While the crypto markets have been in a bear market for most of 2018–2019, the fundamentals have only continued to grow. Below are a few charts highlighting this continued growth in the space.
Bitcoin and Ethereum Growth
Bitcoin
1. Bitcoin wallet growth
The amount of Bitcoin wallets has more than doubled over the past few years. The total amount of addresses has increased from about 21 million as of 2018 to 32 million as of 2019 to about 45 million as of January 1, 2020.
2. Hash Rate
Bitcoin’s Hash Rate is more than 6 times higher than it was two years ago. Bitcoin’s hash rate has increased from 15 million as of 2018 to 41 million as of 2019 to over 96 million as of January 1, 2020.
A higher hash rate is important as it increases competition amongst miners and makes it harder for bad actors to attack the protocol.
3. Active Addresses Per Day
According to BitInfoCharts the number of active addresses per day has been consistently above 400,000 as of 2018, with the highest amount of active addresses per day on any given day at 900,000.
This number is significant as Bitcoin is still for the most part viewed as a Store of Value.
Ethereum
1. Ethereum Wallet Growth
The amount of unique Ethereum addresses has more than quadrupled over the past few years. Ethereum’s total distinct addresses have increased from about 18 million as of 2018 to 54 million as of 2019 to 84 million as of January 1, 2020.
2. Hash Rate Growth
While the overall Hash Rate has declined since the 2017/2018 run-up, it is still significantly higher than it was in 2016 and early 2017. In addition, there has been a steady uptrend since 2019 as well.
3. Active Addresses Per Day
The number of active addresses per day has been consistently above 250,000 as of 2018, with the highest amount of active addresses per day on any given day at 1.1 million.
Overall Trading Volume Growth
While much of 2018 saw a continuous decline in total trading volume, 2019 has faired much better. Overall trading volume has grown in 3 out of the 4 quarters during 2019. The image below shows the steady decline in trade volume on almost all the top exchanges in 2018.
Growth of Decentralized Finance (DeFi) and Decentralized Exchanges (DEX)
DeFi, while only a relatively recent phenomenon, has been gaining traction very quickly. In a little over two years, the total amount of USD locked in DeFi has grown to over $1 billion.
While DeFi has continued to see consistent growth, the same cannot be said for DEX’s. Centralized exchanges still make up more than 99% of the market share. (99.90% to be exact). According to Dex.watch, the overall volume and number of traders have been dropping since the start of 2018 as well.
The chart below shows which Dex’s have the most activity. IDEX and Ether Delta are far ahead of any competitor in terms of total transactions.
While decentralized exchanges offer unparalleled advantages over centralized ones, such as anonymity and better security, the industry has yet to make a breakthrough. Though, with big-name players, such as Binance, entering this industry, this could all change very quickly.
Regulations
Blockchain technology/cryptocurrencies are slowly, but surely starting to become more regulated by various nations. These nations are only beginning to realize the importance of this industry and hope to seize the opportunity to take a higher position in the development of this new technology.
Countries such as Japan, South Korea, and Switzerland all have a positive stance towards crypto and have started legislation as early as 2017 to get ahead in the space.
The United States has also shown great interest in regulating the space as well. Treasury Secretary Steven Mnuchin gave his testimony on cryptocurrencies only last week and said that new regulations focusing on “transparency will be rolling out soon.” While Mnuchin supplied no details on what these new regulations may entail, he did say that we (the Treasury) want to make sure that this technology moves forward.
With the many major economies working on creating Central Bank Digital Currencies (CBDCs) everywhere, it is only a matter of time until every nation is forced to create a legal framework for this new technology.
Some Takeaways
While all of 2018 and most of 2019 was a brutal bear market, there were still many positives to be found. Some of these positives include:
- The number of wallets/users of cryptocurrencies has been growing
- “DeFi” has been growing very quickly
- Countries everywhere starting to recognize crypto/blockchain technology and creating legislations around it
- The overall trading volume has been growing in all but one quarter during 2019
Other factors showing the maturity of this market are institutional products, such as ETP’s, on the rise, crypto exchanges are starting to offer services outside of just the spot market (i.e.: derivatives/futures market), and custody solutions are growing as well. Adoption is slowly but surely increasing and we believe this will translate into higher prices for best-in-breed cryptocurrencies.
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