DeFi: This quarter BTC transaction volume fell to 31.4% of the total spot transaction volume, which was a decrease of about 8% compared to 39.6% in the previous quarter. TokenInsight’s analysis believes that the decline in the proportion of BTC transaction volume is related to the emergence of hot sectors such as DeFi and Polkadot in this quarter.
Abnormal: The authenticity of transaction volume has always been one of the pain points of the industry. According to TokenInsight Research, this quarter, some assets of some exchanges showed abnormal trading volume performance on a few specific days.
Million: The visit traffic of the top 20 countries or regions in the spot market visitor output exceeded 1 million, and those countries with smaller share accounted for 44% of the visits.
-27% : The Q3 2020 total quarterly spot transaction volume of digital assets was $4 trillion, which was a 26.53% decrease from the second quarter of 2020. The market was affected by hot sectors.
22% : This quarter, the exchange token price grew steadily, with an average increase of 22%. Binance’s token BNB increased by 85%.
$340m : This quarter, the centralized spot exchange fee income is estimated to reach $336 million, which is still the main industry’s profit.
Strict: Since this quarter, US regulatory policies have frequently appeared. Government agencies such us SEC is paying high attention to the compliance of the digital asset trading industry.
12.3X : The trading volume of decentralized exchanges continued to rise this quarter, with trading volume reaching $46.2B, which was 12.3 times that of the previous quarter.
Correlation: Different from the previous quarter, the market-wide spot trading volume showed a more obvious correlation with Bitcoin prices 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 digital asset market had encountered a “little bull” triggered by DeFi. We predicted in the “2020 Q2 DeFi Industry Research Report” that the “craze” of DeFi will most likely end within a quarter. In fact, the DeFi boom ended faster than we predicted. However, the popularity of “liquidity mining” brought by the DeFi project has brought new trading volume to the spot market. Meanwhile, it led to ETH’s surging in the third quarter. This phenomenon confirms that the start of a bull market must rely on the spot market, which has large amounts of users and lower barriers to participation. The “threshold to participate” contributes a lot to the bursting of the DeFi bubble. Another crucial factor is that tokens issued by DeFi projects are mostly governance Tokens. The amount of services that DeFi projects can provide is limited, which means most DeFi projects cannot support the rapidly growing market value. In short, there is no time for the bubble to be eliminated slowly. It can only start over after burst.
The trading volume of decentralized exchanges (DEX) achieved rapid growth in the third quarter. One of the reasons is the wealth effect brought by DEX. Different from both the primary market and the secondary market, DEX has opened up a “market between primary and secondary” for users. This gives ordinary users the opportunity to discover high-quality projects that have not yet landed in the secondary market. Further, they could obtain huge wealth effects through early researched investments. In addition, the emergence of DEX has changed the relationship between the Token project parties and the centralized exchanges, making the project parties no longer in a completely disadvantaged position. To project parties, this change in relationship is essentially a change in the business model since 2016/2017, which profoundly impacts the industry.
As for the spot market, public chain projects such as Polkadot will also benefit from DeFi. We shall see many Ethereum “imitated/plagiarized” DeFi projects which “committed to Polkadot ecosystem” in the market. The DeFi ecosystem on Ethereum is relatively healthy. Different projects are related to each other, and many projects have built the underlying infrastructure since Ethereum has the foundation for DeFi to flourish. However, other public chains do not. We kindly remind users discreet investments are suggested.
In terms of mainstream digital assets, traditional financial institutions showed more interest in BTC and ETH. The correlation between Bitcoin and other digital assets began to decrease. After holding mainstream digital assets, institutions will neither purchase other types of assets nor use BTC/ETH to buy other digital assets. Priorly, this behavior was very common among ordinary users. The investment logic is different between ordinary users and institutional users. That is the reason why other assets’ price can not be influenced by BTC’s price soar.
We also brought our third quarter’s update. Now you can log on TokenInsight‘s official website to view complete visual real-time spot & perpetual contracts secondary market data anywhere and anytime.
