In capital markets, spot trading data can only just result from stock exchanges such as Nasdaq and the brand new York STOCK MARKET, some derivatives data result from several financial market companies (CME Group, ICE or CBOE). On the other hand, the info available in the digital asset ecosystem is very fragmented and originates from many different digital asset exchanges.
At the moment, there are in least 20 reputable digital asset exchanges, some global plus some local, with real trading volumes and sufficient liquidity that are worthy of monitoring. Each digital asset exchange has its uneven degree of API, data positioning, meaning the data must be standardized and preprocessed in order for the exchange’s data to be similar. The pace limit of data requests also varies among different digital asset exchanges.
It takes big money to get data from stock exchanges, but digital asset exchanges will vary. Instead, these exchanges have a tendency to send out data cost-free for personal use through RES T and Websocket API. Although most digital asset exchanges provide historical data, they don’t provide historical order reserve data and historical OHLCV data (including starting price Open up, highest price High, minimum price Low and shutting price Close data, etc.).
Market individuals seek the assistance of digital asset market data providers mainly for the next reasons: the foremost is to aggregate the API of most exchanges into a thorough API. The next reason is to gain access to preprocessed historical datasets (order books and OHLCV). It really is impossible to gain access to both pieces of data through the API of the digital asset exchange, so these services are valuable for quantitative or algorithmic traders, hedge funds, investment managers and investment banks.
According to the customer group they serve, market data providers can be subdivided into two categories: retail level (serving retail investors) and enterprise level. Some enterprises cover these two consumer groups at the same time.
Retail service provider.
Unlike other asset classes, much of the interest in digital assets comes from retail customers-especially in the nascent stages of the industry. While the overall composition of market individuals has become significantly corporate within the last couple of years, retail-oriented systems have been pre-emptive and, in some instances, profitable.
Providers of retail services usually support more exchanges, aggregating all data in a straightforward, individual-oriented data dashboard graph. Most systems for retail consumers do not gather order books and deal data, but concentrate on price fluctuations and trading quantities. However, these providers do not preprocess the info, so they often can’t be used or relied on by experts. Similarly, the price index designed for retail investors is not rich enough for professionals.
As of March 2020, CoinMarketCap and CoinGecko, the two largest retail providers, employed 34 and 15 people, respectively. Before CoinMarketCap was acquired by Yuan’an, neither CoinMarketCap nor CoinGecko, founded in 2013 and 2014, raised any external capital, but gradually attracted more traffic and made a profit from advertising.
Network visits to retail data providers.
The biggest revenue for retail-oriented platforms originates from advertising, meaning traffic is most likely the most crucial indicator of success. Relating to SimilarWeb, CoinMarketCap is the most stopped at retail-oriented data site before half a year. From Oct 2019 to March 2020, CoinMarketCap had 207.2 million site visitors, almost five times that of CoinGecko, which got 42.9 million visitors.
Pain factors and problems of growth.
Data providers for retail traders usually need to integrate data from a huge selection of exchanges, and each exchange must be custom-made since there is no standard API,. Furthermore, exchanges often change their API, therefore the related integration must also be updated. All this takes a lot of time.
Another common problem is the need to unify the code for each asset. Many digital assets have different names and codes in different exchanges, and when price comparisons are needed, they need to be adjusted to uniform codes. In addition, some assets have the same code and cannot be seamlessly adjusted. The surveyed companies pointed out that each asset needs to be manually audited to avoid deviation.
The market of data websites focused on retail groups is bound by the amount of retail customers in the encryption field.
Because the beginning of 2018, when the amount of retail customers peaked, advertising as the primary supply of income has stagnated as traffic has plummeted. CoinMarketCap moved into the field of business activities in 2019. CryptoCompare has a SaaS product for corporations and organizes business activities. CoinPaprika recently launched its own digital asset exchange, which focuses on the European market.
With the development of futures and options markets, retail data providers will begin to fully integrate derivatives data, and their products will be more complex and sophisticated. Revenue diversification will continue to be sought after, and more and more retail-oriented data providers will explore and serve corporate customers at the same time.
The biggest player.
In terms of revenue, the leaders among enterprise market data providers are Kaiko and CryptoCompare.
France-based Kaiko, founded in 2014, has the largest standardized historical dataset of order publication data and deal data. Unlike a few of its rivals, Kaiko targets providing market data to capital marketplaces companies and companies.
UK-based CryptoCompare, that was also founded in 2014, is slightly cheaper but offers nearly as good data as Kaiko’s products. Unlike Kaiko, CryptoCompare also offers a retail department and generates income from the site’s activities to market advertising.
Kaiko and CryptoCompare are market market leaders in conditions of the mixture of data width and granularity.
CoinAPI also offers excellent data products, especially its historical quotation data, but its products are popular with designers, while Kaiko and CryptoCompare are mainly targeted at financial institutions.
