Data is the lifeblood of financial markets: Professional traders rely on computer terminals supplied by companies like Bloomberg and Thomson Reuters to look up prices on things like bonds and currencies. And while Wall Street is dominated by these incumbents, especially Bloomberg, the battle to become the go-to data source for crypto traders is just beginning.
Money.Net has been trying to challenge Bloomberg for years, and sees an opportunity in the burgeoning digital asset market. For cryptos like like bitcoin, ethereum, and hundreds of others, there’s no single, comprehensive destination for traders to dig into deep reservoirs of data. The value of these digital coins, meanwhile, has soared to about $700 billion, up from $16 billion a year ago, according to Coinmarketcap.com.
Money.Net CEO Morgan Downey says his company wants to be the Bloomberg of crypto. This week, it’s launching pricing tools for around 550 digital assets, like bitcoin and its cousins, as well as initial coin offerings (ICOs)—a newfangled fundraising method that blends aspects of crowdfunding and crypto. It will provide calendars for upcoming ICOs as well as news feeds.
Downey says technology firms like Bloomberg, where Downey was previously global head of commodities, are too slow and cautious to keep up with the crypto world. He thinks even old-school stock and bond traders need to be aware of what’s happening in digital assets, to look for correlations with securities they are more familiar with.
Former New York mayor Mike Bloomberg’s company recently added pricing for litecoin, ethereum, and ripple to its terminal network. Thomson Reuters’ provides data on bitcoin, ethereum, and bitcoin cash via its Eikon platform, as well as indexes and futures, according to Sam Chadwick, director of strategy in innovation and blockchain at Thomson Reuters.
Regulators have warned investors about the risk of fraud in some digital coins and ICOs; Downey says it’s a buyer-beware market and that the amount of liquidity (the volume and ease of buying and selling) will determine which assets the company provides prices for. It reminds the former trader of the transactions that happen in less regulated, off-exchange (over-the-counter) markets, like precious metals or agricultural products. These markets aren’t for day-trading “dentists and grannies,” he says.
Crypto mania has swept up 20-year-olds as well as Wall Street veterans, and one way to cash in is to develop the digital infrastructure for trading. Exchanges are still evolving—they suffer regular outages and disruptions, and there’s no dominant provider for crypto data. If institutional investors one day make a big play for the market, hedge funds and banks will need accurate data and years of historical information to value assets and make bids and offers.
Downey says most of the exchange breakdowns in the crypto world are the result of immense traffic rather than poor design. His company pulls data from these exchanges, aggregates it, and applies checks and controls to strip out stray numbers that are likely to be erroneous. Cultivating these feeds can be tricky: Coinmarketcap, a widely used source of data, surprised traders when it removed some South Korean crypto-exchanges from its calculations, causing what appeared to be a lurch in prices.
Terminals provide one-stop shopping for such information, and there’s a lot of money to be made in this market: Bloomberg has about 325,000 terminal subscribers and charges them more than $20,000 per year for the privilege. These days, it has around $10 billion a year in revenue. (Disclosure: I used to work at Bloomberg.)
Part of the reason the data business is so lucrative is because it’s prone to monopolies. Traders and analysts build elaborate spreadsheets and other tools based on information feeds they get from terminals, so changing to a new supplier is time consuming and difficult. The platforms’ chat features also tend to be a winner-takes-all business: the more of the industry that uses a particular chat service, the more useful it becomes. Some say Bloomberg’s chat feature—and the importance of the community that uses it—is a primary reason it can charge such hefty prices.
Money.Net partners with Symphony, a competing social network for financial pros that has yet to undermine Bloomberg’s influence. But right now, Telegram Messenger is one of the main ways crypto traders correspond with each other. Downey acknowledged that chat services are one of the most difficult things to get right, and says the company is building its own network. “It’s on our radar,” he said.