What Does the Future Hold for Crypto Exchanges: Key Takeaways
Crypto has come a long way since its birth in the 2000s. Over just a few years, the number of applications has soared, and a more mature ecosystem has emerged. Despite the recent disruptions in the crypto market, we are still at the early stages of blockchain technology and crypto, and it will expand exponentially. This July, Bitget, together with Boston Consulting Group (BCG), and Foresight Ventures published the joint report ‘What Does the Future Hold for Crypto Exchanges’ to provide a comprehensive view of the crypto market landscape. Are cryptos here to stay? Can crypto exchanges tap into emerging market opportunities? What are the top 5 global crypto exchanges? Join us to find out the answers through the below main takeaways of the report!
Growth of the Derivatives Market
The BTC derivatives markets have seen a surge in interest and activity worthy of note. Indeed, since the price drop caused by the Terra/LUNA event, the open interest (OI) in BTC-settled futures contracts has broken through its multi-year ceiling of 400,000 BTC to reach an ATH of 514,000 BTC.
Since the risk associated with this type of contract is particularly high in a downtrend (because the value of the collateral falls with the price), we can deduce the following two points:
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In the event of a further fall in the market, the risk of liquidation of long cascading positions is very high.
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Such positions reflect the confidence of some speculators that the market bottom has potentially been reached.
Derivative trading has witnessed higher growth. While the global quarterly spot trading volume grew sevenfold to $3.2 trillion in the two years to the first quarter of 2022, crypto derivatives trading expanded twelvefold to $6.3 trillion in the same time frame.
The ratio of spot to derivatives volumes: The Bitcoin Spot to Futures ratio rose from 0.13 at the start of July to 0.21 in August 2022. The Ethereum spot ratio has decreased from 0.18 to 0.15 over the month of July.
Source: The Block
Source: The Block
Huge Demand in the Future
The report projects that the global centralized exchange spot value will reach about US$148 trillion, and derivative trading value will reach about US$441 billion, by 2026. The overal l trading value will go up 11x by 2026: Spot trading volume will increase 7x, perpetual swaps will grow 12x, futures will grow 19x, and option trading will grow 38x.
We expect higher crypto derivative growth, reflecting more advanced financial markets with mature regulatory environments regarding derivatives. The overall crypto derivative-to-spot ratio is expected to get closer to those observed in traditional equity markets.
The data is clear that more unique assets available generally correlate with higher transaction volume. Most of the volume is related to Bitcoin and Ethereum.
What stands out most though is that for the most part, Bitget and its fastest-growing exchange categories tend not to draw all of their transaction volume from any one asset or get very little transaction volume from any one asset. While Bitcoin or Ethereum tend to be the most popular, the fastest-growing exchange categories typically still see significant volume across the other two asset types, suggesting that Bitget caters to a variety of use cases, or to use cases requiring multiple asset types.
Crypto is still at the beginning of the adoption curve
When comparing the adoption curve of web 3.0 vs the internet in the 1990s, we can observe that crypto is set to hit 1 billion users by 2030 (if the current growth rate continues).
Bitcoin is such a phenomenal success that many people forget that it is only 11 years old. Those who criticize its high volatility should realize that it is quite normal given its youth. Bitcoin's price volatility will stabilize in the future. When Bitcoin's price volatility stabilizes, we will have achieved widespread adoption. Perhaps, we are still early after all.
Developing countries offer huge scope for growth
Can bitcoin be a lifeline for developing and emerging countries?
As Oxford Business Group detailed at the time, the emergence of COVID-19 spurred a massive expansion in the use of crypto-currencies in several emerging economies.
According to research firm Tellimer, the current phase in the evolution of decentralized digital currency is defined by an emphasis on scalability, sustainability, governance, and blockchain interoperability. The key characteristics of “Crypto 3.0” have made the technology even more appealing and useful in emerging markets. For instance, advances in scalability have lowered transaction fees, thus broadening access. However, it is the increase in interoperability that has proven particularly crucial.
The Market is Getting More Mature With More Institutional Players
Hedge funds and VCs doubled their crypto exposure from US$35 billion to US$70 billion from Q4 2020 to Q4 2021.
