Evolution of employment in the Cryptoasset domain
The development of the cryptoasset ecosystem in the last years proved to have a positive influence on the world of work, providing more job opportunities, but the slowdown in employment growth that took place throughout 2018 has particularly impacted the mining industry. A look at the data provided by the 3rd Global Cryptoasset Benchmarking Study suggests that bigger companies have been less affected than individual firms and that cryptoasset companies in the different regions have not been impacted equally by this slowdown. For example, employment growth in Europe decreased by 14 pp, from 32% between 2017-2018 to 18% between 2018-2019 differently from Latin America (from 45% to 6%). Asia and North American cryptoasset industry reveal a serious decline in employment growth – from 73% to 21% for Asia and from 134% to 33% for North America; on the other hand, despite being one of the two most impacted regions by this decline, Asia shows larger workforce size (with a median of 40 FTE employees) than the median companies from other regions. In general, data show the rise of large firms within each industry group.
The landscape emerging from the analysis is thus rather various with the afore-said slowdown producing different patterns of reactions depending on the area.
High-growth and young enterprises dealing with Cryptoassets
As one acknowledges that the share of high-growth companies in an industry is a good indicator to assess the development stage of the sector, it is interesting to see that, according to the above-mentioned study, high-growth companies represented more than ¼ of the enterprises active in the cryptoasset ecosystem in 2019 a little above the share of high-growth firms in other industries. Interestingly, in 2017-2019, high-growth cryptoasset firms went through a positive growth in the number of employees from approximately 84 employees in 2017 to 200 employees in 2019. It is also worth noticing that 27% of surveyed service providers qualified as high-growth firms compared to 25% of surveyed mining actors, which shows that high-growth firms have been equally distributing into both roles. From a geographic viewpoint, most of these firms are in Asia, where 39% of surveyed enterprises active since at least 2017 can be defined as high-growth firms, while the lowest share of high-growth enterprises was found in Latin America, where only 13% of surveyed firms fell under this category.
The study also surprisingly reported that, unlike the common belief, young companies have not been particularly favoured in the cryptoasset ecosystem: indeed the median high-growth firm in the cryptoasset industry is 6 years old.
As for cryptoasset users, most recent research indicates a total of up to 101 million unique cryptoasset users across 191 million accounts opened at service providers at Q3 2020, with a 189 % increase in users compared to the 2018 estimate.
As far as user activity is concerned, service providers operating from North America and Europe generally report higher user activity, as 40% of users are considered active on average; furthermore, small service providers basically experience higher level of user activity than bigger ones do. Anyway such an estimate is made quite ambiguous by inconsistent definitions used by service providers themselves to monitor activity levels: for example, while 54% of service providers define as “active” a user that logs in or interacts with the service at least once a month, 33% do so using a weekly timeframe.
More interestingly, some clear information is available about the geographical setting of cryptoasset users: firms appear to be primarily dealing with customers based in their region of operation, this being particularly true for companies based in Latin America, less so for those in Middle East and Africa and North America. This is quite significant as North American firms’presence in other regions seems to confirm the success of the internationalisation strategy adopted by these companies.
Several studies have reported a growing interest from institutional investors in cryptoasset markets. For instance, a survey of American and European institutional investors carried through by Fidelity Digital Assets reveals that 36% of respondents have invested in cryptoassets and that 3/5 assert that cryptoassets will be part of their portfolios.
On the other hand, despite the considerable development of institutional-grade financial instruments and infrastructure, data currently available suggests that cryptoasset service providers’ customer base is still primarily retail-driven, showing that despite growing institutional interest, the conversion rate (from expression of interest to investment) remains limited.
Once more, noticeable differences between companies from different regions can be observed. While the majority of firms’ customer base is composed of individual clients, North American and European firms report that an average of 30% of their customers are business and institutional clients.
Carrying on the analysis of the type of business and institutional clients, it globally appears that cryptoasset service providers primarily serve cryptoasset (hedge funds) (37%), online merchants (30%), and miners (27%). Interestingly, company size mix is fairly consistent across institutional and businesses clients (60% to 40% respectively for small and large service providers) except for traditional hedge funds, which equally deal with large-and small-scale firms.