The Crypto Institutional Era under the "Trump Effect": Is CEX Non-Trading Business Entering a "Major Change Era"?

Written by: Xiao He River

As Trump, the "first crypto president," sets his sights on the crypto exchange business two months before officially taking office in the White House, reports indicate that his team is negotiating to acquire Bakkt.

However, it is worth noting that Bakkt is not a traditional crypto trading platform, but rather a platform that focuses more on institutional services and non-trading business layouts. Since the dust settled on November 6, Trump has become the best promoter of Crypto, greatly enhancing global market recognition of cryptocurrencies. Therefore, the signals released by this detail are intriguing:

In the wave of institutionalization, the competitive focus of exchanges is gradually shifting from traditional trading to broader non-trading services, especially diversified services aimed at traditional financial institutions and high-net-worth clients, and this shift may also become the new core battlefield for CEXs to compete for dividends in the wave of "Old Money" entering the market.

Imagine if a large amount of traditional capital begins to shift towards Web3, through which channels are these "Old Money," representing mainstream institutions and high-net-worth individuals, most likely to lay out their crypto assets?

Under the Trump Effect, CEX Non-Trading Business "Emerges"

Four years ago, if someone told you that both party candidates in the U.S. presidential election would actively promote their recognition and support for cryptocurrencies, and that the elected president would personally issue NFTs and cryptocurrencies, you would likely think that person was crazy.

Although Trump has publicly stated that he "does not like Bitcoin and other cryptocurrencies, as their value is highly volatile and lacks any substantial basis," he has made a significant turn in 2024, including issuing several NFT series, launching a crypto donation website, introducing crypto projects, and making multiple Crypto-related promises during his campaign (such as establishing a Bitcoin reserve, creating a mining-friendly environment, and replacing the SEC chairman).

Behind this 180° turn is not only a change in Trump's personal attitude towards the crypto industry but also an important sign of the gradual acceptance and layout of crypto assets by global institutions, especially with the launch of Bitcoin spot ETFs this year, attracting more institutional capital into the crypto asset field and driving the institutionalization wave of Crypto.

Interestingly, crypto CEXs have basically shown a stable pattern of "one strong leader and many strong competitors"—Binance dominates, but OKX (comprehensive business layout), Coinbase (compliance), Bybit (derivatives innovation), and Biget (sector trading hotspots) still possess differentiated competitive advantages in specific areas.

However, with the rapid growth of demand from institutions and high-net-worth individuals, relying solely on trading fees and selecting wealth coins is no longer sufficient to meet the increasingly complex market demands. The competition in non-trading business is becoming the strategic core under the new wave of institutionalization: Chainalysis's 2024 report shows that the flow of institutional-scale funds in the crypto market has generally exceeded 60%, while this proportion was only 20% in 2020.

Interestingly, ordinary investors mainly use CEXs, while institutional-scale funds prefer DEXs and other DeFi services. The key reason is that institutional investors often seek to leverage market inefficiencies in their investment strategies, and due to the more diverse asset coverage and service types of DEXs (including demand for risk hedging products like derivatives), they typically offer more arbitrage opportunities than CEXs.

This indicates that the rise of professional crypto asset services for the B2B sector has become a trend. Therefore, Goldman Sachs has begun to launch digital asset investment services aimed at high-net-worth clients, while JPMorgan is developing blockchain-based wealth management tools through its Onyx platform. The entry of these traditional financial giants is forcing exchanges to upgrade their competition, as simple trading functions are insufficient to meet the needs of high-net-worth clients.

In this context, CEX non-trading business aimed at institutional users and high-net-worth individuals may become the key entry point connecting Old Money and crypto assets, even a new decisive factor.

What Are the Key Levers for Seizing Non-Trading Business?

Since the arrival of the institutionalization wave has raised higher demands for CEXs, which non-trading businesses are likely to become important levers to meet these demands?

In fact, besides traditional spot trading, high-risk contract trading, and high-threshold options trading, major CEXs have already formed distinctive asset management systems in the non-trading business field:

• Binance: Asset management is divided into three main sections, including easy-to-use earning products, dual-coin investments for high-yield users, liquidity mining, and DeFi staking, as well as regular investment plans suitable for long-term investment;
• OKX: Focuses on structured innovation, mainly divided into simple earning, advanced structured products (such as Seagull, Dual-Coin Win, Snowball, and Shark Fin), and on-chain earning combined with the on-chain ecosystem;
• Bybit: Offers multi-tiered asset management products, including savings, liquidity mining, dual-coin investments, discounted coin purchases, win-win strategies, wealth management, and ETH2.0 staking, especially its BTC-based wealth management products are highly attractive to high-net-worth users;
• Bitget: Emphasizes intelligence and trend capture, with an asset management system covering financial treasures, staking earning, dual-coin investments, Shark Fin, Trend Smart Win, and Snowball, balancing returns and strategy flexibility;