For more information about the spot market in the third quarter, Please enjoy the report.
1. Industry Update
① BitZ Exchange obtained the Canadian MSB license, so far BitZ has both the US MSB and Canadian MSB licenses.
② The HBTC 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 Canadian digital asset exchange Coinsquare resigned after reaching an agreement with the Ontario Securities Commission.
① Kucoin announced the extension of the 90 million KCS lock-up period, and its public chain went online main net on Q4.
② The INX Exchange has completed the regulatory requirements for raising US$7.5 million for its listing, and has begun to accept digital assets.
③ Huobi Global 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 25 million US dollars.
⑥ South Korea’s third largest digital asset exchange Coinbit was seized and investigated by South Korean police for allegedly increasing 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 listing security guidelines for ERC-20 standard token.
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 digital assets including BTC.
① The digital asset exchange KuCoin was hacked. The private key of the hot wallet was leaked, resulting in the theft of 281 million US dollars.
② Poloniex exchange suffered deposit delays, and ETH, ERC20, TRX, TRC10 and TRC20 wallets were disabled on September 3 for system maintenance.
③ ZB Exchange experienced data abnormalities in mid-September, and it was down for 48 hours.
④ Binance launched the decentralized stablecoin system “Venus” based on Binance Smart Chain.
⑤ The stolen loss of European Exchange ETERBASE exceeded 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 that it supports the staking of Cosmos token ATOM.
⑧ Bittrex will stop providing services to users in countries such as Belarus and Ukraine.
2. Industry landscape
3.1 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 the abnormal trading volume of some exchanges during the quarter, this quarterly report includes 266 exchanges. The report includes 241 centralized exchanges and 25 decentralized exchanges, intending to make a more comprehensive and accurate research of 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% compared with the third quarter of 2019, and a 26.53% decrease from the second quarter of 2020.
The correlation coefficient between spot volume and BTC price in this quarter was 0.61, which changed from an insignificant negative correlation to a more positive correlation. The average monthly volume in this quarter reached $1,333B, which was less than the monthly average in the second quarter ($1,814B).
In terms of Spot market, DeFi has stirred up some emotions, which in turn drives the whole market.
AAX CEO Thor Chan
The rebound in trading volume is closely related to changes in the BTC price, and the money-making effect brought by BTC price fluctuations has stimulated market activity. In late July, BTC ended its narrow-range oscillation starting from the end of May and experienced a price increase, but the price fell again in early September. At the same time, the spot trading volume of the whole market fluctuated accordingly. The trading volume in August increased by more than 45% compared with July and fell by 4% in September.
There is a certain degree of linkage between the digital asset spot market and the traditional financial market, but the problem of abnormal transaction volume continues existing
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 this quarter BTC price index showed a strong positive correlation with the price of gold (correlation coefficient: 0.82). However, there is no significant negative correlation between BTC spot trading volume and 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
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. According to the monitoring data by TokenInsight Research, some assets of some exchanges showed abnormal trading volume performance on a few specific days. For example, on July 11 and 13, the trading volume of exchange “F” surged to 100 billion yuan, and the abnormally high volume basically came from Zcash transactions; while on September 13 and 14, abnormal volume of Monero, Zcash and Dash occurred at exchange ”C”.
The proportion of BTC spot trading volume continues decreasing, and hot sectors have driven some s to achieve above-average growth
The BTC spot transaction volume this quarter fell to 31.4% of the total spot transaction volume, of which September only accounted for 30.4%. TokenInsight Research found that the decline in the proportion of BTC transaction volume is related to the emergence of hot sectors such as DeFi and Polkadot. The continued enthusiasm of DeFi has resulted in many high returns opportunities, and the transaction volume of such tokens has grown far above average this quarter.
The increase of Bitcoin transaction volume was slightly lower than the average when the whole spot volume rose. In August and September, when spot volume shrank, Bitcoin price decline was slightly higher than the average. In contrast, as the underlying foundation to support the DeFi ecosystem, Ethereum’s transaction volume changes are better than the market average. Meanwhile, the trading volume of Chainlink, rose by as much as 151% in July and August, and Compound still maintained a growth in trading volume when the market volume fell. In addition, the newly launched Polkadot increased by 154% in August and September.