Companies such as Digital Asset Data (Father), Coin Metrics and Amberdata have entered the market for a relatively short time, focusing on chain data. Their products may not be comparable to Kaiko, CryptoCompare and CoinAPI in terms of historical breadth, but they have low latency, few downtime and error correction mechanisms in providing standardized data, and really should catch up with time. Father, Coin Metrics and Amberdata provide data dashboard charts that customers may use to imagine data.
Pain factors and problems in growth.
Data providers that serve corporations often say that data standardization is their biggest problem because the info formats utilized by exchanges vary widely.
The exchange also frequently changes its API format, meaning the consolidation of data providers must be completed on an active basis.
Another significant problem faced by data providers is that it’s difficult to acquire an equilibrium between data structure redundancy and cost benefits, which is normally considered to take years to explore. Pre-emptive companies also need to educate potential customers about the importance of different types of data.
By far the biggest cost for such enterprises is labor costs. Compensation is the main expense subject for data providers. Data engineers or data scientists account for 80 per cent of the employees of such companies, with an annual salary of at least $90,000, which may cost $160000 in a few regions, with respect to the location.
Furthermore, hosting historical transactions and order reserve data occupies a lot of space for storage (a huge selection of TB), which increases overhead, which is also a significant barrier for new businesses to enter the forex market.
Based on the full total spending willingness of most potential market participants, the total market size of enterprise services market data providers in 2019 is approximately $4000. More specifically, this equates to an average of $20000 a 12 months for each of the 2000 market participants.
However, with the growth of institutional interest and the potential of the digital asset market, the number of market participants and the expenditure of each company are likely to increase significantly. The Block expects total spending to grow by at least 50 per cent in 2020.
Even if the potential market develops by 50% in 2020, the industry still has a long way to go.
For reference, FactSet, a traditional financial data company, reported revenue of $1.44 billion in 2019. What are the long-term potential and opportunities in this market? You can think about why some businesses, such as CryptoCompare, have diversified income models, in addition to concentrating on enterprise-oriented products, there are activities and advertising as a dietary supplement.
For a while, growth in the market will continue to be driven by capital allocators and speculators, such as hedge funds and family offices that integrate bitcoin into global macro strategies. In the long run, there will be three sources of growth:
The concern of traditional asset managers and related investments.
Decentralization of financial (DeFi) or sustainable development of open financial applications based on Ethernet Square.
Securities tokens may be adopted.
Securities tokens are digital securities that may be traded on new securities tokens exchanges rather than in traditional markets such as NASDAQ or the New York Stock Exchange. Companies such as Kaiko or CryptoCompare may take advantage of their current dominant position to slice away a bigger cake from this market in the future.
A pattern: enterprise-oriented data providers provide strong support for the derivatives market. So far, the service focus of these businesses has mainly focused on the spot market, but this situation continues to be changing. New companies such as Skew focus almost entirely on the derivatives market, but additionally it is adept at improving professionals’ knowledge of capital flows.
Another trend that will continue to grow is desire for data dashboards. These charts help users visualize and identify styles faster. This feature can help users make options faster and may also develop a degree of devotion to the dashboards of data providers.
With the institutionalization of digital assets in 2019, the demand for enterprise-quality data is growing rapidly. The financial infrastructure of the Bitcoin market has greatly matured, particularly with the growing participation in the derivatives market and the proliferation of handled solutions. These solutions entice more liquidity, which is what large organizations need to enter the market. Since 2019, Bitcoin has become one of the tools for macro traders to consider hedging.
In view of the wide variations in customer needs, enterprise data providers and retail providers are very different categories. That said, the prospective audience of business market data is still quite wide. In terms of average revenue per user, from low to high, the user foundation includes research businesses, universities, designers (applications and websites), algorithmic and global macro traders, hedge funds, trust services, professional service providers (accounting and tax advisers), liquidity providers (market makers, brokers and exchanges), investment managers and investment banks.
In short, customers want tools they are familiar with in other markets (stocks, bonds, foreign exchange, or commodities). These users need deal data and order reserve data, and offer low latency, ardization, st, two no downtime-way prolonged connection and error correction services. As a result, corporate and business customers do not give priority to the number of exchanges supported by providers, but focus on data providers that have strong support from exchanges and access to real trading volume and deep liquidity.
More demanding customers need real-time data dashboards and early warning tailored to their specific signals. Some customers need multi-year historical order publication data to test back their trading models or strategies.
The main business model of the market is Market data as something ((SaaS)). Most companies offer 2-3 levels of membership fees predicated on rate limit and data granularity. Furthermore to subscriptions, most data providers also sell personalized one-time data products to organization customers.
