Cryptocurrency Trading Industry: Ken Research


A cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. The first decentralized cryptocurrency, bitcoin, was created in 2009 by fictitious developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme. The cryptocurrency market is composed of many important intermediaries and groups and this industry has influenced four major sectors including Exchanges, Wallets, Payment Companies and Mining. The global cryptocurrency market is still in its growing phase as the major currencies are gaining prominence in the market. With the introduction of bitcoin other players followed the market such as Ethereum, Litecoin, Dash, Monero and others.

The prominence and popularity of crypto currency technology quickly spread through the general public as means to store and transfer wealth, as well as engage in secure e-commerce. It was witnessed that the global crypto currency market augmented positively from USD ~ billion on 1st January 2014 to USD ~ billion on 4th December 2017 at a whopping CAGR of ~% during 2014-2017. Growth in the crypto currency market has been driven largely by venture capitalists investing in technology infrastructure, and other investors seeking to profit from price fluctuations, rather than by consumers actually using crypto currency. Venture capitalists with formidable experience investing in the technology sector have been pouring capital into the market, expecting that consumer demand will drive future growth of this market, resulting in huge market growth. As various entities have been witnessing huge potential in the business related to crypto currencies, the market for the same has grown exponentially.

By Currency Market Cap: Bitcoin is the market leader in terms of market cap dominating the crypto currency market around the globe. On 4th December, 2017 bitcoin accounted for ~% of the overall market cap among all the crypto currencies in the world. Over the years market price of a single Bitcoin fluctuated from below USD ~ on 1st January 2010 to over USD ~ on 4th December 2017. The highly volatile price has made Bitcoin an attractive investment alternative for traders seeking to profit from the market. Ethereum accounted for ~% of the overall global crypto currency market cap on 4th December 2017. Like Bitcoin, no one controls or owns Ethereum – it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Ethereum was designed to be adaptable and flexible. Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized currency, with no central bank and requires no trusted third parties to operate. Bitcoin cash accounted for a share of ~% of the overall cryptocurrency market on 4th December 2017. Litecoin accounted for ~% of the overall market cap on 4th December 2017 in the global crypto currency market. Litecoin was launched in 2011 and is considered to be the ‘silver’ to bitcoin’s ‘gold’ due to its more plentiful total supply of ~ million LTC. Litecoin uses scrypt in its proof-of-work algorithm, a sequential memory-hard function requiring asymptotically more memory than an algorithm which is not memory-hard. Ripple [XRP] is one of the most popular crypto currency after Bitcoin and Ethereum and the latest crypto currency set to revolutionize the financial services industry and is used by a number of banks. Ripple accounted for ~% of the overall

global crypto currency market share on 4th December 2017. Dash is the first privacy­ centric cryptographic currency based on the work of Satoshi Nakamoto. Dash was officially launched in early 2014 and it has recently experienced increase in market value since the beginning of 2017. Dash has accounted for ~% of the overall global crypto currency market share on 4th December 2017. NEM is a peer-to-peer crypto currency and blockchain platform launched on March 31, 2015. Written in Java, with a C++ version in the works, NEM has a stated goal of a wide distribution model and has introduced new features to blockchain technology such as its proof-of-importance (POI) algorithm, multi signature accounts, encrypted messaging, and an Eigentrust++ reputation system. NEM accounted for ~% of the overall market share on 4th December 2017. Monero (XMR) is an open-source crypto currency created on April 2014 that focuses on privacy, decentralization and scalability that runs on Windows, Mac, Linux, Android, and FreeBSD. Monero accounted for ~% of the overall global crypto currency market on 4th December 2017.

 How is Global Bitcoin market positioned?

Bitcoin is a worldwide cryptocurrency and digital payment system also known as the first decentralized digital currency. It was invented by an unknown programmer or a group of programmers, under the name Satoshi Nakamoto and released as open-source software in 2009. Bitcoins make international payments easy and cheap because bitcoins are not tied to any country or subject to a major regulation. Small businesses prefer to use bitcoins as there are no credit card fees. Many users just buy bitcoins as an investment as the price of the currency is very volatile. Bitcoin uses peer-to-peer technology to operate with no central authority or banks and managing transactions collectively by the network. Bitcoins are created as a reward for mining. Bitcoins are traded from one personal ‘wallet’ to another.  A wallet is a small personal database that is stored in a computer drive, Smartphone, tablet, or somewhere in the cloud. They can be exchanged for other currencies, products, and services. Major banks, insurers, pension funds, hedge funds and asset managers, begun to view bitcoin and its rival crypto currencies as a new type of investment which majorly turned around the market for bitcoins during 2011-2017. Global bitcoin market capitalization has increased from USD ~ billion on 1st January 2011 to USD ~ billion on 4th December 2017 at a CAGR of ~% during 2011-2017. The market of bitcoins surged during 2017 at a very high pace majorly owing to soaring demand in the Asian countries. Increasing market value of bitcoin and increasing awareness around the globe will result in market growth in the future. The blockchain technology used in mining bitcoins has increased prominence over the years which have increased the interest of users in the bitcoin market.

Global Bitcoin market Segmentation

By Use of Bitcoin: Over the long term, a distinct characteristic of the cryptocurrency could ensure its long-term value over all others i.e. the cap on its supply. This gives bitcoin a huge advantage over cash as the users are keen to use these for investment as the supply is limited. In terms of trading volume, speculation & investment segment accounted for ~% (USD ~ Billion) of the overall market share during 2017. All the major digital currency wallets, exchanges, payment processors and others use bitcoin for payment purposes. Bitcoin’s advantage of instant transfer and negligible transaction cost has increased its prominence in the market. Thus, payment & gift vouchers accounted for ~% (USD ~ Billion) of the overall market share during 2017.

