That's why you get outsiders on your exchange to make markets and you just charge commissions and access fees.

> Running a stock exchange is a hard business too; you are the market maker, you set the spread, and the most sophisticated investors in the world are trying to arbitrage you

Normal markets aren’t as centralised as crypto. The exchange and market maker are separate.

This is just not the case. At least on Binance there are number of market makers other than Binance itself and there is a lot of tech built around this. I guess every major crypto exchange after MtGox is as complex as normal markets.

It's pretty uncommon for exchanges to do all their market making directly, and many of the ones that do still rely on outside market making.

FTX was almost the exception since Alameda spun out of it IIRC

> pretty uncommon for exchanges to do all their market making directly

Point is, in real finance, it's pretty uncommon for exchanges to do any of their market making. Largely to ensure they can project confidence in crises. Market makers blow up. Exchanges shouldn't.

Do exchanges in real finance even have long term customer deposits?

> Do exchanges in real finance even have long term customer deposits?

Not really. They used to! (A hundred+ years ago.) But we learned that an exchange blowing up is a hell of a lot worse than a bank or broker. So most systems segregate the functions. (It's also not great to have an exchange making markets and thereby having a vested directional interest.)

Alameda was founded first.

> Now consider crypto, where your ability to pause the market or unwind clearly-erroneous transactions is reduced or removed.

These should be quite possible, no? Exchanges have mainteinance pauses now and then, however if they had them regularly that would drive customers away. Unwinding transactions inside crypto exchanges is also not unheard of I think.