past concentration failures unfolded in real time. The question this cycle poses is not whether concentration risk exists — it plainly does — but whether regulators, exchanges, or the market itself address it before, rather than after, the next forced unwind.
See also: Bitcoin 2013 vs Crypto Bubble 2020-2022 — How Each Cycle Grew Larger.