As traditional investment managers increasingly dip their toes into the world of digital assets, having access to data and information in formats they recognise and understand is critical to their success.
As traditional investment managers increasingly dip their toes into the world of digital assets, having access to data and information in formats they recognise 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.
Quantifying opportunities
Digital asset data from a unified API, on the other hand, can be applied within several parts of an institutional investor’s business. It can inform front office processes like trading, research functions and portfolio management. In the middle office, the data supports risk and treasury functions. In the back office, the data is used to inform fund administration, tax, compliance and audit functions.
“This allows managers to focus on their core strengths and not the complicated business of collecting, processing, and interpreting data into meaningful information. Our customer base includes some of the largest banks on the planet – Citi, Fidelity and Franklin Templeton,” Douglass says, “We’ve created this really unique position where we bring together the smartest people in crypto, the smartest people in traditional financial services and the best market makers to power this whole ecosystem that institutions can adopt.”
He outlines how traders, in any asset class, primarily want to know what is being traded – what the liquidity of the assets they want to trade is and how they should get involved.
Data can support managers in identifying these opportunities; quantifying them to help understand the risk they represent. Douglass elaborates: “We have asset rankings that ‘bubble’ things up for managers to help them better understand the markets. We support the most liquid DeFi protocols in a way that curates and groups those which have more than $500 million total value locked in them.”
“We then treat those as an ecosystem and raise it up to the attention of our clients. Functions like these allow our clients to identify emerging themes. This is critical given that the number of unique addresses interacting with a protocol is starting to accelerate and therefore there is velocity in utilisation. We provide a lens for smart institutional investors to access digital assets and crypto markets with the best information at hand.”
Familiar format
The format in which this data is presented is also key. As traditional money managers continue moving into this arena, they can appreciate access to information in a familiar format.
Douglass and his team are acutely aware of this. Amberdata’s deep expertise has allowed them to build proprietary indexed, searchable, time-series data combined in recognizable formats and delivered with the reliability and quality received from data providers supporting traditional asset classes. “There’s order book data, open, high, low, close and volume, aggregations, volume weighted average price, reference rates, single asset indices, etc.”
“Today, decentralised exchanges have more trading volume than centralised exchanges, like Coinbase, which means the data extraction is quite profound. Also, the data is very different from what investment managers are used to which is why we carry out the exercise of interpreting the data in ways they will understand.”
It’s this level of expertise that makes Amberdata the trusted provider to leading financial institutions entering the digital asset class.
For more information please visit: Best Crypto Market & Blockchain API | Amberdata
Shawn Douglass, CEO and co-founder
Shawn Douglass is a business and technology executive with over 20 years of experience in the industry. Douglass is co-founder and CEO of Amberdata, a leading provider of digital asset data infrastructure and market intelligence to financial institutions. Prior to founding Amberdata, Douglass served as president of Software and CTO at Unified, building and operating the company’s SaaS offerings in cross-platform data management and analytics, while assisting in raising $64m in venture funding. He has held roles as board member, operating executive, technologist, advisor, venture investor, and derivatives trader. Douglass is a graduate of Harvard Business School.
