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The Role of Data Analytics in the Cryptocurrency Industry

Updated: May 27, 2020

While analytics has come a long way in the cryptocurrency industry, it still has a ways to go. Initially, the only information regarding price fluctuations were displayed on historical price charts which had no information pertaining to potential causes or precursors explaining why those prices fluctuated. Over the years, different analytical sites popped up that did blockchain analysis for various chains/coins and would show the movement of each coin as well as additional information such as the number of wallets around the world for a specific coin, the average number of coins per transaction, and other transactional information. We are now at a point where more sophisticated tools, including Artificial Intelligence and Machine Learning algorithms, need to be developed for advanced investment analysis. My company, Omnia Markets, takes this much further by combining different algorithms that measure various aspects of the industry to give our users a broader and in-depth look at factors influencing each coin’s price and the overall industry.

We are now seeing many companies utilize Artificial Intelligence (A.I.) and by extension, Machine Learning (M.L.). These tools are beginning to help companies and analytical platforms, such as Omnia Markets, in combing through the vast amount of data in the cryptocurrency industry. It helps to eliminate unnecessary or inaccurate data (“data fog”) allowing us to show more relevant and reliable information. Some companies use A.I. to measure overall market sentiment pulled across social media, and while this is a good first step, it still does not truly explain what is causing prices to fluctuate; in other words, it is unable to answer the underlying cause behind the sentiment being measured. However, A.I. with Machine Learning (M.L.) is becoming able to understand market movements and our Omnia Markets Platform can create reports based on user-defined criteria to provide insight into the causes and trends for price movements. We intend to develop our own in-house journalism division, also backed and supported by A.I. and M.L., to bring out information that is currently unavailable elsewhere. This will make our analytical tools and offerings truly one of a kind.

Machine Learning (M.L.) helps in understanding the data moving through the cryptocurrency industry by being able to combine a multitude of factors and sources of information to understand the causes behind price fluctuations and industry trends and movements. While there is no tool that can ever accurately predict future prices of any cryptocurrency, M.L. can help create reports that give an industry-wide view on factors influencing prices through the data moving throughout the industry. These reports can be used by investors and researchers to determine their own theories as to whether a coin’s price will increase or decrease over time and come up with appropriate, well-informed investment strategies.

Will it be possible in the future to have a World where analytics takes center stage in the crypto-space? That is certainly our expectation and our game plan in response. As we have seen over the past year, people are beginning to notice irregularities from various analytical platforms in the data they display. In some cases, the data being displayed includes false data (recall my article discussing Wash Trading) and there is increasing scrutiny for analytical platforms to vet the sources from where they grab their data. As the “data revolution” in the industry continues and platforms such as Omnia Markets enter the industry to provide the advanced and in-depth analytics, we believe that these analytics will take center stage – especially in helping to move the industry forward and bring traditional investors and investment banks into the industry by providing a tool that they can use much like the tools that already exist in the traditional finance space.

There are many use-cases for cryptocurrency analytics. One of the major use-case scenarios is in the adoption of cryptocurrencies around the world. As we have seen in recent years, there seems to be a split in countries accepting or banning cryptocurrencies. The countries that ban cryptocurrencies have done so due to their belief that it is a tool used for money laundering and illicit trading for investors to hide money. However, analytics has shown that this is not the case and over time countries that once banned or planned to ban cryptocurrencies have now moved forward with implementing legislation to govern this space (recall my article discussing China's Change of Heart on Cryptocurrencies and Blockchain Technology). Analytics is responsible for investors adopting cryptocurrencies as a part of their portfolios as they are now able to access certain information needed for their investment strategies, as well as reporting on the overall size and movement of the industry. Without the growth of analytics, the cryptocurrency industry would not be able to grow as rapidly as it has and would not be able to continue growing at a stable rate and achieve mass adoption. Omnia Markets aims to provide the most reliable information that can be found in the industry and help achieve mass adoption and provide accurate reports on the industry to allow users and investors to become apart of it.

Analytics can allow us to make sense of what is happening in the blockchain community. As we have seen with Blockchain technology ever since its introduction alongside Bitcoin in 2008 and launch in 2009, this technology is becoming more broadly accepted and widely adopted and many companies in various industries have been looking at utilizing this technology for different purposes. As such, with rapid growth, it can be difficult to make sense of everything that is going on in this industry. We can take a look at the different companies and industries that have begun utilizing this technology to get a sense of its overall adoption as well as the different use-cases for this technology. For example, the real estate, finance, health care industries (and more) are now leading the way for the adoption of the blockchain industry. The community has been advocating for different uses of this technology which has allowed different tech-companies and startups to begin offering blockchain-related services – these fall under the BaaS - "Blockchain as a Service." We can also make sense of what is happening in this industry/community by following the legislative efforts around the globe that have allowed and continue to allow this technology to become more widely adopted and utilized.

I expect the industry to be faced with regulatory hurdles, not just in the United States, but around the globe. This will certainly challenge the industry with moving forward and by extension will also cause my company to increase our efforts in building our platform as well as assisting global agencies with creating positive legislation to govern this industry as I have already been doing so. I also expect my company to be faced with challenges in creating the A.I. infrastructure side of our platform as the information we collect has to be heavily vetted for verification and reliability which can be difficult due to the massive amount of data and sources in this industry.

Bonus points if you made it this far into the article! Now, I have been asked in various interviews, "If I had 3-wishes for this industry, what would they be?" This is a tricky question to answer as I often view these “wishes” as short cuts that the industry can take to reach a certain goal, and I personally believe that there are no short cuts for allowing this industry to achieve true, mass adoption. However, if I come across a magic lamp with a genie that would grant these three wishes for the blockchain and cryptocurrency industries, I would wish for,

1 – a clear, positive, and coordinated global legislation to govern these industries and bring a certain level of predictability and stability;

2 – the removal is all bad players/actors from these industries. Or more feasibly, to wish for enforcement mechanisms to minimize and control the bad players – such as hackers, false prophets (people that provide false or misleading information under the guise of being an industry leader in order to make a profit while others lose), and market manipulators. While you can never eliminate this problem, just like you cannot in any other industry, one can certainly wish for their minimization so their negative impact can become immaterial; and,

3 – for these industries to allow the broadest and most transparent information sharing so there is no information asymmetry and all parties have access to all of the information that leads to equal trading opportunities. It is my hope that Omnia Markets will help in democratizing this industry in these ways.

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