CoinDesk released their 2016 State of Bitcoin report which summarizes the entire 2015 year for bitcoin and blockchain, which includes key trends, data, and events from 2015.
In the annual report, there were clear signs of positive and meaningful growth of both bitcoin exchanges and bitcoin wallets throughout the year.
In 2015, there was an influx of new bitcoin exchanges, saturating the bitcoin ecosystem globally. In particular in developing countries where bitcoin is still a fairly new concept, we are seeing interest where there wasn’t before; where there is interest, there are people who want to buy (and sell) bitcoin. When there is a demand for this, naturally there is an opportunity for bitcoin exchanges to rise and fill the void. We are seeing positive growth in various countries around the world, in particular Mexico, Venezuela, Brazil, India, and United Arab Emirates.
Bitcoin exchanges in the United States still garner the most investor interest, where venture capitalists continued to pour capital into exchanges in 2015. Coinbase and Circle had the biggest VC deals in 2015, as pictured above, with a combined investment of $125m for these two exchanges.
However, in terms of bitcoin exchange market share, Chinese bitcoin exchanges in 2015 captured the most, with 95% of overall trading volume being contributed to CNY exchange transactions. Three Chinese exchanges make up most of the CNY market, which are OKCoin, Huobi, and BTCC, although there are several others.
In this slide, it shows that bitcoin exchange trading volume for the year remained somewhat consistent month-over-month, but in the last quarter volume rose significantly creating a bull market at the end of the year, ending strong with a positive price point going into 2016.
Overall, from the CoinDesk report and our from own analysis, bitcoin exchanges have shown practical signs of growth in the market, especially in developing markets around the world. Everything for exchanges hasn’t been ideal though, as some exchanges that haven’t been able to remain sustainable for various reasons have been forced to close. We predict that in 2016 there will be more mergers and acquisitions with exchanges, which for example, U.S. based bitcoin exchange Kraken has already acquired two exchanges in January to start the year. We expect this trend with other market leaders to continue.
In 2015 bitcoin wallets remained in a positive growth trend, although they didn’t see as much growth as bitcoin exchanges did.
As pictured above, wallet venture capital in 2015 remained somewhat flat. A contributing factor to this may be that investors don’t have a complete picture on how wallets are able to remain sustainable in a volatile market and what their business model may be for generating revenue.
We know that Blockchain which is one of the most popular bitcoin wallets, uses advertising as their main source of revenue. However, for lesser known wallets, advertising may not be best business model. We’ve seen other wallet developers initiate other ways of generating revenue, such asMultibit who uses a per transaction fee model. A newer trend are universal wallets, which have features such as storing, buying, and selling bitcoin all-in-one service, plus other features such as block explorers, altcoin swaps, and so on where there is more opportunity to generate revenue in other ways. Wallets that have more robust features may get more attention than those who are simple storage-only wallets.
In this slide, CoinDesk shows that the Blockchain new wallet growth showed significant growth in the last quarter of the year, which is in tune with the bull market trend mentioned above. There are several other wallets too that are driving bitcoin adoption, such as Electrum, Breadwallet,Airbitz, Multibit, Schildbach, Xapo, and Mycelium. In our Fall 2015 bitcoin wallet statistics report, there were already over 12 million bitcoin wallets and growing with the fourth quarter of 2015 to go. We expect that the number of wallet users will continue to rise, despite venture capital, as wallet users is a direct reflection on the number of bitcoin users which continues to grow year-over-year as the technology becomes more popular.
Overall, from the CoinDesk report and our from own analysis, bitcoin wallets continued to show positive signs of growth despite lacking new investment capital. It will be a challenging year for wallets, as there are several big changes coming down the road to the bitcoin core base code such as Segregated Witness, which will require wallets to commit to major development time to make themselves compatible with the new code changes. For wallets that are already running behind, this could be the trigger for some to shutter. We’ll probably see some mergers and acquisitions in this market as well. All in all, 2016 should be an interesting year.