3.2 Trading volume dynamics on CEX
3.2.1 Overall trading performance
This quarter, the volume of centralized spot exchanges fell to $3.73 trillion, and the estimated fee income reached $336 million
In the third quarter of 2020, the whole spot trading volume of centralized exchanges reported $3.73 trillion, a decrease of 29% from the previous quarter ($5.25 trillion). Calculated on the basis of an average transaction fee of three ten thousandths and a real volume level of 30% , the estimated fee income is $336 million. Despite the decline in trading volume, the trading volume of top-ranked exchanges generally grew, showing the intensified industry competition.
The statistics of centralized exchanges do not include exchanges with disputed exchange types, but the statistics of total market volume includes 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
3.2.2 Performance of key exchanges
Competition in the digital asset spot industry intensified, 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 standards:
① The TokenInsight Exchange Rating of the spot exchange in the third quarter must be above B;
② In the TokenInsight volume monitoring results, 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 The spot exchange has all public APIs which can be used to trace back the volume history.
Finally, a total of 12 spot exchanges passed the screening. These exchanges will be the focus objectives of this report. They are: Binance, Huobi Global, OKEx, Coinbase Pro, Bitstamp, Bitfinex, ZB, Liquid, Poloniex, Gemini, DigiFinex and BitMax.
“This year is the first year of the second-generation blockchain infrastructure. After the infrastructure is complete, the ecology will step into a greater space.”
-Huobi CEO Livio Weng
“Binance’s growth depends on our general layout, like 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 more financial products and services.”
-Co-founder and CMO of Binance Yi He
The daily spot trading volume of the aforementioned exchanges in the third quarter of 2020 is shown in the figure below.
The proportion of spot transactions on key exchanges increased from 11% 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 all investigated centralized exchanges, followed by Huobi and Coinbase.
In this quarter, the spot trading volume of digital assets in the whole market was 1.48 times that of derivatives, which was slightly lower than the previous quarter (-0.4x). Meanwhile, the total market contract volume was 0.68 times the spot volume, which was higher than the previous quarter.
However, for the top three key exchanges (in terms of transaction volume), whose trading volume of derivatives has long been higher than their volume of spot trading, has experienced a 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.
At the same time, different exchanges have different strategies of 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 delivery contract volume is far lower than its spot volume, accounting for only 6.9% of its spot volume; OKEx has less perpetual contract trading volume and its spot trading volume accounted 54% of the total, consistent with the market average.
“Centralized exchanges and decentralized exchanges belong to different racetracks or ports for trading business. At present, in terms of mainstream tokens or stable tokens, 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 James Ju
3.3 Trading volume dynamics Of DEX
The trading volume of decentralized exchanges continued rising, reaching $46.2B this quarter, which was 12.3 times than the previous quarter
In the third quarter of 2020, DeFi continued its hot market in June. The trading volume of decentralized exchanges has steadily increased. The total transaction volume of 25 major decentralized exchanges (excluding Etherflyer and Dex Trade) 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 than the average monthly increase of spot trading volume on centralized exchanges.
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
Among the 25 DEX, Uniswap V2 has an absolute advantage in trading volume, accounting for up to 50%. While the top three DEXs in trading volume account for 74%. In contrast, the spot market competition on centralized exchanges has eased slightly, with the top three exchanges accounting for only a small proportion. Meanwhile, there were 8 exchanges with trading volumes of more than US$1 billion this quarter, compared with zero in the previous quarter.
A number of DEX 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 are Balancer, Curve, 1inch, 0x and Tokenlon. Among them, Balancer’s transaction volume increased by 27.8 Times. The spot volume of centralized exchanges increased by only 1.8 times, which was less than 7% of Balancer.
