BBW24 - Day 1 - KEYNOTE: The Evolution of Crypto Analytics and Its Impact on the Industry

hi there can youall hear me okay okay so that sounds like a page Turner right crypto uh data analytics uh my name is Katie Chase I'm the Chief Operating Officer of coin metrics we are very local so we are headquartered in Boston and um have been here since 2017 when we were founded uh we uh we set forth on a mission to contextualize or explain the economic significance of these public blockchain networks um and you know honestly when we were founded in 2017 it was not that insurmountable of a challenge there were fewer than 21 Assets in existence um and today I'm going to talk a little bit about how things have changed but also uh hopefully give you some interesting facts along the way and provide an organizing framework for how you can think about the digital asset space so roll back uh a bit to uh 2009 and there was one crypto asset Bitcoin um it wasn't until uh 2013 when we saw the launch of two additional crypto assets so still very easy to get your arms around this space um we saw Doge and ripple at that point um and then in 2014 we had three more assets um it wasn't until 2015 that ethereum launched um so you know a small data company uh a few uh data products and uh a fairly easy job for the users of the space the investors in the space to understand what they were looking at roll forward to today there's over 9,000 cryptocurrencies in existence this is a challenge there are over 200 crypto asset trading venues there's hundreds of thousands of of uh trading markets there are over 10 product lines just at coin metrics to represent these crypto assets um we have over a thousand crypto assent metrics to describe them uh and we have 2.5 pedabytes of data so what do you do about this we launched a crypto asset taxonomy called datonomy with Goldman Sachs and msci in 2022 to help organize all this to bring some order to the chaos uh and this uh taxonomy is specifically Geared for the digital asset space if uh if we kind of think about large volumes of data we've always needed uh organiz organizing Frameworks uh in um the 30s we saw the SIC uh that is uh you know a framework that was developed to describe Industries by the US government and uh it it served a great purpose and sort of helped folks standardize things for many many decades um it wasn't until the 90s when we saw the emergence of the service economy that uh it really kind of fell out of favor it became outdated we saw the nakes um really take over in the government space um it's primarily what's used today it was created by uh the US government the Canadian government and the Mexican Government to to uh describe the industries that uh they use for kind of government purposes surveys um economic uh statistics and it largely replaced the SIC for that for that purpose and it did a much better job at handling the service economy similarly right around the same time we saw the introduction of gixs so gixs is probably what everyone in this room has heard of it is the most commonly um used um Financial industry crypto or SE sector taxonomy and um it was produced by S&P and msci and it started to classify new Industries in the service economy but also in it and you know pretty much is is sort of the gold standard for um for analysis today and then you saw like a lot of classification systems in the intervening periods so you know we saw um Isaac uh which is used by like the IMs and the World Bank and uh and was created by the United Nations Bloomberg has their own way of classifying things on their terminal I think refini does but what we found is that none of these Frameworks did a very good job handling this new asset class um this new digital asset space so that's why we created uh datonomy [Music] so what is datonomy uh it is um a framework that looks really familiar it's very similar to the way that uh these other sector taxonomies work it's three levels um each asset has a six-digit code uh each level has two digits of that six-digit code and um and the uh Universe of which we're classifying is determined by accessibility so we've classified over 200 assets um into these datonomy subsectors and um and that's on a basis of you know what are what what assets can people actually get access to and that just means that they're available on more than 25% of our trusted exchanges so you have to be able to like go buy and sell this asset for us to uh put it in the universe of which we're going to call tonomy um the class level is just like a high level IND description I'll get into what some of them are uh and a sector is just like a double click into that industry description so it describes um a a little bit more uh context and then the sub sector a double click into the sector so we have 41 sub sectors and here they are so our four classes are digital currencies so this includes things like value transfer coins like Bitcoin um but also specialized coins like meme coins um or uh you know privacy coins and remittance tokens uh blockchain infrastructure is another class this includes the smart contract space um so so assets like ethereum uh but also includes the blockchain utilities coins uh as well as the Oracle coins the digital asset application space this is the defi space that you guys probably all love uh and it also has the metaverse sectors and then we have our onchain derivatives uh probably the most well-known sector there would be your stable coin sector um but that's also all the tokenized asset all the claim assets so we think that actually will explode in the next several years as more things are tokenized and digitized on chain so you can see how this framework will um will be a bit future proofed and how it can expand as this space expands you can also see that uh all of these sectors sub sectors are based on the purpose or use so we have intentionally not co-mingled things like um like technical features right uh how decentralized is it or um you know what is is um the consensus mechanism so there are other Frameworks that kind of mix those two we've kept this one peer we do have a place for those descriptors um and we can kind of combine them but we wanted to make sure that the classification framework itself