Although these non-trading businesses are already very diversified, in the face of the rapid influx of institutions and high-net-worth individuals, the core competitiveness of CEXs is evolving towards more flexible and intelligent services, with the following three areas being particularly critical:

• Structured Financial Products: By optimizing the risk-return ratio, they meet different risk preferences and asset allocation needs (such as hedging and arbitrage), helping users achieve stable returns in complex market environments;
• Smart Trading Bots: Developing more intelligent and refined tools around the optimization of trading strategies, especially for institutional-scale funds to automatically complete multi-strategy layouts, maximizing profit potential and enhancing trading efficiency and flexibility;
• AI-Assisted Asset Management Tools: Empowering asset management services through AI technology, providing comprehensive solutions including market analysis, customized allocation advice, and investment portfolio management, promoting intelligent investment decision-making, and meeting high-net-worth clients' needs for in-depth services;

Here, we can take relevant non-exchange businesses as examples to review the innovative practices in these three categories, which can more clearly show how CEXs design differentiated solutions to meet the demands of the institutionalization wave while promoting the overall industry towards a more professional and diversified service model.

1. Structured Financial Products: Multi-Layered Satisfaction of Different User Needs

Structured financial management mainly aims to meet the asset management needs of different types at multiple levels. For example, all CEXs have a "dual-coin investment" section, and OKX and Bitget promote categories like "Shark Fin," "Snowball," and "Seagull," allowing users to choose products based on current market conditions and risk preferences, capturing potential returns while avoiding risks.

However, overall, while these structured products eliminate the hassle of using derivatives like contracts and options for combination hedging, they are still not very intuitive, and the vast majority of users still prefer to trade directly based on price predictions.

Bybit's selection of financial products is quite interesting—it's centered around pairing long/short volatility, where "discounted coin purchase" can be used for short volatility trading, and "win-win" is an excellent target for long volatility, while "Leverage Worry-Free" supports up to 200x leverage.

From a trading perspective, trading volatility is undoubtedly one of the most universal trading underlying strategies:

• If you sense that volatility will decrease and converge, meaning price changes will be small, then you can directly short volatility;
• If you anticipate that the market might experience a significant drop due to factors like ETF approval/rejection, leading to increased price changes, then you can bet on long volatility;

"Predicting volatility and executing one-click trades" is also the most easily understood and lowest-threshold trading strategy for the vast majority of ordinary users.

It is worth mentioning that Bybit has also launched a BTC-based wealth management product with historical annualized returns ranging from 0.75% to 20.00%, specifically targeting high-net-worth users, deeply binding to the demand for Bitcoin asset allocation, helping users earn annualized returns through various trading strategies in Bybit's derivatives/spot market, which is highly attractive to VIP groups.

2. Trading Bots: Enhancing Trading Efficiency and Strategy Flexibility

Smart trading bots have become an important part of CEX non-trading business, helping users optimize trading strategies, improve execution efficiency, and significantly reduce the complexity of manual operations through automation and intelligent technology.

For example, OKX has done well with spot/contract grid, Martingale, or arbitrage order types, helping users achieve efficient market operations by automatically executing preset trading strategies. The overall trend among CEXs is to provide more customizable options for professional traders or VIP users, allowing them to adjust strategies based on their risk preferences, asset scale, and market expectations:

Users can set custom buy and sell ranges, risk thresholds, and portfolio rebalancing rules to enhance capital management efficiency—For instance, Bybit offers denser grid layouts for VIP users, amplifying arbitrage space and creating a clear distinction from retail investors.

Bybit also has an interesting new product called "Contract Platter," which helps users create a contract portfolio in specified proportions (allowing manual creation or using AI-recommended parameters) and automatically restores the proportion of each trading pair when the holding ratio deviates.

This design gives users significant flexibility and risk control capabilities, especially during periods of high market volatility, as the contract platter can help users reduce potential losses caused by asset weight imbalances through an automatic rebalancing mechanism. For example, for risk-averse investors looking to capture the Beta returns of mainstream assets in a bull market:

They can create a "10x Long" high-leverage platter consisting of BTC/USDT, ETH/USDT, and BNB/USDT, with proportions set at 50%, 30%, and 20%—if the prices of the three assets rise simultaneously, the contract platter can help users maintain portfolio weight while amplifying profitability, achieving multi-asset portfolio management under high leverage.

Overall, this tool is not only suitable for professional traders executing complex strategies but also provides simplified asset management solutions for novice investors.

3. AI Tools: The Future of Intelligent Investment

Additionally, just as AI-driven robo-advisors (like Betterment and Wealthfront) have played an indispensable role in traditional asset management by providing personalized asset allocation advice, AI is gradually emerging in the Crypto field, becoming an important part of CEX non-trading business.

