The Secret for a $1 Trillion Crypto Market? Keep Building

Earlier this year, the total value of all crypto assets reached an all-time high of over $800 billion, driven by a flood of retail customers looking to capture opportunities in a new market.

The industry wasn't prepared, and while volumes have sharply declined, the work to develop the ecosystem over the last year has increased dramatically.

Within traditional capital markets, there are different systems in place that work together to enable these markets to operate efficiently.

These hurdles have made it challenging for investors - particularly on the institutional side - to enter these markets.

While the industry is addressing these nuances, there are several key obstacles to overcome before it is prepared for the next wave of market participation.

Crypto asset market structure is extremely fragmented; there are more than 200 unique exchanges and platforms, each offering their own set of products.

You have to think about managing your operational risk in a completely different way than in traditional markets - this is the only market in the world where the operational risk is greater than the financial risk.

While regulators have taken important steps to understand these markets and have provided guidance in some cases - bitcoin classified as a commodity, not a security - we still need clearly defined rules of the road. Anyone sitting on the sidelines today is likely waiting on clarity from regulators before even considering operating in these markets.

While these drawbacks may sound daunting, the pressure on these systems has prompted the industry to arise and to begin developing solutions at a much faster rate than if we hadn't experienced the rush of market activity late last year.

On the regulatory front, we saw the introduction of new industry associations and SROs focused on protecting market participants, providing clear rules and standards and encouraging professionalism in the space, including the Blockchain Association, the Association for Digital Assets Management and the Virtual Commodity Association.