could continue to be double clicked on so we didn't want to then have the level four be how decentralized it is because that sort of limits you in terms of being able to double click to a level four in the future if we want to say expand on tokenized assets [Music] so what has happened over time is you've seen a real shift in sort of the market dominance of these classes uh even as recently as 2020 you still had the digital currency asset class which has Bitcoin in it um really kind of be the the dominant um the dominant class because of bitcoin's dominance we're now really seeing uh the blockchain infrastructure class uh as uh a very kind of large component of the overall market cap of the space um that class includes ethereum but also tokens like salana um BNB Tron so a lot of those top 10 market cap coins um and you can see some of the events that have occurred between now and then um but it you know you have seen a big shift I think it's about 30% of the market cap now is in that digital infrastructure class um and and you see you know those other two classes the digital asset applications and the onchain derivative those are just teeny tiny less than 10% of the total market caps as much as we talk about those um they're they're still very small so we'll dive a little bit into that digital asset application clashes because it has a lot of the cool stuff in there um these are all of the tokens that are native to the operations of an nonchain application uh so um within there we've got the decentralized finance sector um the decentralized finance sector is tokens that are native to uh an onchain application that uh basically is taking the place of traditional Financial Services uh and you know within there you've got your dexes or digital exchanges with the digital exchange being a very specific type of uh token that is taking the place of financial uh traditional Financial Services um and that it is a a token for the spot markets enabling peer-to-peer transfer of assets through these liquidity pools so the dexes are things like UNIS swap Sushi swap um and uh and you know a lot of those you know platforms that a lot of kind of crypto assit enthusiasms are interacting with fairly frequently so while this is a pretty tiny uh percentage of the overall market cap of the space it's less than 5% Actually All Digital asset applications um it represents more than half of the assets uh in our autonomy framework so there's a lot of individual assets that don't have sort of a very substantial uh market cap some of the other um sub sectors in here include you know prediction markets crowdfunding uh things like uh like uh derivatives uh decentralized derivatives platforms um insurance so there are it's a pretty big space which is why there's so many names so by far the deck sub sector is the largest component of dii it's 46% of the market cap of the sector and you can see it's maintained that it has consistently been the largest portion of that sector um and uh and it represents a large portion of the names not quite uh 46% I think it's like 38% of the names but you know it it is very dominant one of the other you know interesting things that we can do is we can match up other data so not just market cap or price with with um these sectors but we can think about the onchain data and uh here I'm showing the um the total uh defi index so it's the cmbi defi index so it includes all the names in the defi index and you can see kind of the performance there in green um with an overlay of uh onchain activity and we're using active addresses here to represent onchain activity so how many addresses are active in a particular interval what's interesting about this is you see the um the peak in the onchain activity before you see the price Peak so you can kind of see that there was a lot more onchain activity leading to um a price Peak and you can also see there was a decrease in that activity that preceded the decrease in the price so by merging these data sets together you can kind of see some of the fundamentals that should eventually be driving price I won't say this works in cases um crypto currencies um are kind of well known for kind of not looking at the fundamentals uh so a lot of the price action has actually nothing to do with the fundamentals but you know in in in some cases it does show you something and uh in the future you know it should show us a lot this should be something that folks are making decisions on around whether or not this is a good investment is there any kind of useful utility to to this token that I'm investing in so what are some of the other kind of uses of this data and these sectors um well creating investment products so uh we um we uh foresee investors wanting to get exposure to a particular sector and they can invest in these indexes um we also foresee folks wanting to exclude maybe sub sectors so they might want to invest in a space but they might want to exclude meme coins so they could sort of easily strip that out um another kind of usefulness uh is around portfolio performance we can easily measure um the different kind of components of our portfolio uh we uh can get a quick view of our sector relative performance versus maybe the total portfolio um we can educate our users one of the big um uses of this right now is around the disclosure framework so there will be regulatory um requirements to disclose more information about these assets if you're running a exchange or a c a custody business um this is happening in Europe and it's happening in the US and um in in order to you know provide reasonable disclosures you probably need some data one of the things that The Regulators want to see is that you're telling your user what the purpose is of the asset so they can kind of validate that um so purely educational um you can create Factor models um like Factor mimicking models so you can um hedge the risk and return uh that these assets share in commmon so essentially you can leave only the idiosyncratic risks um by kind of stripping out the kind of common commonality across the things in the um in the sector um and then you can analyze the sectors using metrics that matter for that sector so I think folks think of this as kind of like a