Earlier this week we published a landscape of our industry, with all of the companies currently servicing the blockchain space. Researching who had joined the space when, and what role they play now, revealed some interesting trends in the way the space is evolving. Here are some key takeaways:
- Leading centralized exchanges are developing their own blockchains.
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.
- More blockchain projects are requiring BI analytics to grow.
When they first launch, blockchain projects need to care about the price of their native token because their network has to have value for their incentives to work properly. Things only have value if people believe they have value, which is a bit circular.
What we’re seeing is an increasing number of projects now looking beyond price and investor relations, to focus on growing their networks by acquiring more customers. For that they need deeper analytics to evaluate whether their networks are delivering value to each stakeholder, which is why we’re seeing the market for blockchain intelligence and token economics grow.
- Professional investors are flooding the crypto market.
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 professionalisation 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 capitalisation 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.
- Governments are investing more time and money in crypto regulation.
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.
We’re also seeing governments and financial institutions spending considerable amounts of money to fund compliance solutions, especially in North America, Europe and Israel. The NY based company Chainalysis, leader in compliance solutions, managed to raise a total of $53.7M, some of which came from the U.K. and more recently Japan.
- Everyone is focusing on stablecoins.
From regulatory oversight (Chainalysis was quick to support many different stablecoins), to block explorers (Blockscout only provides data for xDAI stablecoin) and in depth research, we’re seeing an impressive shift in focus towards stablecoins. 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.
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?