The Safello Story: Smaller Crypto Exchanges Must Partner to Survive

In the dog-eat-dog world of cryptocurrency exchanges, smaller startups that don't attract the volume of megaliths like Binance, Coinbase and Kraken must band together to survive turbulent market cycles.

The Swedish cryptocurrency exchange Safello, founded in 2013, is one such startup.

Edge founder Paul Puey said the industry reminds him of Internet Service Providers in the '90s. He said he expects a shakeout in 2020, as more companies succumb to market volatility and risky business models.

He expects exchanges to become more akin to infrastructure providers for mass users, rather than front-end products.

Edge, a San Diego-based startup originally found in 2013 as Airbitz, has partnered with the incumbent Israeli exchange Bits of Gold, the lightning-friendly brokerage Moonpay and several other startups.

Puey is one of the rare Californian entrepreneurs who has paid his staff in bitcoin for years, now encompassing a team of 12.Both Edge and Safello have each raised nearly $3 million in venture capital so far and opted not to seek larger raises like Coinbase did during the 2017-2018 market cycle.

Coelho said his wallet startup noticed an increased percentage of downloads from European bitcoiners since integrating with Safello this autumn.

His team is already busy working on an integration with BTCPay Server, an open source payment processing project, and a partnership with Hodl Hodl.From Puey's point of view, such startup models allow teams to build out a "Broader product" despite limited engineering resources.

According to their founders, both Edge and Safello were profitable in 2018.

CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.