monolithic thing right now and I need to look at you know I don't know active addresses and that's an important metric for every asset but the reality is different sectors have kind of different things that matter so if I'm looking at the stable coin sector it's probably really good to pay attention to whether or not my asset is D pegging you know it's probably um interesting to see kind of the velocity of the activity is it really used in kind of any kind of a payment way um but that is maybe not relevant for an asset that's in the smart contract space in the smart contract space you might want to see if people are building on this um on this layer one right are people building applications how many applications so uh sort of developing kind of your Frameworks for how you analyze these assets by sector is probably very helpful so this is just an example of you know how you might think about this from an investment product creation perspective so here you have um all of the coin metrics sector and sub sector indexes um we roll those up into a total market index which includes everything in datonomy that is a market cap weighted index um and then you know each of these uh these individual indexes are equal weighted and um and this enables folks to create investment products probably not going to see a lot of investment product Creation in the US in the short term because there isn't regulatory Clarity on all of these assets we are seeing a little bit of this activity in Europe uh advisors like to diversify um so when there's regulatory Clarity we think that you will see investment products in this way um I think uh hedge funds also like to hedge so there'll be another kind of user of [Music] that here we're showing the year-to DAT performance of all of the sector indexes what stands out here is that they're all doing pretty crappy here to dat right uh Bitcoin is at the top there so that's the dark line at the top uh and it's outperforming all of the sectors the only one that's even in kind of you know kind of close to positive territory uh is the um is the sector that contains the meme coins so meme coins have done okay and here's a look over the last seven days so I I I snapped this on Thursday last week I think I had to get a copy of this presentation over on Friday um but same story right kind of red territory here uh the only green territory last week was the stable coin sector barely green you would be very surprised if that you know if that wasn't basically zero um but everything else was in the negative [Music] so what uh what are we doing uh we are creating uh lots of information on this stuff so sorry uh we have the movers and shakers which highlight all of the new assets that are kind of about to be covered by datonomy so they've reached a certain accessibility threshold we publish that every month so you can read about how these assets U are used we are starting our single asset coverage start uh later this month it's you know all free all of our research is free uh that will uh Start begin with a coverage initiation piece for Bitcoin uh and it's going to look like a saleside research report uh in October we'll begin our sector research so we're starting with the stable coin sector um this is kind of near and dear to coin metrics and our Founders uh so we'll be uh creating a kind of think of it as like an industry uh report for each of these sector spaces um we're adding to our asset profiles for this disclosure purpose uh so people can better understand the descriptors of these assets and um and we've got a community data product so um I'm and we have a great new way for kind of everyone here to experience the the community data it's a free data product we have a new um user interface so new front end kind of easy to create charts and kind of uh look around in there and all of that is organized by class so you can see all the assets and all different classes that they're in um we have um we have thousands of assets covered um I think in the front end tool we are offering uh about 220 so um a good way for folks to kind of explore and learn about these assets and uh and kind of see it in a very visual way so I don't want to kind of leave everyone on that sad note you know the performance is kind of crappy year to date the performance is terrible in the last seven days uh because I think um I think the future is super bright so August was one of our best months ever in the history of Co metrics from um from kind of a new client perspective um and what's great about that is is data is really a leading indicator for what's to come so we're seeing a ton of interest in the market uh obviously before people launch products before they invest in products uh before they build products they need to understand the ecosystem that they're operating in and you know and that's when we the data buyers coming on so that's you know that's got us very very optimistic we're also really optimistic that we're going to see some form of regulatory Clarity and um and I think that's um that optimism is also you know what our users are seeing which is why we're bringing on all these new clients so I think everybody's kind of hopeful that as we come into 2025 um we're going to see a whole lot of new applications uh we um you know we really do believe that many many parts of our financial economy are are better uh on chain and uh I think you will see you know pretty much everything that we do kind of fitting into that taxonomy somewhere in you know 5 to 10 years so I am I'm not sure what this clock means I know I ran out of time so uh so I'm very happy to take any questions I I it reset so I don't know if that means that I still have time okay okay okay [Music] hello um so how close are we to rwas for stocks like onos black rocks onos what H how how soon in the future can we be looking to use this um so like stocks equities I would I I personally think that um we we will see that kind of in The Fairly distant future uh I would um I would expect to see other financial instruments like well before that so you're already seeing money market funds to ganized on chain um we're already seeing some like Bond issuance on chain I think there's another uh another sort of panel coming on to talk about