How do you explain infatuation with cryptocurrencies? Michelle Bailhe, a partner at Sequoia, and Shaun Maguire agree that cryptocurrencies are still in their infancy. Shaun Maguire further states that cryptos will be "the biggest megatrend of the next 20 to 30 years."
Another concern is the colossal ecological footprint of crypto-currencies related to the proof-of-work concept popularized by bitcoin. However, many less energy-intensive crypto-currencies have been developed using proof-of-stake or proof-of-space concepts, which negate the need for concentrated "mining" activities requiring large amounts of electricity. As the global momentum behind the transition to net zero carbon builds, the pace of innovation in the green crypto-currency space is expected to accelerate further.
Bitget as the Powerhouse of Crypto Derivatives Trading
The first half of 2022 has been a time of explosive growth for Bitget. Bitget has jumped to the top 3 global derivatives exchanges with the flagship One-Click Copy Trading product.
Established in 2018, Bitget’s mission since the very beginning has been ‘Better Trading, Better Life’. Cryptocurrencies have the power to change the world for the better, and we are here to make sure that everyone gets the chance to hop on board, with US$8.1 billion in average daily trading volume and more than 2 million in cumulative registrations. But that’s not all. In the first half of 2022 only, Bitget has launched:
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Bitget Launchpad, where users can get early bird access to new projects and tokens in several ways,
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Bitget Academy, to boost the collective knowledge of crypto,
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Bitget Spot and Futures Grid Trading feature, to help users sail through sideway markets,
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GroupCoin feature, where users and friends can enjoy a discount of up to 50% of the token price,
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To prepare for a potential crypto winter, Bitget has decided to allocate 6,000 BTC and 80 million USDT, which is equivalent to more than US$217 million at the time of writing, to the new Bitget Investor Protection Fund.
BGB: Powering the vibrant Bitget Ecosystem
Centralized exchanges (CEXs) registered the lowest losses in all crypto sectors in Q2 2022. By the end of June, Bitget’s daily volume of all futures contracts was standing above US$100 billion, and Bitget Token (BGB) surrendered a 20% decline in returns compared to the market’s average of 50%. This is proof that Bitget, together with other CEXs, has been and will continue to be one strong warrior.
Data shows that the trading volume of Bitget Token (BGB) remains above US$5 million for the entire period. Trading volume declined since April - May, partially due to the spreading market contagion. The main reason is, however, more BGB have been locked so that holders can participate in several ludicrous events by Bitget.
BGB’s performance in the first half of 2022 is relatively good.
Powering the vibrant Bitget Ecosystem, BGB is a small token with big impact. Think of it as the perfect mediator, who helps smooth out communication across multiple chains, nudge the transition from Web2 to Web3 and dislodge regional royalties.
For the time being, holders can use BGB to enjoy a direct 20% discount in transaction fees and get early access to exclusive fundraising events on Bitget Launchpad. Other lucrative opportunities are also available on a weekly basis, don’t forget to check out Bitget Hot Takes - our weekly report - to keep yourself updated!
See more about BGB Performance in 2022:
Conclusion
In sum, this paper indicates that there is a strong demand in the crypto market. This presents crypto exchanges with an opportunity to expand the product offerings. The evolution of Web3 also provides an additional impetus, as it brings disruption and the opportunity to use distributed ledger technologies across a wider range of applications.
Tapping into this context, the first half of 2022 has been a time of explosive growth for Bitget. Despite unwelcoming market conditions, we release a host of new products and services, expand our team, and partner with several world's top athletes. Bitget volume for derivatives rose to 10% of the global derivatives trading in Q1 2022, more than Q3 2021 and Q4 2021 combined, helping Bitget secure a seat at the big table and join in the top 3 global derivatives exchanges.
Bear market over or not, this is a good time to accumulate and that's what the market is doing. Meanwhile, Bitget is dedicated to building the ecosystem before a new bull market that we are all waiting for. We hope that together, we can turn crypto into an integral element of the global financial system. Crypto is here to stay. And so are we.
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