TokenInsight: Overview of the cryptocurrency exchange industry trends in the third quarter

Bitcoin prices fluctuated little in the third quarter, and cryptocurrency transactions continued to shrink.

Original title: “2020 Q3 Digital Asset Spot Exchange Industry Research Report | TokenInsight”
Written by: TokenInsight

Summary of main points

1. DeFi impact? In this quarter, BTC transaction volume fell to 31.4% of the total spot transaction volume, which was a drop of about 8% compared to 39.6% in the previous quarter. Tokeninsight analyzed that the decline in the proportion of BTC transaction volume was in line with hotspot sectors such as DeFi and Polkadot. Related to the emergence of.

2. Abnormality: The authenticity of transaction volume has always been one of the pain points of the digital asset trading industry. In the monitoring of TokenInsight Research this quarter, some currencies of some exchanges showed abnormal trading volume performance on a few specific days.

3. Million: The output value of the top 20 countries or regions in the spot market visitor output exceeded 1 million, and a small share of countries accounted for 44% of the visits.

4. -27%: The total quarterly spot transaction volume of digital assets in the third quarter of 2020 is $4 trillion, which is 26.53% lower than the second quarter of 2020. The market is affected by hotspots.

5. 22%: The platform currency grew steadily this quarter, with an average increase of 22%, of which the Binance exchange platform currency BNB increased by 85%.

6. $340 million: The estimated fee income of centralized spot exchanges this quarter reached $336 million, which is still the industry’s profit center.

7. Strict: Since this quarter, US regulatory related policies have frequently appeared. The compliance of the digital asset trading industry is valued by government agencies such as the SEC. Exchanges are paying more attention to compliance.

8. 12.3 times: The trading volume of decentralized exchanges continued to rise this quarter, with the trading volume reaching $46.2B, which was 12.3 times the previous quarter.

9. Correlation: Different from the previous quarter, the spot transaction volume of the whole market showed a more obvious correlation with the price of Bitcoin in this quarter. It is worth noting that this quarter Bitcoin price and gold price showed a correlation of 0.82, which is more obvious than the correlation with the Nasdaq index.

In the third quarter of 2020, the market ushered in a “small bull market” triggered by DeFi. Just as we predicted in the “DeFi Industry Report for the First Half of 2020″ that the “crazy” of DeFi will most likely end within a quarter, in fact, the DeFi boom will end sooner than expected. However, the popularity of “liquid mining” brought about by the DeFi project has brought new trading volume to the spot, and also driven the skyrocketing of ETH in the third quarter. This phenomenon confirms that the opening of the bull market must rely on the spot market, on the participation of users with a larger base and lower barriers to participation. One of the reasons for the bursting of the DeFi bubble is that there are actually certain thresholds for participation in DeFi projects. Another important reason is that the tokens issued by DeFi projects are mostly governance tokens; the service level that the project itself can provide is limited and cannot support the rapidly growing market value; there is no channel for slow elimination of the bubble in the short term, and it can only start again after it bursts.

The transaction volume of decentralized exchanges in DeFi achieved rapid growth in the third quarter. The wealth effect brought by DEX is one of the core reasons. Different from the previous primary market to the secondary market of the exchange, DEX has opened up a “1.5 level market” for users. This gives ordinary users the opportunity to discover high-quality projects that have not yet landed in the secondary market, and obtain huge wealth effects through early research investments. In addition, the more important point is that the emergence of DEX has changed the relationship between the Token project party and the centralized exchange, making the project party no longer in a completely disadvantaged position. This change in relationship is essentially a change in the business model of the Token project party since 2016/2017, which has a profound impact on the development of the industry.

In the spot market, public chain projects such as Polkadot will also benefit from the development of DeFi. Soon we will see many “imitation/plagiarism” Ethereum DeFi projects “committed to Polkadot ecology” in the market. Even this situation will appear on Filecoin. We hereby remind users that the DeFi ecosystem of Ethereum is relatively healthy. Different projects are linked to each other and many projects have built the underlying infrastructure, so there is the soil for DeFi to flourish. But other public chains are not, please be careful!

In terms of mainstream currencies, we have also seen that traditional institutions are increasingly interested in Bitcoin and Ethereum. The correlation between Bitcoin and other digital assets has begun to decrease, and it is no longer “the same rise and fall”. After the institution purchases mainstream currencies, it will basically not purchase other types of assets, and will not use the purchased BTC/ETH to purchase other assets. Prior to this, this behavior was very common for ordinary users. The difference in investment logic between ordinary users and institutional users was the main reason why BTC “cannot bring” other assets.

