Here’s how the pickup in crypto DeFi activity is influencing Australian trading activity
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The relatively strong performance of major cryptocurrencies hasn’t been lost on investors since the pandemic began.
Along with Bitcoin, the post-March rally has also seen demand flow through to other major alt-coins led by Ethereum, which acts as the operating platform for a new wave of decentralised finance (DeFi) projects.
While BTC (along with gold) prices came off this week, the world’s largest crypto has still rallied from March lows beneath $US5,000 (~$7k) to above $US11k (~$15,700).
While the tech around DeFi remains the subject of much development and debate, one way to frame the current environment is — how are all these factors affecting trading activity?
To get an insight into how those dynamics are playing out, Stockhead caught up this week with Caroline Bowler, CEO of domestic crypto exchange BTC Markets.
“What we’re seeing on our exchange — and this may not be the case across all exchanges — but for us typically around 65 per cent of trading activity is in Bitcoin,” Bowler said.
“But what we’ve seen — and this is a global trend — that’s now reduced down to around 60 per cent. It doesn’t seem like a lot, but it’s quite a material movement into coins based on the Ethereum ERC-20 protocol.”
Tradable coins on the BTC platform include LINK, the digital token used to pay for services on the Chainlink network — a smart-contract platform built off ERC-20.
Chainlink’s protocol acts as a data aggregation system, where information is batched via “node operators” who are rewarded for providing information with LINK tokens.
And as DeFi speculation increases, LINK tokens have climbed from around $6 at the start of June to more than $18.
Bowler said BTC Markets had also seen lots of volume in XRP, the digital tokens for established cryptocurrency Ripple.
“We’re the Australian On-Demand Liquidity (ODL) partner for Ripple, so it would be normal that we’d expect to see activity on there,” Bowler said.
“But what were seeing at the moment isn’t to do with ODL, it’s pure trading activity in XRP. XRP tokens have always been around the top four (most traded assets), but looking at the exchange today (Friday August 7), the volume’s above Ethereum.
“I think a feature of digital assets and crypto is that while you’re going to see domination of Bitcoin, where nearly everything else ranks underneath it in terms of trading sizes, we’re seeing that volume spilling over into the other coins. So I think that’s an interesting trend.”
Like any nascent sector, cryptocurrency has had its share of surges and slumps as markets try and determine what constitutes fair value.
But having weathered the 2018 bear market and acted as a viable alternative asset class during the pandemic, Bowler said it felt as though the industry had reached something of a “tipping point”.
“The conversations and qualities of partners looking to come to the table are broadly different from where we were even a year ago,” she said.
In that context, the focus for BTC Markets — which Bowler said processes around 45 per cent of crypto trading volume in Australia — was geared around building out its product offering.
“As a trading platform we want to do the best we can for the Australian market because we don’t want Australia to be left behind,” she said.
“So the key question for us from a product standpoint is — does this add value for someone who’s interested in the asset class? It’s not about being flashy, it’s about getting things to work.
“At last count we had 29 (new projects), and we’ve just launched two of them so we have another 27 projects currently on our board. We’re working away furiously and that’s indicative of what’s going on around us.”