Despite ongoing pockets of scams and opaqueness in the cryptocurrency markets, a flurry of recent developments are proving that the markets are maturing. Exchanges are self-regulating, on-chain data analysis is exposing curious events (i.e., Coinmetrics spotlights Ripple), and institutional products are gaining favor with regulators.
For investors, better maturity means less wash trading and trans-fee mining on major exchanges among a host of other advantages, including, eventually, less market volatility.
As we continue into a new landscape for crypto markets, where many altcoins will likely be purged, it is relevant to survey the emerging field of crypto investment tools and products available to investors. In particular, the areas of institutional products and analytics providers are rapidly gaining momentum among capital firms as the next wave of promising products in an otherwise convoluted market of digital assets.
A Growing Ecosystem for Investors
Whereas early 2019 saw the hype machine around security tokens hit a fever pitch, only to fade away into the background, the more realistic, fundamental developments have centered on building more sophisticated crypto-oriented financial products. In particular, the explosion of interest and volume for bitcoin derivatives following the success of BitMEX and exchanges like OKEx that offer bitcoin swaps.
However, pending the recent probe by the CFTC into BitMEX, the new wave of derivatives platforms, mostly futures so far, are targeting regulatory compliance.
For example, ErisX, a Chicago-based, physically-delivered bitcoin futures platform, recently received the green light from the CFTC to launch their platform. Similarly, LedgerX is currently the only regulated bitcoin spot, futures, and options platform in the US following its CTFC approval for bitcoin-settled futures last month.
Perhaps the most high-profile of the bunch is Bakkt, the NYSE-backed physically delivered bitcoin futures platform, recently began testing in its much-anticipated run-up to launch pending regulatory approval.
Outside of the US, crypto derivatives platform FTX is making noise, partnering with the likes of Circle, and is supplemented by successful quantitative trading firm Alameda Research.
The institutional developments don’t just stop with crypto derivatives products either. With more obscure, ambitious “infinite volume” virtual trading platforms like Morpher already in testing, it is likely we will continue to see more clever takes that merge conventional finance with blockchain-oriented technologies throughout the rest of 2019.
Parallel to the rise in financial products for investors has been the transition to market maturity, taking the shape of better transparency. Namely, with better market metrics (i.e., on-chain metrics), boutique analytics services, and coupling of transparency initiatives with comprehensive analysis engines.
For example, CoinMetrics is progressively becoming one of the most popular on-chain metrics and charting tools for industry observers, cited regularly by analysts like David Puell, head of research at Adaptive Fund. CoinMetrics now provides weekly reports via its newsletter that are highly insightful and the company recently made noise for highlighting the misleading numbers of Ripple’s escrow system involving XRP.
Investors are taking notice of operations like CoinMetrics too. For example, Digital Assets Data, an institutional-focused crypto market data platform, just completed a $3.2 million funding round led by venture capital firm North Island, among others. Additionally, Crypto Briefing, the highly popular independent news and analysis outlet, recently closed a successful seed round spearheaded by DHVC, Fenbushi Capital, and more.
Crypto Briefing’s fundraising round also preceded the launch of their institutional analysis product, Simetri, which focuses on comprehensive analysis and indicators for projects in the space, removing the veil of opaqueness plaguing the industry. Crypto Briefing is even a partner of CoinMarketCap’s (CMC) transparency push with the DATA Alliance, has partnered with CoinGecko, and is embedding Simetri into CMC’s token profile pages.
Beyond institutional products, nuanced analysis is much more commonplace now that there is some context on crypto markets and insights into how to leverage data. For example, boutique market analysis firms, like Skew Markets, provide in-depth purviews into bitcoin futures and perpetual swaps (i.e., BitMEX) market trends.
All of these developments supplement the narrative that bitcoin, and the broader crypto markets, have come a long way since the days of Mt. Gox. Regulatory clarity is still desired in many regions, particularly the US, but that has not stopped a wave of companies from taking action and strengthening market maturity themselves.
Once institutional entrance into crypto is hitting on all cylinders, we can expect regulatory certainty to materialize. Until then, the growing suite of tools and institutional products at the disposal of investors and analysts is providing the glimpse of hope that crypto markets may eventually evolve into a full-fledged conventional financial alternative.