For the third quarter update, you can log on to TokenInsight’s official website: www.tokeninsight.com to view complete visual real-time data on the secondary market spot trading perpetual contracts anytime and anywhere.

For more information on the spot market in the third quarter, please Enjoy the Report.

Industry Tracking

July 2020

1. BitZ Exchange obtained the Canadian MSB license. So far, BitZ has both the US MSB and Canadian MSB licenses;
2. The HBTC public chain is in the code test and audit stage;
3. Poloniex added two new digital assets related to the US presidential election;
4. The executives of Coinsquare, a Canadian digital asset exchange, resigned after reaching an agreement with the Ontario Securities Commission;

August 2020

1. Kucoin announced the extension of the 90 million KCS lock-up period, and the public chain mainnet was launched on Q4;
2. The listing on the INX Exchange has completed the regulatory requirements for raising US$7.5 million in legal tender, and has begun to accept digital assets;
3. Huobi Global Station established a “Global Observation Area” and launched the first batch of projects YFII and YFI;
4. Coinbase announced that Marc Andreessen, a partner of the American venture capital firm a16z, and Gokul Rajaram, an executive of Door Dash, have joined the Coinbase board of directors;
5. Two managers of the South Korean exchange Komid were sentenced to imprisonment on suspicion of fraud and embezzlement of US$25 million;
6. South Korea’s third largest digital asset exchange, Coinbit, was seized and investigated by South Korean police for allegedly inflating trading volume and manipulating market prices;
7. Coincheck, a digital asset exchange under the Monex Group, announced the launch of Japan’s first IEO in cooperation with Hashpalette;
8. Coinbase released the ERC-20 standard token listing security review guide;
9. The digital asset trading platform OKCoin Japan launched spot trading services on August 20, and launched the first batch of spot trading pairs in 4 currencies including BTC;

September 2020

1. The digital asset exchange KuCoin was hacked, and the private key of the hot wallet was leaked resulting in the theft of $281m. The stolen funds were frozen by multiple platforms and $140 million was recovered;
2. Poloniex exchange suffered deposit delays, and ETH, ERC20, TRX, TRC10 and TRC20 wallets were disabled on September 3 for system maintenance;
3. ZB China Currency Exchange experienced data abnormalities in mid-September and was down for 48 hours;
4. Binance launched the decentralized stablecoin system “Venus” based on Binance Smart Chain;
5. The European exchange ETERBASE was stolen and lost more than 5 million US dollars;
6. In September, the average website traffic of the digital asset exchange dropped by more than 10% from the previous month, and the Uniswap website traffic increased by more than 40%;
7. Coinbase announced support for the staking of Cosmos token ATOM.
8. Bittrex will stop providing services to users in countries such as Belarus and Ukraine.

Ecological picture of the digital asset exchange industry

Transaction dynamics

Market volume dynamics

As of September 30, 2020, TokenInsight has included and studied more than 300 digital asset spot exchanges. Due to the unstable data of some small exchanges or the fact that it is difficult to determine the authenticity, and some exchanges have abnormal trading volumes during the quarter, this quarterly report includes 266 exchanges. It includes 241 centralized exchanges and 25 decentralized exchanges, in order to conduct a more comprehensive and accurate research on the industry.

The digital asset spot market rebounded in July with the end of the Bitcoin sideways period, and the quarterly total spot trading volume reported $4 trillion

In the third quarter of 2020, the total volume of digital asset spot transactions was 4 trillion, a year-on-year decrease of 12.15% from the third quarter of 2019, and a month-on-month decrease of 26.53% from the second quarter of 2020.

20Q3 full market spot transaction volume and BTC price, source: TokenInsight

The correlation coefficient between spot transaction volume and BTC price in this quarter was 0.61, which changed from an insignificant negative correlation in the previous quarter to a more obvious positive correlation. The average monthly transaction volume in this quarter reached $1,333B, which was less than the monthly average in the second quarter ($1,814B). However, the transaction volume in August and September was significantly better than that in June.

“In terms of spot, DeFi has stirred up some sentiment, which in turn drives the entire market.”

– AAX CEO Thor Chan

The rebound in trading volume is closely related to the price changes of BTC, and the money-making effect brought by BTC price fluctuations has stimulated market activity. In late July, BTC ended its narrow range shock from the end of May and experienced price increases, but prices fell again in early September. At the same time, the spot transaction volume of the whole market fluctuated accordingly. The transaction volume in August increased by more than 45% compared with July, and fell by 4% in September.