In addition, some new players entered this quarter. Among them, Sushiswap is a fork of Uniswap. Due to the introduction of governance tokens and the introduction of liquidity mining, it has received enthusiastic attention from the market once it went online, 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 is still in the early stages of development, but the industry competition pattern has been initially established, and the huge industry growth and the entry of new players show that decentralized transactions had good future potential among all industries.
3.4 Trading Conclusion
Since 2020, quarterly transactions volume in the digital asset spot market have continued shrinking. The Bitcoin horizontal prices in June and July led to the deserted market and relatively low trading activity. With the end of the horizontal price movement in late July, the spot market gradually recovered its vitality, but the trading volume has not yet recovered to the level of April and May. Meanwhile, the price of Bitcoin set a new high ($12,350) during the upward exploration in August, but fell again in September. Generally, compared with the extreme market situation that occurred in the first quarter and the month-long price increase at the beginning of the second quarter, the price of Bitcoin fluctuated little in this quarter.
Difference from the previous quarter, the spot transaction volume of the market has shown an obvious correlation with the price of Bitcoin in this quarter. The price of Bitcoin continued the linkage between the previous quarter and the U.S. stock market. The layout of traditional funds for digital assets has also been further expanded in the near future: After the Bitcoin Trust under Grayscale of the United States became a reporting company of the United States Securities Regulatory Commission (SEC) in January, Grayscale’s second trust product, the Ethereum Trust Fund, was also officially approved by the SEC.
In addition to Bitcoin, the biggest highlight of this quarter was the continued vitality shown by popular sectors. The prosperity of the DeFi field, the succession of the NFT field, the promotion of the popularity of related assets by the Polkadot main network and the launch of new tokens, and the rise of Filecoin have all played different roles in mobilizing and leading market sentiment.
The popularity of DeFi has enabled the decentralized exchange (DEX) to experience good development this quarter. DEX trading is mostly on spot trading, as derivatives trading is still in the trial stage. While trading volume is rising and DeFi tokens impacts the proportion of Bitcoin trading volume, new DEX players continue to enter the market, which has a certain impact on centralized exchanges, arouse centralized exchanges to think and act on the layout of DeFi and DEX.
However, issues such as fake 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 shown by some exchanges that still exist, there have been some fund security incidents such as hacking attacks in the industry recently.
Regarding the follow-up development of the spot market this year, according to the nearly 30 exchanges interviewed by TokenInsight Research, exchanges are generally optimistic about the trend of the spot market and believe that the emergence of hot sectors such as DeFi has already 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.
4. Exchange Token dynamics
Traders’ enthusiasm for the platform token has not diminished, and the prices of exchange tokens with good fundamentals have all increased
4.1 Exchange token trading volume and price dynamics
Recalling the above, the total market volume of digital assets in July, August and September 2020 was $1,038B, $1,510B and $1,045B, respectively. The month-on-month changes were 45% and -4%.
Although the prices of mainstream digital assets increased in July 2020, the trading volume of each exchange token has not seen any significant changes compared with June. In August and September, the growth rate of mainstream digital asset prices slowed down and accompanied with fluctuations. Investors’ willingness to trade rebounded. The trading volume of major platform coins increased significantly in September 2020. Among them, the trading volume of Binance platform coin BNB increased by more than 2 times compared with August, close to $13 billion. However, the overall exchange tokens volume declined compared with previous quarter, and mainstream exchange tokens fell by an average of 30%.
4.2 Exchange Token Analysis
TokenInsight has compared the price trends of the listed six major exchange tokens with Bitcoin. The Bitcoin trend in the figure below is marked with a thick line. Compared with the previous quarter, the price of the mainstream exchange token achieved steady growth this quarter, with an average growth rate of 22%. Overall, the performance before September was relatively stable. Except for BNB which continued to outperform Bitcoin, most of the exchange tokens did not perform as well as Bitcoin, and HT, ZB, and OKB were highly correlated. At the beginning of September, the exchange tokens rebounded after the rebound, and the exchange tokens with good fundamentals rebounded more rapidly. Affected by hot events like the launch of the Binance smart chain, BNB rose to $31.26 on September 15 and became the highest, with an increase of up to 85%. KuCoin’s exchange token KCS has a larger standard deviation than Bitcoin, and has higher volatility. Due to the impact of the theft, the price fell sharply in late September.
