Data is a vital resource in ensuring market efficiency. Market efficiency reflects how well prices represent all obtainable information. Quality information hinges on accessible data. Traditional financial markets are abundant with data characterized by high levels of standardization and accessibility, providing participants numerous analysis routes.
Conversely, while digital asset markets have extensive data, the lack of structure and standardization complicates fundamental and quantitative analysis.
Ironically, the transparency offered by public blockchains, which allows anyone to access transactions and data almost immediately, does not guarantee accessibility or usability. Prioritizing dissemination and context is essential; masses of raw blockchain data do not automatically enhance market efficiency. The complexity of blockchain data might benefit knowledgeable analysts but contributes to volatility, which deters institutional investment.
Until recently, the fragmented nature of blockchain data has been acceptable due to a retail-dominated market. However, for the digital asset market to evolve and attract institutional players like pension funds and endowments, it needs to advance.
Learning from conventional markets, digital asset platforms should ensure performance metrics are easily available, akin to ‘investor relations’ pages for investors. Start-up crypto projects might not communicate information as publicly held companies do, but they can take interim steps to bolster the landscape.
Relevant data points for most projects could include supply schedules detailing inflation, fees, active users, and daily transactions. Each project should strive to disclose applicable data metrics, despite their different utilities.
Crucially, data should come with clear definitions and methodologies, allowing reproducibility of the analytical processes derived from blockchain. It must be accessible over time and support download or API-based access.
By improving how key data is shared, uncertainty and volatility should decrease, aiding capital inflows into crypto. Investors now expect such transparency and should reward projects prioritizing clear performance indicators, while advocating for improvements where necessary.
Larry Fink, CEO of BlackRock, remarked during a recent earnings discussion about how enhanced transparency and analytics could widen digital asset investments, comparable to the transformation of traditional asset markets. Companies like Artemis are paving the way with blockchain data and analytics, setting standards essential to the development of digital finance. Just as traditional platforms like Bloomberg and S&P’s Capital IQ are crucial, projects in the digital asset realm need to enhance data access for investors. As transparency and analytical depth in the crypto market progress, investment possibilities should significantly broaden.