19Q3-20Q3 quarterly full market spot trading volume & 20Q3 month full market spot trading volume, source: TokenInsight

At the same time, hot spots such as DeFi and Polkadot were frequently launched this quarter, which drove market sentiment to a certain extent. But as the core of the digital asset world, BTC’s price trend is still the key to affecting transaction volume.

There is a certain degree of linkage between the digital asset spot market and the traditional financial market, but the transaction standardization is far less than that of the traditional market, and the problem of abnormal transaction volume continues to exist

In this quarter, the BTC price index and the Nasdaq Composite Index (^IXIC) maintained a significant positive correlation in the previous quarter (correlation coefficient: 0.75); it is worth noting that the BTC price index in this quarter showed a strong positive correlation with the price of gold (Correlation coefficient: 0.82). However, there is no significant negative correlation between the BTC spot trading volume and the Nasdaq Composite Index component trading volume (correlation coefficient: -0.24). Compared with the previous quarter, the correlation between the index and trading volume has declined.

The quarterly correlation coefficient between the Nasdaq Composite Index and BTC price: 0.75

Quarterly correlation coefficient between gold price and BTC price: 0.82

20Q3 full market spot transaction volume and BTC price, source: TokenInsight

In addition, compared with the standardization of traditional financial markets, the authenticity of transaction volume has always been one of the pain points of the digital asset trading industry. In the monitoring of TokenInsight Research this quarter, some currencies of some exchanges showed abnormal trading volume performance on a few specific days. For example, on July 11 and 13, the trading volume of an exchange in F surged to 100 billion, and the abnormally high volume basically came from Zcash transactions; while an exchange in C was on September 13 and 14 Abnormal transaction volume of Monero, Zcash and Dash occurred.

Trading volume abnormal currency trading volume trend, source: TokenInsight

The proportion of BTC spot trading volume continues to decrease, and hot sectors have driven some currencies to achieve above-average growth in trading volume

In this quarter, the BTC spot transaction volume fell to 31.4% of the total market spot transaction volume; of which, September only accounted for 30.4%. TokenInsight Research analyzed that the decline in the proportion of BTC transaction volume is related to the emergence of hot sectors such as DeFi and Polkadot this quarter. The continued popularity of DeFi in this quarter has created many options for achieving high returns in the market, and the transaction volume of such currencies has grown far above average this quarter.

20Q3 BTC trading volume accounted for the proportion of total spot trading volume, source: TokenInsight

Top ten digital asset transactions in the third quarter, source: TokenInsight

When the spot transaction volume of the whole market rose in July and August, the increase of Bitcoin was slightly lower than the market average. In August and September, when spot transactions contracted, Bitcoin’s decline was slightly higher than the market average. In contrast, as the underlying foundation to support the DeFi ecosystem, Ethereum ‘s transaction volume changes are better than the market average. At the same time, the trading volume of Chainlink, the DeFi oracle project, rose by as much as 151% in July and August, and Compound continued to increase its trading volume when the market volume fell in August and September. In addition, the newly launched Polkadot increased by 154% in August and September this quarter.

20Q3 Monthly change rate of spot trading volume of five digital assets, source: TokenInsight

Trading volume dynamics on centralized exchanges

Overall trading performance

This quarter, the volume of centralized spot exchanges dropped to $3.73 trillion, and the estimated fee income reached $336 million

In the third quarter of 2020, the spot trading volume of market-wide centralized exchanges reported $3.73 trillion[1], a 29% decrease from the previous quarter ($5.25 trillion), with an average handling fee of three ten thousandths and a real volume level of 30 % Calculation, the estimated fee income is $336 million. Despite the decline in trading volume, the trading volume of top-ranked exchanges generally ushered in growth, showing the intensified industry competition.

[1] The statistics of centralized exchanges do not include exchanges whose types of exchanges are still controversial, but the statistics of total market volume include such exchanges. Therefore, the total transaction volume of centralized exchanges and decentralized exchanges reported in this report is less than the total transaction volume data of the entire market in the previous article.

20Q3 centralized exchanges ranked top 25 in spot trading volume, source: TokenInsight; *Trading mining and other modes have a certain impact on TI’s volume research model

20Q3 Centralized Exchange Spot Trading Volume and Confidence Interval & 20Q3 Monthly Centralized Exchange Spot Trading Volume, Source: TokenInsight

Key exchange performance

Intensified competition in the digital asset spot industry, leading exchanges have stronger market expansion potential

In order to eliminate the interference of false transaction volume on data statistics, TokenInsight Research selected key exchanges through the following measurement standards:

1. The TokenInsight exchange rating of the spot exchange in the third quarter must be above B;
2. In the results of TokenInsight’s volume monitoring, the average real trading volume of the spot exchange in the third quarter of 2020 is higher than 80% and the real trading volume ratio has always been maintained at more than 60%;
3. This spot transaction has all public APIs that can be used to trace back the volume history.

