Bitget has published a joint report with Boston Consulting Group (BCG) and Foresight Ventures. Bitget’s first comprehensive industrial report, “What Awaits Crypto Exchanges in the Future,” dives into the competitive landscape of crypto exchanges. He shares key development trends in crypto markets, his role in activating the Web3 economy, and his insights on how to navigate the crypto space during a bear market.
This report presents an intense study of the evolving environment for crypto exchanges through different lenses, such as a thriving derivatives market, momentum of rapid trading volume growth, regulatory implications, and innovative practices. The report also provides a forward-looking perspective on the current competitive landscape, along with perspectives on growth paths for crypto exchanges.
Commenting on the report, Bitget Manager Gracy Chen said,
“This report shines a light on the latest developments in the crypto market with sharp information revolving around crypto exchanges and future earning operations. Despite such market conditions, we continue to receive great interest from investors. According to the report’s findings, while crypto trading volume still has ample room to grow, LATAM and APAC remain the two most attractive regions for global players to expand due to higher market potential and progressive crypto regulations. He agrees, reflecting our development strategy, as these two regions are among our primary focus. In the meantime, we will continue to develop our products with creativity and innovation and increase adoption of crypto and social commerce, with a vision of increasing financial independence for the rest of the world.”
Tjun Tang, BCG Manager and Senior Partner,
“Despite the recent market disruption, we believe the market has growth opportunities ahead. Crypto exchanges play an important role in the Web3 ecosystem by providing access, liquidity and infrastructure. With intensifying competition, crypto exchanges must adapt to the dynamic market situation and change their strategy to win the competition. In this report, we provide perspectives on the future of Web3 adoption, emerging high potential markets, crypto exchange competitive landscape, and the future state of the art. We highlight the unique growth opportunities that crypto exchanges can explore: powering and scaling core offerings; expand into adjacent products and offerings; developing innovative business models. It is leading the way in bringing Web3 solutions to traditional industries.”
Summary
Strong historical growth of the overall crypto industry and increased adoption worldwide
- Despite the recent disruptions in the crypto market, it is believed that the crypto economy will endure
- Global centralized crypto trading volume was $54 trillion in 2021. Spot trading volume was $20.6 trillion, more than 2,000 times 2016 volumes. Historically, spot trading volume has been strongly correlated with overall crypto market cap and volatility.
- Crypto is still at the beginning of its adoption curve:
- In terms of value: Only 0.3% of individual wealth is currently held in crypto assets, as opposed to 25% held in stocks
- In terms of volume: the level of crypto adoption is now close to the internet it was in 1998. While it is difficult to predict if the crypto adoption trendline continues, the total number of crypto users could reach 1 billion by 2030
Three Macro Trends Influencing the Growth of Crypto Exchanges
- I. Complexity of the market with increased institutional participation
- Global quarterly spot trading volume increased sevenfold to $3.2 trillion in the two years to Q1 2022, while crypto derivatives increased twelvefold to $6.3 trillion in the same timeframe.
- Institutional investors, mostly prop trading firms, are attracted to derivatives trading because of their greater flexibility to implement trading strategies, higher capital efficiency, better risk management and tax efficiency.
- The rapid development of Web3 applications leads to an increase in the trading volume of altcoins
- Web3 applications leverage blockchain technology, increasing the utility of crypto in real-life applications. The number of apps increased from ~800 in 2017 to ~10,000 today
- Crypto exchanges are key to enabling the Web3 ecosystem by providing liquidity. In some cases, centralized exchanges may also take responsibility for providing infrastructure for crypto oversight through exchange custody wallets.
- More than 70% of spot trading volume growth between 2020 and 2021 was driven by BTC and non-ETH tokens to illustrate the emergence of Web3
- Emerging markets lead the way in crypto adoption; Significant increase in 2021 transaction volume
- Emerging markets and developed APAC countries accounted for 1/3 of global spot trading volumes and around 40% of global derivatives trading volumes in 2021.
- Spot trading volume in MEA, LatAm and APAC increased from 26% in January 2021 to 32% in December 2021. Volume share of derivatives in the same region increased from 39% to 42%
- Crypto penetration in some emerging markets is already higher than in developed countries; For example, crypto penetration in Nigeria is over 40%, even higher than traditional banking penetration in the country.
- LatAm and APAC are the two most attractive regions for global players to expand due to higher market potential and relatively more progressive and specific crypto regulations.
- Some use cases in developing countries go beyond just being an investable asset: they can range from remittances to crypto-backed payments as a cheaper alternative to traditional financial infrastructure.
- The future of work coordinated by decentralized autonomous organizations (DAOs) will unlock new collaboration use cases
Growth prospects for crypto derivatives
- We expect higher crypto derivatives growth, reflecting more developed financial markets with mature regulatory environments regarding derivatives. The overall crypto-derivative-to-spot ratio is expected to approach that observed in traditional equity markets.
- More product innovations in crypto derivatives that favor futures and options over perpetual swaps.
- Emergence of institutional investors has increased demand for hedging and risk management
- Given the recent market events and volatility, potentially tighter regulations are expected for derivatives compared to spot markets.
Crypto Exchange Breakthrough perspectives
- The crypto exchange environment is concentrated, with the top five crypto exchanges accounting for approximately 70% of spot trading volume and approximately 90% of derivatives trading volume in 2021.
- Similar to how the traditional financial market landscape has developed historically, regulations will play an important role in shaping the competitive end-state and preventing monopolies. Especially after the recent market events, an increasingly proactive stance is observed from the regulators.
- Comparing with traditional finance, a competitive end is predicted where the top five exchanges will continue to consolidate the market and take a 65-75% share in spot transactions Globally.
- Similarly, the top five exchanges are expected to consolidate and reach 80-90% of derivatives trading in emerging markets and 70-80% in derivatives trading in developed economies due to tighter regulatory environments and competition from local regulatory players.
The Playbook for Crypto Exchange Growth
- In the short to medium term, crypto exchanges should focus on strengthening their product offerings by adapting to the needs of their core customers and expanding into emerging markets.
- In the medium to long term, crypto exchanges should explore a combination of different growth tactics.
- Expansion into adjacent areas such as NFTs and DeFi
- Leveraging exchange tokens to boot ecosystems and user growth
- Adopting traditional finance use cases, especially in emerging markets where financial infrastructure is relatively immature and crypto-backed infrastructure has the potential to surpass traditional finance
About Bitget
Founded in 2018, Bitget is one of the world’s leading cryptocurrency exchanges. Now serving more than two million users in over 50 countries around the world, Bitget has stepped up its mission to promote decentralized finance in 2021 with a workforce of 500 people spanning over 20 countries.
Since Bitget’s official launch on the crypto derivatives market in June 2019, the platform has now become one of the largest crypto copy trading and derivatives exchanges in the world, ranking in the top five globally by CoinMarketCap and CoinGecko for derivatives trading by volume. Bitget’s flagship product, One Click Copy Trade, has attracted more than 20,000 copy traders worldwide bringing innovation to the experience for crypto derivatives traders.
Strictly adhering to the philosophy of ‘Better Trading, Better Life’, aiming to be the portal that transcends Bitget, Web2 and Web3, connecting CeFi and DeFi, resulting in a wide bridge, providing users globally with secure trading to the comprehensive and extensive crypto network. is committed to providing solutions. In September 2021, Bitget announced its sponsorship as the first jersey partner of world-renowned soccer team Juventus and soon after as the official esports crypto partner of the PGL Major. Partnerships with the leading esports organization Team Spirit and Turkey’s leading and well-established football club Galatasaray were also announced in early 2022.
About Boston Consulting Group Boston Consulting Group
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