Bitcoin: The trillion-dollar underdog

In just 10 short years, bitcoin has built a market spanning the globe with millions of active participants. It has generated interest and attracted talent away from the largest banks, hedge funds, consulting firms, and technology companies. Yet despite the numbers, it has retained underdog sentiment among major market players relative to its traditional asset peers. I argue that through the lens of the analysis presented, bitcoin’s network is competitive with many developing economies.

Since January 2017 over $2.9 trillion in bitcoin has been traded across dozens of currency pairs on self-clearing exchanges located around the world. Despite the broader market liquidity fragmentation inherent to self-clearing markets as well as a year-to-date bear market in the bitcoin price, trading volume continues its trend of well over 100% year-on-year growth.

While over $2.2 trillion worth of bitcoin was traded in 2018, its growth rate returned to its 2016 level of approximately 150%. This doesn’t quite match its 2017 level of 2,636%, yet still indicates rapid, sustained market growth. Trading volume growth was driven by derivatives exchanges offering relatively high leverage to traders, coupled with increased clarity provided by regulators across the world that bitcoin is not a security and by legislators that it is a legal asset to hold and trade. Improvements to derivatives liquidity and counterparty optionality has also significantly increased investors’ and traders’ ability to hedge the asset by reducing hedging transaction costs and counterparty risk. ..Read More..

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