In the end, a total of 12 spot exchanges passed the screening, and these exchanges will be the focus of this quarterly report; they are: Binance, Huobi Global, OKEx, Coinbase Pro, Bitstamp, Bitfinex, ZB, Liquid, Poloniex, Gemini, DigiFinex , BitMax.

“This year is the first year of the second-generation blockchain infrastructure. After the infrastructure is complete, the ecology will usher in greater space.”

– Huobi CEO Qi Ye

“Binance’s growth depends on the overall layout, such as the acquisition of CMC traffic portals and the earlier deployment of DeFi. More importantly, we have learned the advantages of DeFi itself and provided users with more financial products and services.”

– Binance Co-founder and CMO He Yi

The daily spot trading volume of the aforementioned exchanges in the third quarter of 2020 is shown in the chart below.

Spot trading volume performance of key exchanges in 20Q3 (unadjusted), source: TokenInsight

Monthly volume performance of key exchanges in 20Q3 (unadjusted, including derivatives), source: TokenInsight

The proportion of spot transactions on key exchanges this quarter increased from 11% in the previous quarter to 23%, and the proportion of key exchanges in the derivatives industry remained basically unchanged. The single spot exchange (Binance) with the highest trading volume increased its market share from 2.69% to 7.66%, achieving the highest increase in market share among the market-wide centralized exchanges, followed by Huobi and Coinbase.

Key exchanges (derivatives), trading volume ratio & 20Q3 key exchange market share (in terms of trading volume), source: TokenInsight

Top 3 market share growth & 20Q3 key exchange market share (in terms of transaction volume), source: TokenInsight

In this quarter, the spot trading volume of digital assets in the entire market was 1.48 times that of derivatives, a slight decrease (-0.4x) compared with the previous quarter. At the same time, the total market contract volume was 0.68 times the spot volume, higher than the previous quarter.

20Q3 Digital Asset Spot and Derivatives Trading Volume & 20Q3 Digital Asset Spot/Derivatives Ratio, Source: TokenInsight

However, for the top three key exchanges (in terms of transaction volume) where the trading volume of derivatives has long been higher than the volume of spot trading, the market has experienced greater volatility this quarter. The average trading volume of the top three derivatives on key exchanges was 2.17 times that of the spot trading volume, which was 2.23 times lower than the previous quarter.

2020 Q3 Top 3 key exchanges (in terms of volume) derivatives/spot ratio, source: TokenInsight

At the same time, different exchanges have different emphasis on the derivatives market, resulting in large differences in the ratio of contract and futures trading volume to spot trading volume.

Among the top three key exchanges, Huobi’s contract and futures trading volume is relatively balanced, both about 1.5 times the spot trading volume, showing Huobi’s comprehensive layout in derivatives. Due to Binance’s late entry into the delivery contract market, the current volume of delivery contracts is far lower than its spot volume, accounting for only 6.9% of its spot volume; OKEx has less perpetual contract trading volume and is spot trading volume 54% of that is in line with the market average.

Top three key exchanges in 20Q3: Perpetual/spot and delivery/spot ratio, source: TokenInsight

“Centralized exchanges and decentralized exchanges are different tracks or ports for trading business. At present, in terms of mainstream currencies or stable currencies, some decentralized exchanges have advantages, and some large DEXs have even more liquidity. Centralized exchanges, we believe that there will be a lot of business happening on decentralized exchanges in the future.”

– HBTC founder & CEO Ju Jianhua

Decentralized exchange trading volume dynamics

The trading volume of decentralized exchanges continues to rise, with the trading volume reaching $46.2B this quarter, which is 12.3 times the previous quarter

Monthly transaction volume and total change, source: TokenInsight

In the third quarter of 2020, DeFi continued and carried forward the hot market in June. In this context, the trading volume of decentralized exchanges has steadily increased. The total transaction volume of the 25 major decentralized exchanges (excluding Etherflyer and Dex Trade[2]) surveyed by TokenInsight Research this quarter reached $46.2B, accounting for 1.24% of the total spot market transactions. The volume of decentralized exchanges increased by $42.45B this quarter, with an average monthly increase of 140.5%, which was 7.35 times the average monthly increase of spot trading volume on centralized exchanges.

