Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
Thanks to the University of Cambridge’s Global Cryptocurrency Benchmarking Study, we have a clear picture of the current crypto landscape. Representing the third such study, from cooperation with the Centre for Alternative Finance, the exhaustive 71-page report details the current state and trends of all things crypto.
What’s the State of Crypto in 2020?
Relying on surveys conducted in March and May this year, the Global Cryptoasset Benchmarking Study explores the state of the following crypto sectors:
Crypto-mining: costs across continents, employment, renewables and market trends.
Crypto-employment across all subsectors.
The state of stablecoins.
Regulatory compliance, crypto-insurance, and government subsidies.
Notably, the crypto space still hasn’t surpassed the 2017 peak, as manifested in the price of $20,000 per Bitcoin (BTC) at the time. In fact, the growth of the crypto sector has been on a downward trajectory from that high peak, as shown by year-over-year (YoY) growth of 57% in 2018 compared to 21% YoY in 2019.
Cryptocurrency Market Overview in 2020
Unlike some who view BTC as ponzi scheme, BTC completely dominates the cryptocurrency space, followed at a distance by Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), and Ripple (XRP). These last three crypto coins are available on only 50% of crypto providers in 2020, while BTC is available on 90% of platforms, a decline of -8% compared to 2017.
However, valued but still non-mainstream cryptocurrencies such as Monero (XMR) and Zcash (ZEC) show a steady adoption rate due to their unique value-propositions. XMR is available on 24% of crypto services, while ZEC is available on 17% of crypto platforms.
The situation isn’t very surprising when one looks to the increased accessibility of both Bitcoin and cryptocurrencies. A number of regulated, popular stock brokers, and even the top Forex trading platforms, now offer access to not just BTC, but other popular cryptocurrencies as well.
The stablecoin sector represents a haven from cryptocurrency’s inherent volatility, which is why stablecoins like Tether (USDT) continue to gain massive grounds in terms of availability. USDT jumped from 4% to 32% availability, while other stablecoins jumped from 11% to 55% across all surveyed crypto providers.
Overall, the study surmised there to be around 101 million unique crypto users dispersed across 191 million accounts in Q3 2020. This discrepancy is likely a result of multiple accounts being held by single identity-verified users. For comparison, a 2018 study revealed only 35 million identity-verified crypto users.
Crypto Mining Statistics in 2020
Due to increasing equipment and electricity costs, it’s safe to say that global crypto-mining is turning into an industrial-grade endeavor.
As mining activities consolidate across the world, the employment level suffered a 37-point decrease. Likewise, the FTE (Full Time Equivalent) employment dropped by 36% from the 2017’s peak up until 2019. The growth in the Asia-Pacific (APAC) region you see on this chart can be accounted for by very young companies and startups, making 49% of surveyed respondents.
As always, BTC is the mining choice across the regions. This has remained a common trend throughout crypto’s short life span.
As far as utility expenditures go, they account for about 79% of total operational expenditures. However, owing to geographic peculiarities that can support hydroelectric sources of power, which remains the number one cost-effective mining solution, electricity costs diverge across continents.
Effectively, Asian and North American miners are roughly aligned in electricity expenditure.
The drive toward renewable energy sources is still ongoing, but only 39% of miners draw their power from renewable energy sources. Mining subsidies are present but to a small extent. Of all the miner respondents, only 28% report having received government subsidy.
Regulatory Compliance and Subsidies
It bears noting that if people are given a choice between more freedom or additional safety measures, most will opt for the latter. This aligns with the results of the study, showing a marked increase in regulatory compliance. Europe continues to be the most regulated crypto marketplace.
Adoption of know-your-customer (KYC) went from a measly 13% to 48% during the period of the last two years. According to the study, such a significant upward trend is owed to the enforcement actions of the Financial Action Task Force (FATF).
Of the totality of respondents, 75% hold some type of inhouse compliance, while the European region invests most in achieving regulatory compliance. This is understandable given the notorious heavy-handed approach of the EU’s bureaucracy.
The Emerging DeFi Market
The study notes what we have already addressed before. Decentralized Finance is highly promising, but peppered with uncertainties in the form of experimental projects. Going into the next year, the study’s authors estimate that DeFi services will seriously impact all major crypto providers.
Additionally, the authors note that DeFi defies its moniker. Most of the DeFi services are not truly decentralized as they rely on centralized oracles and kill switches. However, the popularity of government tokens paves the path for increased decentralization over time. With such prospects, DeFi is poised to potentially become a major game-changer.
What do you think about the current state of the crypto market? Will DeFi boost the market to new heights? We’d like to know what you think in the comments section below.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.