Crypto Market Participants
There are 3 main participants in the market: Miners, Exchanges, and Traders. Each participant plays crucial roles in the functionality of this market.
Miners are the individuals or companies that invest in equipment that generates computational power. Miners spend electricity to run computer nodes within the network to validate transactions and potentially be rewarded for their efforts in Bitcoin. These nodes collect transactions and consolidate/organize them into blocks. Marathon Patent Group is an example of a company that is involved in Bitcoin mining operations. It is incentivized to ensure the network’s security and in return gain exposure to the asset class as well.
Exchanges are where individuals can buy, sell, or transfer cryptocurrencies for other digital or traditional currencies. There are plenty of exchanges that are important to security, compliance, and expanding recognition of the cryptocurrency market. In the 2017 bull-run, Coinbase served as the “on-ramp” for many retail traders to gain exposure to the cryptocurrency market. Most exchanges transfer their cost of business onto the traders, adding exorbitant trading fees for each transaction. For active traders it is important to research the fee structure at the exchange you plan to use. CrossTower offers an industry-best fee schedule. At CrossTower, taker orders earn a 0.01% rebate for their trade, and the fee maker orders pay is as low as 0.01%. CrossTower’s fees are cost effective for retail, active, and institutional traders. This helps promote a healthy market and encourages true price discovery for cryptocurrencies.
Then there are traders, which are broken up into three types: Retail, Wholesalers, and Corporate. Retail traders are everyday people who plan out a strategy to accumulate Bitcoin and hold it, or actively trade it. These people may buy Bitcoin every time they have a chance and they use Bitcoin as a de-facto investment account for some portion of their savings. Then there are wholesalers, who are mostly known as “whales” in the crypto community. These are Bitcoin believers from the start, usually pre-2014. These wholesalers have hundreds of Bitcoins since they were introduced to the concept and bought in when the price was still well below $1,000. Lastly, we have Corporations, which are large companies that have decided to invest in crypto. Several notable companies have now started investing in Bitcoin as a treasury reserve asset to protect their wealth. MicroStrategy was the first, but Jack Dorsey’s Square and MassMutual also invested in Bitcoin in 2020. As corporations and hedge funds continue to purchase Bitcoin, JP Morgan projected there will be $600 billion of new demand created by corporate investors.
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CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.