[2] The statistical scope of decentralized exchanges in this quarter has been adjusted compared with the previous quarter, and does not cover the types of exchanges that are still in dispute

20Q2 Comparison of trading volume between decentralized exchanges and centralized exchanges, source: TokenInsight

Among the 25 decentralized exchanges, Uniswap V2 has an absolute advantage in trading volume, accounting for up to 50%, while the three decentralized exchanges occupying the top three in trading volume account for 74%. In contrast, the competition in the spot market of centralized exchanges has eased slightly, with only the top three exchanges in terms of trading volume accounting for only. At the same time, there were 8 exchanges with trading volumes of more than US$1 billion in this quarter, compared with zero in the previous quarter.

20Q2 Decentralized Exchange Trading Volume, Source: DeBank, TokenInsight

At the same time, a number of decentralized exchanges experienced rapid growth this quarter. Except for the newly launched decentralized exchanges in the second and third quarters, compared with the previous quarter, the decentralized exchanges with the largest increase in transaction volume in this quarter were Balancer, Curve, 1inch, 0x and Tokenlon. Among them, the balancer transaction volume increased by 27.8 Times. The spot trading volume of centralized exchanges increased by only 1.8 times, which was less than 7% of Balancer.

20Q3 new online decentralized exchange trading volume, source: DeBank, TokenInsight

In addition, a number of new players entered this quarter. Among them, Sushiswap, as a fork of Uniswap, has received enthusiastic attention from the market once it is launched due to the introduction of governance tokens and the introduction of liquidity mining, robbing Uniswap of a large amount of liquidity. The latter also launched a governance token in September, which consolidated its leading market position. Compared with centralized exchanges, the decentralized exchange industry as a whole is still in the early stages of development, but the industry’s competitive landscape has been initially established. The huge industry growth and the entry of new players show that decentralized transactions Good future potential for all industries.

20Q3 new online decentralized exchange trading volume, source: DeBank, TokenInsight

summary

Since 2020, quarterly transactions in the digital asset spot market have continued to shrink. The sideways trading of Bitcoin prices in June and July led to the deserted market and relatively low trading activity. With the end of the sideways trading period of Bitcoin in late July, the spot market gradually recovered its vitality, but the trading volume has not yet recovered. The level of April and May. At the same time, the price of Bitcoin hit a new high this year ($12,350) during the upward exploration in August, but fell again in September. Generally speaking, compared with the extreme market situation in the first quarter and the month-long price increase at the beginning of the second quarter, the price of Bitcoin fluctuated generally in this quarter.

The obvious difference from the previous quarter is that the spot transaction volume of the whole market has shown a more obvious correlation with the price of Bitcoin in this quarter. The price of Bitcoin has continued the linkage with the U.S. stock market in the previous quarter, and the layout of traditional funds for digital assets has also been further expanded in the near future: in January, the Bitcoin Trust under Grayscale in the United States became the United States Securities Regulatory Commission (SEC) report After the company, Grayscale’s second trust product, the Ethereum Trust Fund, was also officially approved by the SEC.

In addition to Bitcoin, the biggest highlight of the market this quarter was the continued vitality shown by the rotation of popular sectors. The prosperity of the DeFi field and the succession of the NFT field, the popularity of related assets driven by the Polkadot mainnet and the launch of new tokens, and the rise of Filecoin have all played a full role in mobilizing and leading market sentiment.

The popularity of DeFi has enabled the decentralized exchange (DEX) to experience very good development this quarter. DEX trading is basically spot, and derivatives trading is still in the trial stage. While the transaction volume is rising and the DeFi currency impacts the proportion of Bitcoin transaction volume , new DEX players continue to enter the market, which has a certain impact on the centralized exchanges and triggers the centralized exchanges to the DeFi and DEX layout Think and act.

But at the same time, issues such as false transaction volume and fund security are still pain points that have plagued the industry for a long time. In addition to the abnormal trading volume displayed by some exchanges that still exist, there have also been some fund security incidents such as hacking attacks in the industry recently.

Regarding the follow-up development of the spot market this year, as far as the nearly 30 exchanges interviewed by TokenInsight Research are concerned, relevant persons in charge are generally optimistic about the trend of the spot market and believe that the emergence of hot sectors such as DeFi has attracted market attention. . In addition, most of the exchanges have taken actions to lay out the hot spots in order to lay a solid foundation for the long-term development of the platform in the future.

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