The increase in the price of each platform’s currency is not only due to the rebound in the spot market, but also due to the active deployment of hot projects DeFi by various exchanges. This data shows that when the exchange faces a new market environment, its fundamental advantages can help it to respond more quickly to the new changes, grasp more opportunities in advance, and bring more growth space for its exchange token.
It is worth noting that HBC rose 234% in the second quarter, and fell 6% this quarter.
5. Users And Popularity
5.1 User Traffics and web browsing time
The monthly average number of unique visits in Q3 2020 has slightly changed from the previous quarter. Among the top exchanges in terms of traffic, Binance and Coinbase Pro grew significantly, increasing by 31% and 29% respectively this quarter. While OKEx and ZB exchanges did not see significant changes. Among the exchanges with relatively small monthly visits, except for Bitstamp, which increased by 14% compared with the previous quarter, the other exchanges did not increase. Among them, the KuCoin exchange dropped by about 50%, the highest among them. Among the statistics of web browsing time, only the KuCoin and Poloniex websites have increased the average browsing time significantly.
As shown in the figure on the down, Binance, Coinbase Pro, OKEx, ZB, and Kraken have a total of 82% of the unique visitors of the surveyed exchanges in the total visits data this quarter, of which Binance accounts for more than 50% of the visits share, reached 106 million times. While other exchanges have not reached 20 million times. These exchanges may have a high user base and professional user ratio. The accuracy of the data disclosed on the Similarweb website is only shown to the level of the number in millions, but this level of data still has reference value.
Quarterly visits proportion of each exchange in Q3 2020
5.2 Website, mobile and Its ranking analysis
Among all the surveyed exchanges, most of the exchanges’ website users are much higher than mobile users. HBTC has not launched the mobile terminal, so the proportion of data on the web is 100%. Binance, Coinbase Pro, and Huobi Global have more than 80% of web users. The average share of other exchanges’ web users is around 75%, while ZB exchange web users only account for 11%.
Changes in the traffic rankings of exchanges are not outstanding. Only KuCoin has experienced a significant drop in platform visits due to the negative incident.
5.3 Community popularity
The spot market performed well this quarter, and the number of Twitter followers on various exchanges increased significantly, reaching an average increase of 11.64% from the previous quarter. Binance, OKEx and Huobi Global all grew at a rate greater than 12%; OKEx had the highest growth rate at 17.57%. It is worth noting that among the exchanges surveyed, only Bitstamp and Poloniex saw no significant changes in their growth rates from the second quarter, and the gap in growth rates in the remaining quarter was greater than 7%.
5.4 User source analysis
Each visit traffic output of the top 20 countries or regions in the spot market exceeded 1 million
TokenInsight analyzes the source regions of users of various exchanges. Noted that this survey selected 10 prominent exchanges, and collected data from the top 100 countries in the source countries of each surveyed exchange. Although it does not fully cover all countries, the data still conveys significant information.
Compared with the previous quarter, the source of users has changed obviously in this quarter. The figure on the left shows the country distribution of visits numbers to the exchanges. Countries that have not entered the top 20 are classified as Others.
It is worth noting that other countries that did not rank in the top 20 visits accounted for about 44% of the total visits, which is close to half of the total visits. This data shows that the degree of globalization of user sources is becoming more obvious, not only concentrated in developed countries and developing countries with high-population.
According to the Sankey Chart data, except for the United States, Ukraine, Russia, the United Kingdom, and China, all of the top 20 countries or regions’ traffic exceeded 1 million visitors. Among them, Turkey, Vietnam, and France all exported more than 2 million visitors to every exchanges. In comparison, the United States only accounts for 12% of the total.
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the crypto currency they discuss. The information and content are subject to change without notice. Visionary Financial and its affiliates do not provide investment, tax, legal or accounting advice.