It seems like Poloniex hasn't lost many of its users since it began to run into serious technical difficulties last month, but that is due to the fact that there are no other exchanges that can meet many trader's needs.
There are literally over a thousand different exchanges on the web throughout the globe currently, but almost none of the exchanges have seen significant success. Of those that have, few have come close to building a platform that is close to Poloniex in terms of practicality and performance. Poloniex was always the biggest exchange in terms of volume and active users, which gives the exchange a direct advantage compared to other exchanges. If a trader or investor is attempting to place an order for a significant sum, Poloniex is likely the best exchange due to the volume of coins traded and volume on the active order books. This gives Poloniex the ability to leave large and institutional traders with very limited options in terms of finding a different exchange, because no other platform has the volume and trading activity that their position requires.
Due to the fact that that Poloniex is a licensed and regulated company within the United States Of America, institutional traders and new users alike feel as though Poloniex is a legitimate company that they can trust. Being a licensed and regulated company instills trust in customers that the exchange will be held accountable in the event of a theft of coins or a potential hack. Poloniex just began running into issues with the technical issues of their site within the past two months, and prior to that they always offered a fast and efficient platform. While many of the large traders have server setups that are close in proximity to the trading engiene to ensure that their orders are made reliably and quickly, users utilizing average hardware have been having to wait minutes for the site to load correctly and have normal functionality.
While it may seem like Poloniex simply needs to improve and upgrade their physical infrastructure like their servers, Poloniex must first consider the safety and security of any addition of infrastructure. This means that Poloniex doesn't have the ability to scale to meet demand efficiently, because every improvement must first be carefully inspected and be up to the standards set by regulations or their own policies. Due to the fact that Poloniex is a licensed company, they must take certain criteria into account when making decisions. It is very likely that they have relatively strict regulatory requirements surrounding their site infrastructure and security. This leads me to believe that Poloniex will eventually get caught up with demand, but that they will always be several months behind. I hope that they are updating their infastructure substantually so that it is 'future proof', but with the way things are headed I wouldn't even count on that anymore.
Why haven't more users left Poloniex for other exchanges?
Besides the fact that the choices of exchanges is still relatively limited, Poloniex has the most aesthetically pleasing and best interface of any exchange that I have seen. While this may not seem like it should be a huge deciding factor for a financial exchange, it is a much bigger factor than many realize. While Bittrex is a good alternative for average to small traders, the interface is nowhere near as convent or efficient compared to Poloniex. At least in my experience when I checked out the Bittrex platform after being a long term user of Poloniex, I was incredibly disappointed in the interface. While this shouldn't be a deciding factor when it comes to which platform to use to exchange cryptocurrencies, it can take some getting used to from Poloniex users.
In my opinion the biggest reason that many traders still remain on Poloniex is due to the fact that Poloniex is still where all the 'action' takes place. While Bittrex and Poloniex often have very similar prices on many coins, I have noticed that Bittrex typically follows the trend of Poloniex. Any of the very high volume and value traders that are trading in heavy volumes are still on Poloniex, which means that most of the major price movements and trends will likely originate their. Traders who have been around for awhile are so used to Poloniex that they may simply have no deesire to change things up, but I assume that the retention rate of new users on Poloniex is down signifcantly compared to what it used to be.
Who does the poor platform performance hurt the most?
In my opinion, the small and average traders and speculators are the individuals that are most affected by the platform delays and lags. High value and volume traders have proper hardware setups to ensure that they still experience a fast and efficient connection, but users with average setups simply cannot connect to the platform in an efficient way. Even though one of my most successful strategies is the strategy of short term speculation and playing on the margins, I have had to adjust my strategy greatly due to the incredibly poor performance of Poloniex.
There have been numerous instances where it would be a total of over 5 minuted from the point in which I wanted to open/close a position to the point when I was actually able to initiate the trade. With the levels of volatility that we have seen over the past several months, this makes it extremely risky to open a position which you need immediate access to. Instead of being able to watch the market very closely and close my position at a slight loss if the market turns, the risk of not being able to actually initiate an order for several minutes is still very high.
I believe that users are not going to put up with this forever, and are more ready than ever before to give a new platform or system a try. In my opinion, if this continues platforms like Bitshares and WAVES will continue to gain interest and practicality. While the switch to a decentralized exchange likely wont happen overnight, the atmosphere that Poloniex has created could be the perfect scenario for a decentralized exchange to gain success. While Poloniex must scale upwards very slowly and in a specific way, a platform like Bitshares could likely scale to meet increased activity and volume with a much better degree of ease. Graphene systems like the one that Bitshares runs on, are some of the most scale-able and capable blockchains in existence, and could likely handle additional activity much easier than a centralized exchange.
I really hope that you enjoyed this post, and I urge you to leave any comments, input, questions, ect. below. Thank you for reading!