Data Critical to Success in Crypto Foray

As traditional investment managers increasingly dip their toes into the world of digital assets, having access to data and information in formats they recognize and understand is critical to their success.

With an immensely vast array of exchanges and protocols to monitor, the potential for data overload is very real. However, solutions exist to help avoid this and to encourage efficient and incisive investment in digital assets. 

“To be successful when investing in digital assets, asset managers need to have the telemetry into what is happening across the market to be able to identify opportunities and quantify risk,” explains Shawn Douglass CEO, Amberdata, “The really unique thing about digital assets is the radical transparency which is not available in traditional financial markets.” 

Although this transparency results in significant investment potential, the breadth of the digital asset space can be challenging for investment managers, especially those more accustomed to traditional financial instruments. 

Digital assets trade across a large number of venues around the world, around the clock, within numerous jurisdictions. In fact, they resemble foreign exchange markets more than stock markets, in terms of the way they operate. 

The structure of the market can be a barrier to entry for some investment managers. “Each trading venue has its own API – these are fast-moving and change all the time,” notes Douglass, “For an institution to be able to understand and quantify what is happening from a global liquidity and market depth perspective they would have to connect with around 30 exchanges.” 

Although this can be done, it is an onerous and often thankless task for investment managers to undertake themselves. Douglass outlines how Amberdata saw the opportunity to reduce the cost and time to market for managers entering the digital asset class through the creation of a global digital asset data platform.  

“As digital assets become pervasive and widely adopted, we are becoming fundamental infrastructure for the next generation of financial services,” he says. 

Comprehensive datasets 

Amberdata is the most comprehensive digital assets data provider today and is focused on empowering financial institutions with historical and real-time fundamental (on-chain), DeFi and market data for research, trading, risk, analytics, reporting, and compliance. The firm provides clients with a single API which gives access and visibility into every digital asset exchange that matters, every spot market, every derivatives market, every options market.  

“The aim is to make managers’ lives easier through a data infrastructure which is available any time of day or night and is scalable,” says Douglass. 

In truth, all the data gathered by Amberdata, as it relates to the trading of decentralised digital assets, is in the public domain. Blockchain networks have protocols running on top of them and each of those protocols has both input and output data. This means there is a count of who held what, when and at what price. All the information about market participation, liquidity and trading is available. 

However, amassing this data for even just one protocol is an enormously arduous task, let alone, running the same exercise for 55 protocols or more. “Accounting for every address, every wallet, is massively complex, and a financial institution would need to spend millions of dollars and invest years of time just to learn how to do this properly,” Douglass warns. 

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