By Mining Facilities around Globe: China is the country which hosts most mining facilities and uses the highest power consumption of all countries for crypto currency mining. A zoom into China shows that mining facilities are concentrated in remote areas where both electricity and land are very cheap. A significant concentration can be observed in the Sichuan province. China accounted for ~% (USD ~ Billion) of the total number of mining facilities around the globe during 2016. The US is known for good infrastructure facilities and high speed internet access which has attracted major mining facilities towards the country. Mining facilities in the US accounted for ~% (USD ~ Billion) of the revenues of the global mining market during 2016. Other countries such as Sweden, Czech Republic and Germany accounted for the remaining percentage share of mining facilities.

Trends & Developments

Bitcoin dominates the cryptocurrency market in terms of market capitalization but other cryptocurrencies have been increasingly cutting into bitcoin’s historically dominant market cap share. It has been witnessed that bitcoin market capitalization accounted for ~% of the total cryptocurrency market during March 2016 which dropped to ~% as of 4th December 2017. Other currencies have been increasing their percentage share in the market and a tough competition will be witnessed in this market in coming years.

Over the long term, a distinct characteristic of the cryptocurrency that could ensure its long-term value over all others is cap on its supply. This gives bitcoin a huge advantage over cash as the users are keen to use these for investment as the supply is limited.

There is usually no transaction fee for purchase via cryptocurrency because the miners are compensated by the network as they receive payment rewards for each block. This has attracted many users towards bitcoins as the involvement of multiple intermediaries is eradicated and the businesses and individuals don’t have to suffer from high transaction charges.

Issues And Challenges

It is known for a fact that cryptocurrency can’t be tracked and for the same reason people around the globe have been using the same for tax saving, money laundering and other illegal activities. As the acceptance of crypto currency is increasing around the globe it has become mandatory for the government to impose strict laws and regulations for cryptocurrency to maintain law and order in the countries.

One of the main problems of using a cryptocurrency is the need to verify that the coin has not already been previously used by its owner to perform another transaction.

Market Share of Major Mining Pools in Global Cryptocurrency market

AntPool is the leading mining pool in the global cryptocurrency market accounting for ~% of the overall market share during 2017. AntPool is a pool run by Bitmain Tech Ltd. which was founded in 2013. Bitmain Technologies, now among the world’s most recognizable Bitcoin companies, was established to develop and sell the world’s leading bitcoin miners using Bitmain’s ASIC chip technology. F2Pool followed AntPool in terms of number of blocks mined during 2017. F2Pool accounted for ~% of the overall market share during 2017. F2Pool is a Chinese mining pool, also referred to as “Discus Fish” which was opened on May 5, 2013. This name “Discus Fish” originates from the time before the pool had an English interface. At the time they were known only by their coinbase signature. BitFury followed F2Pool in terms of number of blocks mined during 2017. BitFury accounted for ~% of the overall market share by number of blocks mined during 2017. Bitfury is the leading full service Blockchain technology company and one of the largest private infrastructure providers in the Blockchain ecosystem. Bitfury develops and delivers both the software and the hardware solutions necessary for businesses, governments, organizations and individuals to securely move an asset across the Blockchain. BTCC Pool followed BitFury in terms of number of blocks mined during 2017. BTCC Pool accounted for ~% of the total number of blocked mined during 2017 around the globe. Headquartered in Hong Kong, BTCC serves a global customer base and has become an industry leader for security, risk mitigation, credibility, and technological innovation. BTCC was founded on June 1, 2011. Other major players in the mining industry included

Competitive Landscape of Major Mining Pools in Global Cryptocurrency Market

The cryptocurrency market is fragmented as the currency can be developed anonymously by anyone and launched in the market. Increasing awareness and demand of the currency increases the market value of currency. The mining companies in the network are dependent on financial institution websites for their marketing and as increasing number of users register on their (mining companies’) portal and trade, the mining companies earn revenues. The payment methods and reward system in all the companies are majorly same and companies do not provide special offerings to attract users to their websites as they are aware that a user will be willing to join only if he is interested in the cryptocurrency.

Future Outlook of Global Bitcoin Market

It has been expected that bitcoin market will have three potential futures scenarios during 2017-2022. Firstly, bitcoin market may witness a major bubble burst and the value of bitcoin will witness major fall and then stabilize over the years. It has been witnessed that price of bitcoin has gone up at a faster pace than any other speculative vehicle in market history which has attracted a lot of investment and speculation in the market. The experts at Ken Research believe that the bubble is expected to burst and the price of bitcoin will fall drastically and stabilize with time. Secondly, it is highly expected that respective governments will accept and introduce norms against bitcoins and the market witness steady growth in coming years. Criminal activities in and around the world have raised the concern for the government to introduce new regulations in the market for using bitcoins. Many countries have officially started using bitcoins as mode of payment but the regulations imposed aren’t strict enough in the countries to avoid illegal activities. It is anticipated that as the prominence of bitcoin in the market increases, it will be mandatory for the government to impose necessary regulations to avoid misuse of the currency. Thirdly, it has been anticipated that the bitcoin market will grow at same growth rate and will rise at a good pace in coming years. It is expected that three to four major cryptocurrencies will grow in future and bitcoin will be one of those and the major reason for the same will the first-mover advantage, the scale and the pioneering. The price of bitcoin has been highly volatile but its value has increased at a double digit CAGR in past five years. It is anticipated that the value will increase at higher or same growth rate in near future.

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