um something along those lines uh why why I think equities are hard is because there is like an offchain representation of them uh and so what you don't want to have is like these two kind of competing markets uh for the same the same essentially instrument um so I I think the things that you can kind of natively issue on chain like denovo issue it on chain like a a bond issuance um are probably a little bit easier in like the short run so but that's just one person's and will um synthetics still be used if in fact we can do rwas pardon me will synthetics still have a place in the market uh like you know synthetics yeah I think you'll just see you know different representations of them yeah I mean you're you're basically seeing um everything that we do with traditional Finance kind of mimicked and and decentralized finance uh you know obviously you know in some cases we're making all the same mistakes We Made In traditional finance and decentralized finance that's you know but we'll learn from that and uh and yeah I do think we'll see you know very similar kind of Market structures hopefully improved Market structures more transparency everything should be more transparent [Music] gotta hi uh just real quickly could you just go back to your comment when you made that you made earlier about kind of how it the the the product doesn't lend itself to fundamental research and does that mean that there's an aversion towards you know more traditional fundamental research shops providing coverage to some of these assets I I think that's a shortterm um phenomenon so I think over time the fundamentals will drive the asset price uh so you know up in till now there's been a lot of kind of speculative ity there's not a lot of liquidity in all these markets um sort of you know a small buy or a small sell can really kind of change the price so uh so I I think you know the you you could see a chain like completely tick off line right like it's not even producing new blocks it's not even working at all but the price isn't impacted by that well that that's very strange right that that's not how um how things should work over time all of the kind of Market Arbitrage and you know the sort of uh the sort of hopefully speculative nature of this space will sort of I think kind of fall off a bit and you will see a lot more kind of fundamental research driving price but and people are still doing it there's some great reports out there so if you read kind of Galaxy's um research or Fidelity research um Goldman Sachs these guys do really good kind of fundamental research search on the [Music] space um so I'm thinking that this data will be very useful for Traders who are trying to make maybe an algorithm to do the trading for them so do you guys have any API which can be used to do that you do yeah we're Prim primarily an API first uh product uh we have uh apis for every single data point that um that coin metrix produces uh we even have a community API so we have a lot of our data our free data available through API um a little bit more limited history on on the public facing free API um they the front end tools are like the charting tools that's just meant to be a convenience for folks that you know aren't comfortable with um with an API maybe a lot of our users are not engineers and don't really know what to do with an API but yes it is our it is our primary product [Music] I was hoping you could tell us a little bit more about the top of the funnel as far as deciding which assets get covered I mean you could launch multiple meme coins a day at this point so how do how do you all decide what gets included in the database yeah so we uh we cover I think 45 of the top cryptocurrency trading venues um and so we get all of the trading data from from those venues you know thousands of assets um are traded on on that collection of exchanges and um and we uh go a step further and and rate and rank all of the exchanges that we cover uh so there's a research paper on our website if you want more information about how we're rating on ranking exchanges uh but there is a certain set of them that we consider trusted exchanges meaning we think that real trading activity is driving um the prices that you're seeing on those exchanges they're not you know they're not pumping their um their volumes they're not doing kind of it's It's not like driven by like Casino kind of gamey type of activity um there's a whole sort of set a statistical analysis go that goes into whether or not we think it's fake trading or not and if we suspect there's fake trading then that exchange is not qualifying as a trusted Exchange in order for us to uh progress an asset into datonomy you uh we have to see that it's widely available in The Trusted exchanges so it has has to be available on 25% of our trust exchanges I think there's I I'm going to say like 20 trust exchanges so you know has to be available on maybe five exchanges right now something like [Music] that any other questions oh over there sorry the lights are like super bright hello hey I'm wondering if you ever heard of the regen Network the regen network no they they kind of work on uh like almost climate related oh cool tokenized assets that are uh based off of like environmental remediation okay so for me as somebody that's been a Speculator in the implementation of the technology uh I get excited when we look at like managing a farm properly and using sensors to kind of see what the environmental benefit of doing so looks like and then uh putting that type of asset yeah so I'm just wondering if where that might fall in your your your list of classifications of an asset you know like yeah so I mean I think it would fall in that kind of that onchain kind of derivatives bucket um and probably in well I guess it depends if it's a governance token then it would be in sort of one of the um blockchain infrastructure uh uh buckets but um assuming that it's some representation of something that that you know exists in real life then it would be that onchain derivatives uh it um yeah I mean you can just see with that with those 41 sub sectors just the diversity of things that people are doing on these blockchains and some of them are like really super cool like like that