Especially in the context of 24/7 uninterrupted trading and completely transparent on-chain data, AI can analyze vast amounts of market data in real-time through deep learning algorithms, big data analysis, and automation technology, including price trends, trading volumes, on-chain activities, and social media sentiment, helping users capture early signals of market fluctuations. This is not only applicable to retail investors but also provides timely and precise market analysis support for institutional investors.

However, currently, there are very few practices in this area among leading exchanges, with only Bybit launching the AI trading chatbot TradeGPT in September. Based on the ChatGPT large language model, it can recommend tools suitable for users' trading styles based on their investment situations and provide real-time Bybit market data.

Currently, TradeGPT's core functions mainly include two aspects.

(1) AI Project Diagnosis

By scoring crypto projects through AI algorithms, it helps users quickly identify quality projects. This function not only improves the efficiency of users screening projects but also reduces the risks of investment decisions.

For example, if a user is considering investing in a new project TokenX but is doubtful about its potential, they can use TradeGPT's AI project diagnosis function. By entering the project name TokenX, the AI will autonomously score the project based on indicators such as liquidity and decentralization (depth distribution across CEXs), token security (contract security analysis), social media interaction (followers, exposure), team and funding (fundraising ability, member disclosure), and on-chain activities (like TVL, active user numbers), providing a comprehensive score and detailed analysis for individual dimensions.

This function supports users in quickly identifying quality projects, especially when facing thousands of new projects, helping users save time and reduce the risks of blind investments.

(2) Crypto Market Q&A Function

Additionally, TradeGPT can provide users with real-time market answers, trading guidance, investment advice, and market insights. Users can simply ask questions to receive real-time market information and operational suggestions, optimizing allocation strategies through big data analysis.

For example, if a user asks, "What is the recent price volatility of ETH? Is it suitable for grid trading?" it will combine real-time data analysis with deep learning algorithms to achieve precise responses to the demand:

"Based on recent price data, ETH has experienced significant price volatility in the past 24 hours, with a difference of 130.23 USDT between the highest and lowest prices. This indicates that there is some volatility in the market, making it suitable for short-term trading strategies." Even better, it can directly provide suitable contract or grid trading options, simplifying decision-making and enhancing investment efficiency.

The Trend of CEX as "Private Banks"?

Trump's return to the White House not only brings a positive shift in market sentiment but may also directly drive the intensive realization of policy dividends, making the large-scale entry of institutional and high-net-worth funds a major trend in the next four years. In this context, the differentiated competition of CEX businesses will also reach a turning point, especially the non-trading business aimed at institutional users will become the most important incremental market.

This wave of institutionalization is also driving CEX businesses to transform from a trading-centric model to a diversified service ecosystem. In the future, exchanges that can take the lead in structured product innovation, intelligent trading tool development, and AI asset management capabilities are likely to become the preferred platforms for institutions and high-net-worth users.

In simple terms, compared to the past competition focused solely on trading depth and liquidity, today's CEXs must expand their fronts and embrace a richer service matrix, forming a comprehensive solution that meets the needs of high-net-worth individuals and institutions, from wealth management to intelligent asset management tools, from market making to trading strategy optimization, to welcome the entry of Old Money.

However, despite the good performance of OKX and Bybit in innovative products, the overall service model of CEXs still has some shortcomings, especially in the customized services for high-net-worth clients—compared to traditional private banking services in the financial sector, CEX's high-net-worth services appear relatively singular and standardized, failing to fully meet the needs of ultra-high-net-worth clients:

Most CEXs' asset management services are concentrated on standardized shelf products, such as structured financial tools (like dual-coin investments, liquidity mining) and fixed-income products. While these products cover retail and ordinary high-net-worth users with medium to high-risk preferences, they still lack personalization and flexibility for ultra-high-net-worth clients (such as large institutions, family funds, etc.).

Especially ultra-high-net-worth clients prefer to connect directly with professional teams rather than simply purchasing ready-made products. What they need is one-on-one customized services, including dedicated financial advisors, tailored strategy designs, and ongoing investment support.

Therefore, to attract and retain ultra-high-net-worth clients, CEXs could even draw on the service model of traditional private banks in the future, creating dedicated customized financial management areas. Whether it is customized financial plan design, exclusive advisors and professional team support, or customized rights and value-added service dimensions, there is much to be done, further improving the service matrix and gaining an advantage in the new round of institutional competition.

Conclusion

In summary, the future competition of CEXs is not just a contest of trading depth and liquidity but a competition of comprehensive service capabilities—by integrating trading, financial management, and AI tools to create a closed-loop service ecosystem, providing one-stop solutions for institutions and high-net-worth clients.

In the face of unprecedented changes in a decade, for the CEX track, no one can sit back and relax. Those who can seize the opportunities of the institutionalization wave will stand out in this new cycle of competition.