This report provides a detailed analysis of the cryptocurrency trading ecosystem for January 2020, building on CryptoCompare's ongoing research. It examines spot trading volumes, derivatives data, exchange fee models, and the breakdown between crypto-to-crypto and fiat trading. The analysis includes Bitcoin trading against various fiat currencies and stablecoins, rankings of top exchanges by volume, and a look at the evolving landscape of fee-mining and decentralized exchanges.
Key Market Overview
The cryptocurrency market experienced significant growth in trading activity during January 2020. Overall exchange volumes increased, with particular strength in derivatives products and trading on higher-tier platforms.
Exchange Benchmark Analysis
- Top-Tier Exchange Growth: Exchanges rated AA-B by CryptoCompare saw their combined trading volumes increase by 61.2%.
- Lower-Tier Exchange Growth: Exchanges rated C-F experienced a 46.4% increase in their trading volumes.
- Market Share: Despite robust growth from lower-tier platforms, top-tier exchanges accounted for 29.3% of the entire market's volume, highlighting their significant role in the ecosystem.
Trade Data Insights
- Largest Trade Sizes: Among top exchanges, Coinsbit, Bitforex, and HitBTC recorded the largest average trade sizes, with averages of 2.4 BTC and 1.2 BTC per trade, respectively.
- Highest Number of Trades: Binance and Liquid, both high-grade exchanges, recorded the highest number of daily trades. Their BTC/Tether and BTC/JPY markets saw 417,000 and 415,000 daily trades on average, respectively.
Dominant Fee Models
- Fee-Charging Exchanges: Platforms that charge standard trading fees represented the majority of volume, accounting for 76% of January's total.
- Fee-Mining Exchanges: Exchanges utilizing a Transaction Fee Mining (TFM) model captured 22% of the total market volume.
Derivatives Market Analysis
The derivatives market saw explosive growth, both on regulated institutional platforms and on crypto-native exchanges.
Institutional Derivatives Products
- CME Dominance: Regulated bitcoin derivatives trading continued to be dominated by the Chicago Mercantile Exchange (CME). Its total volume surged 145.6% from December, reaching $9.72 billion.
- Grayscale's GBTC: The Grayscale Bitcoin Trust (GBTC) also saw substantial growth, with its total volume increasing by $913.25 million (a 131.4% rise since December).
Crypto Exchange Derivatives
- Market Leaders: OKEx was the leading derivatives exchange by daily volume, processing $4.96 billion per day (31.1% market share). It was followed by Huobi ($4.29B, 26.9%), BitMEX ($3.13B, 19.6%), and Binance ($1.86B, 11.6%).
Top Products: The products with the largest monthly volumes were:
- BitMEX's Bitcoin Perpetual Swap ($82.53 billion)
- Huobi's BTC_CQ futures contract ($60.37 billion)
- Binance's Bitcoin Perpetual contract ($43.36 billion)
Perpetual Futures Breakdown
- Bitcoin Perpetuals: BitMEX, Binance, and bitFlyer dominated this market. BitMEX's monthly volume grew 148% to $82.5B, Binance's rose 47.6% to $43.36B, and bitFlyer's increased 72.4% to $34.35B.
- Ethereum Perpetuals: BitMEX also led here, capturing 49.6% of the market with $7.15 billion in monthly volume (a 96% increase). Binance and OKEx followed with $3.46B (+81%) and $2.45B (+44%), respectively.
Fiat and Stablecoin Trading
Crypto-to-Crypto vs. Fiat Trading
- Crypto-to-Crypto Dominance: Exchanges offering only crypto-to-crypto trading accounted for 75.4% ($6.14 trillion) of January's total volume.
- Fiat Gateway Volume: Exchanges with fiat on-ramps represented 25.0% ($2.04 trillion) of the volume, a ratio consistent with previous months.
Bitcoin-to-Fiat Volume
- USD Prominence: Trading Bitcoin for USD made up 73.0% of all BTC-to-fiat volume.
- Volume Increases: BTC/USD volume rose 40.0% to 1.17 million BTC. BTC/JPY volume increased 32.0% to 946,490 BTC, and BTC/EUR grew 42.0% to 316,150 BTC.
Bitcoin-to-Stablecoin Volume
- Tether's Hegemony: Trading between Bitcoin and Tether (USDT) totaled 7.58 million BTC, though it saw a slight decrease of 2.34% from December.
- Market Share: USDT dominated the stablecoin sector, representing 94.08% of the volume between BTC and the top four stablecoins (USDT, USDC, PAX, TUSD).
Exchange Volume Rankings
Top Crypto-to-Crypto Exchanges
- Bitforex: $67.51 billion (increased 89.45% from Dec.)
