Data is Key to Differentiate Digital Asset Platforms From Each Other
The recent challenges that cryptocurrencies like Bitcoin are facing, combined with the downward trend of the Terra-Luna stable coin, has forced platforms and exchanges to reassess themselves after a long run of gains. The market’s recent ructions have also highlighted the importance of data in a marketplace that has usually been characterized by large fragmentation of liquidity, which can make it difficult to derive a holistic view of the sector as a whole.
This was one of the key messages from a recent panel discussion on digital investments at Consensus 2022, an annual crypto technology conference, which included Jeff Dorman, CIO at Arca; David Duong, Head of Institutional Research at Coinbase; Liz Young, Head of Investment Strategy at SoFi; and Taylor Culberston, CEO at Hedgehog.
Although the panel addressed digital investments, the discussion was primarily focused on the recent market turbulence, with panelists sharing their outlook on inflation, rising interest rates, the prospect of heightened regulatory scrutiny of crypto markets, and how portfolios will be affected by the recent volatility.
The panelists stated that vast amounts of data is able to be derived from order flows and chain analysis, but emphasized that it remains a challenge to understand what’s driving market dynamics without getting access to data directly from crypto trading platforms.
As more and more institutional players enter the digital assets segment, they bring with them an expectation of data and analytics that can give them insight into these market dynamics. But the marketplace for digital assets and crypto is massively fragmented, presenting institutions with the challenge of ensuring they have quality data from the various exchanges, wallets and trading platforms to support their decision making.
In this environment, the ability of crypto exchanges and platforms to offer the kinds of data and analytics institutional traders are accustomed to receiving in other asset class markets like equities and foreign exchange, helps differentiate their offerings, helping to attract and retain institutional liquidity.
Moreover, as firms come to expect risk-related capabilities like KYC and seamless client onboarding, a well-defined data offering can help demonstrate strong governance. And finally, adding data and value-added services like analytics can give crypto exchanges a new source of revenue, giving them much-needed diversification for when times are more challenging.
For these exchanges, offering data as a service or a product can extend the customer relationship and provide customers with a broad array of data and intelligence to make smarter trading decisions. As the institutionalization of digital assets accelerates, so does the need for enterprise-grade data and the tools to support it.
One such tool is TickSmith’s Data Web Store platform, which gives exchanges complete control of their data by allowing direct delivery of their services without the need for third-party redistributors, minimizing barriers to entry and streamlining data discovery.
The impact can be significant. Chicago-based CME Group, the world’s largest derivatives exchange operator, once regarded its data services as a necessary cost. After implementing TickSmith’s Data Web Store, CME Group saw a 50% increase in consumption of its data services.
More recently, BlockFills, a global cryptocurrency and digital asset technology company, commercialized their digital asset and crypto market data by leveraging the Data Web Store. BlockFills’ institutional clients now have access to reliable market data that can offer insights into market dynamics and assist in executing trading strategies through the platform.
Recent market turbulence may have temporarily spooked crypto markets. But for digital assets trading platforms to add value, mitigate risk and drive new revenue streams even during times of economic uncertainty, they need to offer their clients the data, analysis and insights they need to make informed market decisions.