Crypto Market Data: Will It Stay Free Forever?

Opimas expects that institutional holdings of cryptocurrency will grow from just under 30% of cryptocurrencies’ cumulative market cap, to more than 50% by 2026. Despite all of this, cryptocurrency spot exchanges continue to provide their market data for free, even to institutional investors.

A new research report from Opimas—Crypto Market Data: Will It Stay Free Forever?, authored by analysts Suzannah Balluffi and Anne-Laure Foubert—looks at the size of the market for cryptocurrency data, examines who is currently earning money and how, and forecasts how the market is likely to evolve over time.

Some key findings in the report include:

• In contrast to traditional capital markets, where exchanges are able to charge impressive sums for market data, crypto exchanges have been largely unable to monetize their data feeds, instead enabling free access via APIs. Coinbase’s recent S1 filing showed revenues for 2020, 96% of which came from transaction revenues, with no mention of any revenues derived from the sale of market data. By contrast, only 38% of Nasdaq’s 2020 revenues came from trading and clearing fees, while 31% came from their investment intelligence segment – an area that includes market data, indices, and analytics.
• In addition to an ethos in the crypto world that frowns at limiting investors’ access to trading data, the market is still fragmented. There are hundreds of cryptocurrency spot exchanges – roughly 300 at the time of writing – and competition for volumes is fierce. If one exchange began to charge for their market data, traders could easily switch venues. Opimas expects significant consolidation amongst crypto exchanges going forward.
• A number of firms play a key role by acting as re-sellers of the data – both as cryptocurrency data aggregators and market intelligence providers. Cryptocurrency data aggregators combine multiple exchanges’ market data feeds into one consolidated stream, whereas market intelligence providers often provide analytical tools that sit on top of this information. These data re-sellers earned about US$94 million in revenues in 2020, representing the majority of the US$100 million market for crypto data. These players generate profits largely from the sale of online advertising, not direct data licenses, reflecting the still dominant role of retail investors in the crypto market.
• Close to 80% of crypto data revenues are generated from online advertising, with data aggregators capitalizing on the heavy retail investor traffic their websites receive, as opposed to data licensing fees and subscriptions. Crypto data aggregators and market intelligence providers earned roughly US$6.5 million from subscriptions and close to US$80 million from advertising in 2020. As institutional investment increases in the coming years, Opimas expects advertising revenue to contribute to a decreasing fraction of crypto data revenues. By 2023, just under 60% of crypto data revenues will be generated in this manner.
• Derivatives exchanges like Bakkt and CME, with a majority of their crypto derivatives traders being institutional, have had limited success selling market data thus far, earning only about US$5 million in 2020. By 2023, Opimas expects this to increase to at least US$14 million. Crypto spot exchanges have not yet monetized their data feeds, though Opimas also anticipates this changing over the next three years.
• With cryptocurrency exchanges undergoing a phase of significant consolidation, and competition heating up amongst the data providers, Opimas expects that, with time, dynamics will shift, and cryptocurrency exchanges will start to charge users for access to their data feeds.