Coin Metrics has released a report entitled, The Crypto Universe Through the Lens of datonomy.
Tanay Ved and Matías Andrade from Coin Metrics noted that the crypto universe has expanded from a single asset in 2009 to “a vast ecosystem of 4 asset classes, 14 sectors and 41 subsectors as covered by datonomy.”
The Coin Metrics report also noted that the aggregate market capitalization of assets in the datonomy universe “stands at $2T today, 2x higher than a year ago.”
The Coin Metrics report added that “combining on-chain metrics with datonomy can provide valuable insights into the evolving relationship between fundamental value-drivers and sector returns.”
The report from Coin Metrics also mentioned that “the On-Chain Derivatives asset class, comprising stablecoins and tokenized assets, represents 50% of trusted spot volume across all sectors.”
In 2008, Coin Metrics pointed out that the world “was introduced to Bitcoin—the first decentralized digital currency and peer-to-peer electronic cash system.”
Following its then meteoric rise came altcoins like Litecoin, the “silver” to Bitcoin’s “gold”; Dogecoin, inspired by the popular “Doge” meme and Ripple, each offering unique capabilities influenced by Bitcoin’s foundation.
However, Coin Metrics added that “there existed a void in the ability to support more versatile and programmable transactions.”
According to the research report from Coin Metrics, this gap was “bridged with the launch of Ethereum, broadening the scope of what blockchains could achieve via smart-contracts and on-chain applications.”
Coin Metrics further noted that several “other Layer-1s emerged, each with its own optimizations and tradeoffs—from high-throughput chains like Solana to customizable architectures like Cosmos and Avalanche.”
Since then, we’ve witnessed an explosion of “use-cases and tokens in the ecosystem, from tokenized assets and Layer-2 scalability solutions to oracle and application-based governance tokens and numerous more.”
As stated in the update, the inception of “a single concept has now flourished into a vast and complex universe.”
But how do investors, operators or market-watchers make sense of this rapidly evolving landscape? In the Coin Metrics’ State of the Network, the team “provides an update on crypto-asset valuations, sector performance and volumes leveraging datonomy, a classification system for the digital asset ecosystem.”
An ecosystem with constantly growing complexity requires simplification. This is where datonomy comes in, “bringing tremendous value by classifying assets into 4 classes, 14 sectors and 41 subsectors based on their economic context of use.”
This allows investors to discern “Smart Contract Platforms” from “Digital Currencies”, and “Tokenized Assets” from “Decentralized Finance” providing a transparent framework to build portfolios, manage risk or understand trends shaping the market.
For instance, Coin Metrics explained that “dividing the digital asset ecosystem into four major asset classes allows a better understanding of the relative market size of the industry and how it has evolved over time.”
As one of the first-use cases, the Digital Currencies class “remains the largest, comprising 57% of total market capitalization, while Blockchain Infrastructure, composed of smart contract platforms, and utilities like scalability and interoperability solutions has been steadily growing, holding a 31% market share.”
With a ~4% share Digital Asset Applications still remain “relatively small in size, presenting a tremendous opportunity for the next wave of growth underpinned by public blockchain infrastructure and tokenized assets.”
In aggregate, the market capitalization of assets covered in the datonomy universe “currently stands at $2T, growing by 100% since September 2023.”
Breaking the cryptocurrency market into sectors enables participants to identify trends, optimize portfolios, and assess risk across diverse segments of the industry. Much like how traditional equity investors analyze “Consumer Discretionary” or “Financials” sectors, cryptocurrency investors can gauge the performance of specific sectors such as Decentralized
The Coin Metrics researchers added that finance and compare it “to the broader market.”
According to the report, this sectoral approach “provides valuable insights into market dynamics and the strength of prevalent narratives, enabling targeted investment strategies, informed around the nuanced risks and opportunities within the cryptocurrency ecosystem.”
As stated in the report from Coin Metrics, changes in trading volume “across major DEXs like Uniswap and Curve demonstrate a dynamic relationship with DeFi sector returns.”
According the research report, periods of positive “correlation (~0.25) often indicate increased user participation and speculative activity coinciding with rising DeFi prices.”
As explained in the research study, this was “evident in October 2023 when correlations rose from -0.25 to over 0.1, driven by altcoin and memecoin activity amid a broader market uptrend.”
However, DEX volume spikes can also occur “during market stress, such as the Silicon Valley Bank collapse, leading to rapid correlation shifts as investors manage risk.”
Over time, the declining trend in correlation “may be attributed to the sector’s growth beyond just on-chain exchanges to stablecoin issuers like Maker and money markets like Aave, reflecting a more diversified ecosystem.”
The evolution of spot trading volume “reflects market activity and liquidity across asset classes of the ecosystem.”
Driven by the adoption and nature of early projects, the Digital Currencies sector dominated volumes. However, the subsequent rise “of Blockchain Infrastructure underpinning Digital Asset Applications is evident—currently making up 20% and at times, 40% of total spot volume.”
In parallel, the On-Chain Derivatives sector has “grown substantially to represent a 50% market share of spot volume among all asset classes.”
The report further noted that this “growth stems in particular from the Stablecoins sector, contributing $25B, or half of the 30D average spot volume which stands at $50B across all sectors. Value Transfer Coins and Smart Contract Platforms have maintained their importance, representing a combined 45% market share of spot volume across trusted exchanges.”
While volumes have tapered off recently, they remain at levels observed “during the bear market phase of 2022 and significantly higher than the summer of 2023, when several market makers retreated their operations.”
What once was a single application has now “flourished into a multi-faceted industry encompassing smart contract platforms, scalability and interoperability solutions, on-chain financial, information technology and media infrastructure as well as a plethora of tokenized assets, from stablecoins to off-chain financial instruments.”
The report concluded that as “the building blocks of the digital asset ecosystem continue “to develop, it is likely that the ecosystem will increase in breadth and complexity, owing to the need for standardized classification frameworks such as datonomy.”
Daily active addresses increased by 5% for Bitcoin and 2% for Ethereum “over the week respectively.”
The report added that adjusted transfer value (USD) for Ripple surged “by 4466%, reaching $17B on the back of an announcement of the Grayscale XRP Trust.”