Earlier this week we published the above landscape of our industry, with all of the companies currently servicing the blockchain space. The research that went into it revealed some interesting trends in the way the blockchain industry is evolving.
Things only have value if people believe they do, which is a bit circular. It forces blockchains to first focus on price to ensure that their incentives can function.
Today, an increasing number of projects are able to look beyond price and investor relations, to focus on the next stage of growth: acquiring more customers. For that they need deeper analytics to evaluate whether their networks are delivering value to each stakeholder. Indeed this has caused the demand for more advanced intelligence solutions to increase. Just yesterday, we announced our partnership with Prysm Group to create a new set of dashboards focused on these types of economic insights.
Binance, OKEx, Huobi, and Bithumb all announced they were in the process of testing their own blockchain platforms this year. The move is a way to consolidate their positions as industry leaders and build a moat around their respective businesses. By developing a native blockchain, to which it invites projects to issue digital assets, an exchange is more likely to retain trading volumes – a critical determinant of their top line.
In a similar move, Binance acquired CoinMarketCap (CMC) earlier this year for $400M. With its extensive data on prices, volumes and other metrics for 5,290 cryptocurrencies, CMC has served as a trusted source of information for retail investors since its launch in 2013. The deal has caused many to question the intentions of Binance, which now has surveillance abilities over competing exchanges.
In 2018, we saw institutional investors surpass high-net-worth individuals (HNWIs) for the first time in terms of purchasing cryptocurrencies. It’s fast becoming part of a diversified investment strategy.
The speed of professionalization in the cryptocurrency market has ramped up since, with much of the recent growth driven by more efficient financial infrastructure. As of today, the total market capitalization for these digital assets in circulation is just under $300bn.
With a clear need present, crypto asset management tools are quickly emerging to assist retail investors with their exploration of the market. We see this in the growth in numbers of companies focused on investor insights, from Crypto Briefing founded in 2017, to Xangle and Digital Assets Data in 2018.
We also see it in the series of acquisitions from centralized exchanges who are working to provide institutional traders better ability to customize the front end of their trading platforms to bridge the gap with traditional finance. Kraken and Bittrex acquired trading data platforms Cryptowatch and Tradedash in 2017 and 2019 respectively.
Regulatory uncertainty hangs like a cloud over the industry as it aims to attract conventional investors. At the same time, it’s been preventing the use of digital currencies to deliver fast relief to the millions of people currently unemployed due to the pandemic. As a result, governments are accelerating the process for adoption, by working on new regulation including a “Crypto-currency Act of 2020”, to advance the federal oversight of digital assets.
“The atmosphere is such that things that seemed far-fetched are now in the conversation,” said Bharathan, who chairs a group working on a digital coin that could be used by central banks.
Globally, governments and financial institutions are also spending considerable amounts of money to fund compliance solutions. NY based Chainalysis for instance managed to raise a total of $53.7M, some of which came from the U.S., the U.K. and more recently Japan.
The value of assets for all stablecoins surpassed $10 billion just yesterday, having surged by over 70% in just two months, according to Coin Metrics. The momentum is of course not lost on the analytics industry, with companies such as Chainalysis announcing its regulating of stablecoins, and in depth research working to explain this “invasion”.
Coindesk argues stablecoin supply growth comes as more cryptocurrency traders choose to trade alternative cryptocurrencies (or altcoins) using dollar-backed digital tokens instead of bitcoin.
As volumes increase and hype builds, questions still beg how exactly these stablecoins are being used. Are they driving DeFi? Is the ecosystem still dominated by centralized exchanges? What regions are adopting at the fastest rates, and which coins control the market? With our process of ingesting and labeling blockchain data, we’ve been able to join the party by decoding stablecoin on-chain behaviors. More on that coming soon!