Using institution-focused analytics to navigate the crypto market

December 6, 2021

Using Institution-Focused Analytics to Navigate the Crypto Market(desktop).png

At a glance

As the crypto space has matured, tracking data in the digital asset universe has evolved into institutional-scale solutions sought by professional investors.

Key takeaways

  • For institutional investors, having access to robust data analysis is as critical in the cryptocurrency space as it is in the traditional markets.
  • With access now to real-time and historical analytics for cryptocurrency spot and derivatives markets, investors are better equipped when deploying capital.

Written by

  • Coinbase Institutional

Introduction

Even with major innovations in market data analysis, it’s not surprising that many professional investors still consider one of the most important technology platforms to be a ubiquitous, black-screened software system that is nearly four decades old.

The Bloomberg Terminal has become nearly as synonymous with Wall Street as the trading floor of the New York Stock Exchange or the Charging Bull sculpture in Manhattan’s Financial District, because what it offers is nearly unmatched in the industry: A simple, one-stop solution to the comprehensive needs of professional investors, providing them with a trading system, news updates, price quotes, messaging and, of course, real-time global financial data.

It’s the financial data offerings that the Bloomberg Terminal is arguably most associated with, particularly because solid, real-time, and historical data is critical to navigating the complex global markets.

For institutional investors, having access to robust data analysis is no less important in the cryptocurrency space. And as the crypto space has matured, tracking data in the digital asset universe has evolved into institutional-scale analytics sought by professional investors.

Gathering intelligence

When taking a historical view of data and analytics in the cryptocurrency market, most crypto data products were catered toward retail trading activity. Capabilities usually included the latest price and some technical analysis of bitcoin and other digital assets from a variety of sources.

Until recent years, there has been a greater challenge to gather intelligence on what’s behind the price movement and volatility. And because the market is more fragmented than traditional markets, investors historically had issues with the quality of data and the lack of norms, making it difficult to know what was real and what was not.

Today, institutional investors have increasing access to sophisticated data and analytics that’s tailored to their needs.

Using Institution-Focused Analytics to Navigate the Crypto Market-1(desktop)

Data illumination

In order to give professional investors more color on the positioning of the markets, Coinbase Prime offers a set of institutional-focused market data features that provide real-time and historical analytics for cryptocurrency spot and derivatives markets. This analytics solution seamlessly integrates with the best-in-class liquidity that Coinbase offers on the Coinbase Prime platform, giving institutional investors the tools they need to deploy large amounts of capital.

Coinbase ingests and analyzes market data from a large variety of sources to enable investors to design strategically tailored investing strategies based on their portfolio objectives. For institutional clients, gaining access to both macro and micro analysis is critical; and with the maturation of crypto as an asset class, the approach to analysis is growing more similar to traditional investing.

From a macro perspective, investors are looking for a good understanding of the flows in crypto markets across products and assets. This means understanding which products/venues have the most liquidity, as well as understanding when and where key trading levels take place. This can give allocators insights into where the big positions in the market are, and let them review the largest trades from the prior day or week, for example.

The micro angle centers around pre-trade analytics: institutions entering crypto are looking to deploy significant capital, which makes liquidity especially important. For investors who are new to a rapidly evolving space like cryptocurrency, it is critical to understand how much liquidity they can deploy in a given day or hour — and whether their trade will impact the price of an asset.

The data and analytics features available on Coinbase Prime look at how much liquidity is available at the order book level, historical volumes, and the average trade size. The aim is to enable institutional investors to make more informed decisions before investing in the market.

The explosive growth of institutional investments coming into the market has helped build the infrastructure for crypto as a new financial system. Whether it’s sending and receiving, saving, staking, earning, or borrowing and lending, there are not only many more ways to put crypto to use, but much more data to track.

With new trading technology, the industry is no longer limited to monitoring the movement of assets on the exchanges. With institution-focused analytics tailored to specific investment objectives, investors are now able to utilize a broader data set that enhances how they track the maturing crypto markets.

newsletter.png

Sign up for our insights

Get the latest market insights, developments and updates, direct to your inbox.