A robust price index is a required prerequisite for any trader or investment manager to use digital assets to create products. The weakness revealed by the underlying spot exchange at some point may be used to manipulate poorly organized price indices. It could also lead to invalid clearing in the derivatives market.
On May 17, 2019, a trader hung a $4300 BTC order on the Bitstamp exchange, triggering a six-point sell-off spree, while the derivatives exchange BitMEX closed its long position worth $250 million because of a flaw in the design of the price index.
At the time, half of BitMEX’s index was made up of spot prices on the Bitstamp exchange, while Bitstamp’s trading volume was actually several times smaller than that of BitMEX itself.
Different spot exchanges choose different parameters to prevent some orders from having too much impact on their market, but there is no solution to ensure a perfect preventive effect. The exchange’s efforts include speed bumps, support for hidden orders (to absorb instantaneous market volatility), maximising order size, setting thresholds for large purchases, and market cooling-off intervals.
A robust price index can resist the manipulation of weighted averages and active exclusion requirements, and price outliers can be automatically detected and excluded from the calculation. A robust index weights differently based on several variables, including amount, liquidity (measured by order book depth), and historical deviations from the median.
If the liquidity of an exchange is low at some point, the impact of rapid price changes will be magnified, in which case the weight of the price needs to be greatly reduced or not included in the index calculation at all. To prevent mistakenly passing the liquidity test, the soundness index should also check whether an order book has not been delayed to prevent it from mistakenly passing the liquidity test.
The business model for creating an index includes charging a smaller upfront and then sharing the income. CryptoCompare, Brave New Coin, CME provide agency, Kaiko, Deribit and TradeBlock-level indices.
Business merger and acquisition activity.
Yuan an recently acquired CoinMarketCap, the first major acquisition of an electronic asset data service provider, with a reported deal value of $400m. Qian an completely is the owner of CMC, but it is reported that CMC will continue steadily to operate as another entity.
The acquisition is also the 3rd most significant in conditions of value in the whole digital asset Bitstamp, following the acquisitions of Poloniex and sector. CoinMarketCap attracts a great deal of traffic, even more than Yuan an, which is suspected that it’ll turn into a marketing and customer route for Yuan’an. Yuan an also obtained DappReview, a Chinese language data start-up that paths data from decentralized apps.
In early May 2020, TokenAnalyst announced that it could turn off its service plus some of its teams joined up with Coinbase. It isn’t clear whether the company was acquired.
In January, Anchorage announced the acquisition of Merkle Data, a data company focused on liquidity assessments and asset quotes. In March 2017, Kraken acquired Cryptowatch, a chart and transaction data platform, and hired its founder to lead the development of the Kraken interface. In January 2017, CoinDesk acquired Lawnmower, a market data and investment tools company, and hired the whole team.
Recent institutionalization in this field, as well as the difficult financing environment caused by the global COVID-19 epidemic, may lead to further integration of digital asset data and infrastructure.
Digital asset data is likely to become a specific sub-industry in the broader field of encryption, giving birth to unicorns like other ecosystems. So far, only exchanges, token development studios and mining chipmakers have produced profitable companies in the encryption sector, with unicorn-level valuations. Logically, data and infrastructure companies will follow.
Global spending on financial market data has exceeded $30 billion in each of the past two years, the highest level since the 2008 financial tsunami, according to a report by consulting firm Burton Taylor. Bloomberg takes the lead with a market share of about 33 per cent, followed by Luft (Refinitiv), S & P; Global Market Intelligence), Moody’s Analytics (Moody’s Analytics) and FactSet.
Over the past few decades, data providers in traditional financial marketplaces have been merging and integrating. The digital asset data industry will older similarly. Healthy competition within the industry, as well as the pressure of the COVID-19 epidemic, may speed up the speed of maturity in the field, and we’ll see that data and facilities providers with insufficient differentiated characteristics of product pieces will be obtained or expire of competition. non-etheless, the view for digital asset data and facilities is bright because of the strong momentum produced by more attention and interest from financial fintech companies, traders and establishments.
About the survey publisher.
BRD is a worldwide company focused on getting the financial services and infrastructure generated by blockchain into use today. Founded in 2015 and headquartered in Zurich, Switzerland, BRD is a venture-backed company that has raised $56 million from SBI Holdings, Ripple and other top investors specializing in banking, blockchain and fintech. BRD’s products include both Blockset by BRD, for the enterprise market and BRD mobile apps for consumers. Blockset is a new blockchain infrastructure hosting platform that allows enterprise development teams to create better applications at a lower cost. The BRD mobile app provides consumers with the easiest and most secure way to buy and protect bitcoin and other cryptocurrencies. BRD has more than 4 million users worldwide, accumulatively protects approximately $6 billion in encrypted property, and is one of the fastest growing blockchain-based financial applications for everyday consumers (the top 10 financial applications in 71 countries).