- Coineal: $50.61 billion (increased 70.72%)
- Bkex: $46.88 billion (increased 125.28%)
Top Fiat-to-Crypto Exchanges
- Biki: $54.08 billion (increased 120.14% from Dec.)
- P2PB2B: $41.87 billion (increased 52.01%)
- Coinsbit: $35.4 billion (increased 52.23%)
Top Fee-Mining (TFM) Exchanges
- Bitforex: $67.51 billion (increased 89.45%)
- CoinBene: $43.14 billion (increased 58.04%)
- Bibox: $36.51 billion (increased 99.91%)
Decentralized Exchange (DEX) Volume
- Leader: IDEX was the largest DEX with $10.05 million in volume (a 25.4% increase).
- Market Context: The entire DEX market volume was just $17.8 million, a fraction of the global spot volume (0.003%). This represents a dramatic 88% decline since January 2019, when DEX volume was approximately $148 million.
January 2020: Key Industry Developments
The first month of 2020 set a dynamic tone for the year, with exchanges expanding products and services amid growing investor interest and anticipation of major events like the Bitcoin halving.
New Trading Products
- BitMEX solidified its lead in crypto derivatives, launching a new XRP/USD swap contract. This product allows traders to gain exposure to XRP's price movements without holding the underlying assets.
- CME Group launched options on its Bitcoin futures contracts, providing a new tool for institutional investors.
- Deribit announced the introduction of daily Bitcoin options, expiring daily at 08:00 UTC.
The Regulatory Landscape
Compliance remained a central theme. Deribit made headlines by moving its parent entity from the Netherlands to Panama, citing a desire to operate outside the EU's "very strict" regulatory framework which it feared would create high barriers for its users. The move was accompanied by the implementation of new KYC requirements.
The Stablecoin Expansion
Stablecoins continued their ascent as a foundational element of the crypto economy. Kraken listed the USDC stablecoin, while Binance invested in South Korean stablecoin company BxB to provide a KRW-linked digital asset.
Fiat On-Ramp Progress
Improving access to crypto markets remained a priority.
- Binance partnered with fiat gateway provider Banxa to add support for GBP, EUR, and AUD deposits via Faster Payments and other local methods.
- Bitfinex enabled direct purchases of Bitcoin, Ethereum, and Tether using credit and debit cards.
Custody Services for Institutions
The demand for secure asset storage grew alongside institutional interest.
- Coinbase Custody officially launched its services internationally, expanding beyond the US following its acquisition of Xapo's custody business.
- Gemini launched a captive insurance company, announcing that it now offered the largest insurance coverage for digital assets in custody at $200 million.
Mergers and Acquisitions
Market maturation led to consolidation. Kraken acquired Bit Trade, Australia's longest-running crypto service provider, signaling a strategic expansion into the Asia-Pacific region.
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Frequently Asked Questions
What is the CryptoCompare Exchange Benchmark?
The CryptoCompare Exchange Benchmark is a rating system that scores exchanges based on multiple factors including transparency, quality of operations, regulatory compliance, data provision, and security practices. It aims to help investors identify trustworthy platforms. Exchanges are graded from AA (highest) to F (lowest).
What are perpetual swaps or perpetual futures?
Perpetual swaps are a type of derivative contract that allows traders to speculate on the future price of an asset like Bitcoin without an expiry date. They use a "funding rate" mechanism to tether their price closely to the underlying spot market, making them a popular tool for both hedging and leverage trading.
Why did decentralized exchange (DEX) volume decline so much?
DEX volume declined primarily due to the rise of high-liquidity centralized exchanges that offer faster transaction speeds, more trading pairs, and advanced features like margin trading. At the time, many DEXs also struggled with user experience challenges and liquidity fragmentation.
What is Transaction Fee Mining (TFM)?
Transaction Fee Mining is a model where an exchange returns a portion or all of the trading fees to its users in the form of the exchange's native token. This model was popularized as a way to attract initial trading volume and users, though it has been scrutinized for potentially incentivizing wash trading.
Which stablecoin is most popular for trading against Bitcoin?
In January 2020, Tether (USDT) was overwhelmingly the dominant stablecoin for trading against Bitcoin, commanding over 94% of the volume among the top four stablecoins. Its deep liquidity and widespread integration across exchanges made it the primary dollar-pegged asset for traders.
How significant is the derivatives market compared to spot trading?
The derivatives market has become incredibly significant. In this period, the daily volume of major derivatives products often rivaled or exceeded the spot market volume on many exchanges. This indicates that a large portion of market activity is driven by leveraged trading and hedging strategies.