Analytics in a multi-asset, multi-venue, multi-chain world.

February 12, 2024

There are few detailed statistics on crypto investors, and almost nothing on investment size, trading volumes, or returns.  But one thing is clear: the days of buying and holding Bitcoin, and Bitcoin only, are long gone.

Hoptrail’s research shows that around 95 percent of crypto investors trade more than one asset.  A slightly lower number – approximately 90 percent – trade across multiple exchanges.  

A lot of this is logical.  To trade an ERC-20 token, one would usually need to purchase Ethereum first; to transfer from one venue to another would likely require converting assets to Bitcoin, Ethereum, or a stablecoin.  Now, if you wanted to stake on Fantom, you’d have to move blockchains, which presents a third component.  

Things very quickly get complicated.

You’ve traded far more than you thought!

As well as being investments in their own right, Bitcoin and Ethereum are also gateways – starting points to other assets, not to mention entry points to various financial products and token standards.

We now live in a multi-asset, multi-venue, multi-chain world.  What this means is that crypto portfolios are increasingly complex.  One recent audit completed by Hoptrail featured 25 trading venues – which do not include non-custodial wallet services – and more than 150 deposit addresses across almost 50 crypto-assets.

When it comes to transitioning those proceeds back to the ‘real world’, the sheer volume of data can present significant issues.  In many cases – such as buying property or moving cash into other investments – satisfying AML checks is a requirement.  

The complexity in piecing together trading history is often too overwhelming for the investor (you’ve traded far more than you think!); and almost certainly too challenging for a potential counterparty.  That being said, blockchain data is extremely useful in deciphering the story of a portfolio.

Keep track of your data!

So, what are the key things an investor needs to know?  Preparing the data is the first step.  We delve into some of the key considerations for investors sitting on large proceeds.

  1. On Ramps: Fiat money going in does not just happen at the start, but periodically over time, often months or years, and often across multiple venues.  Invested money is your source of funds; and being able to explain where that came from is a critical AML step.  Know your on-ramps.
  2. Main Assets: usually an investor has one particular asset from which most of their gains flow.  The ability to identify when and where those assets were acquired and stored is essential to establish source of wealth.  This allows us to chart the performance of that asset during the holding period, and assess the approximate gains based on the holding during that time.  
  3. Venues: more than once we’ve identified trading venues the client has forgotten to disclose!  Keeping track of exchanges helps us to explain the fund journey.  More importantly, knowing where and when non-custodial wallets are used is the key stepping-stone in the movement of one venue to another, and in ruling out potential red flags.
  4. Cash Out: Liquidations usually occur on one or two exchange venues.  The route leading up to those sales is important.  That means showing which assets were sold, and where they came from.  Part of our analysis involves assessing whether the final amount matches with the appreciation of assets held over the investment cycle.

Hoptrail takes a risk-based approach to its analysis.  For regulated firms, key factors are always (1) source of funds, and (2) source of wealth.  For us, blockchain-based AML checks flows from the on-chain data we are given.  This not only helps us to evidence and verify the data, but to present the journey of the crypto in a manner which is clear, concise, and ultimately understandable.  

Knowing what data is important will allow the transition from digital to ‘real’ to be far smoother, regardless of complexity.  


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