Markus Thielen, the Head of Research and Strategy at Singapore-based crypto service provider Matrixport, has spent numerous years analyzing digital assets. His debut book Crypto Titans was released recently, deep diving into the leading forces that move the cryptocurrency market, exploring their motives and methods of gaining influence.
In his exclusive interview with DailyCoin, Thielen speaks about his entertaining history book and its fundamental discoveries.
Winners Define History
The author says his initial goal was to understand the processes behind the key aspects of the crypto industry. These included questions like how Binance became the biggest crypto exchange or when stablecoins gained such an influence. However, the book’s findings surprised the author himself.
“One of the big realizations I took away was discovering how connected the crypto industry has been among the players and firms. It all made sense to me how this all works,” reveals Thielen.
Putting the pieces together led him to conclude that the winners always write history.
"I think it's like "winner takes all" in this industry. We have seen a few exchanges over the years with a 70-80% market share. It started with Mt. Gox. Then, at one point, BitMEX had a massive market share among the derivatives exchanges. Now we see Binance having a massive market share," Thielen notes.
In his opinion, influential structures rarely come out of nowhere. There are linkages and close relations from where they get the support. Ties often lead to different venture capital firms that stand behind the existing or newly emerging industry leaders.
Some of the titans stay within the media’s sight. However, they are often the same people behind different projects that shape the crypto market.
For example, BitFinex. Basically, the same people behind the exchange are the ones that are behind Tether. They’re not going on to the TV the whole time like Sam Bankman-Fried. But they have their own way how they support the ecosystem.”
Thielen hints at Tether’s support to many companies, including the troubled Hong Kong crypto lender Babel Finance, which froze withdrawals last summer following the market downturn after Terra’s collapse.
“But we also have seen, because of Three Arrows Capital, that a lot of the capital is closely held within a few industry players. That was really a big surprise. And there is always some connection.”
Thielen outlines many surprising factors in the book on how certain big players have moved from the Bitcoin mining business to Bitcoin ATMs, participated in the ICO craze of 2017, and used their funding to become big names in the NFT space.
Regulations Lead to New Crypto Titans
“The entrepreneurs and protocols that managed to attach themselves to more libertarian and regulatory-friendly jurisdictions thrive and succeed. This is one of the revelations in the book.
Thielen views regulators as the ones who set the level of the crypto playing field and decide top-down where the industry can grow. And history has already proved it.
In his opinion, the current regulatory landscape and the crypto market’s reactions are similar to what happened in 2013, when the US showed a harsh regulatory stance towards crypto while China became crypto-friendly.
The move led to the closure of certain crypto companies named as the forefront of innovation in the US, as the whole industry moved to China. At one point, China accounted for 90% of all global Bitcoin trading volume.
With the US tightening its regulation on crypto and Hong Kong re-opening on June 1st, the regulatory landscape is again changing. Thus it is logical that industry players move to more liberal jurisdictions to guarantee maximum success, Thielen says.
On the other hand, crypto titans realized that they had fully utilized the potential of individual retail investors. According to Thielen, they must convince institutional investors to come on board to truly advance the crypto industry. And to bring them in, they must collaborate with the regulators.
"For the institutions to really come into crypto, you need to have the right jurisdictions, the right level playing field, and the right regulatory environment. I think this is why all those big Titans are praising and emphasizing that they're trying to work together with the regulator," highlights the author.
In his view, the process is already underway, with TradFi giants such as Fidelity entering the crypto space with more “broken down” services that are easier to monitor and regulate than crypto exchanges.
Dominance Doesn’t Last: Binance out, Justin Sun in
Although the crypto space does not have a long history, it shows patterns of when new winners emerge. Thielen says the market leadership typically lasts three years until a new name emerges.
And I think we see already how Binance is trying to step back a little bit, so they have like a lower target on their back. They’re willing to give back market share,” claims Thielen.
The world’s biggest crypto exchange hugely increased its market share after employing a zero-fee trading policy in July 2022. However, it canceled the campaign nine months later, before “a lawsuit slowly launched” against the exchange.
According to Thielen, the exchange seems “quite happy” to retreat and let Justin Sun enter the spotlight.
“Justin Sun bought various exchanges. He bought Huobi recently, and magically, he bought it shortly before Hong Kong announced being more crypto-friendly. So it’s very interesting.”
Thielen says he documented some more “miraculous timing” examples illustrating how well-connected Justin Sun is. For example, the TRON founder bought the US-registered Poloniex crypto exchange a few years ago and merged it with Hong Kong-registered Huobi in March 2023. Both exchanges since then have operated under the Huobi brand name.
“There is some vision from these titans, how they can combine various jurisdictions, various capabilities, or bring more capabilities from one area to another.”
Where to Look for the Next Crypto Titans
According to Thielen, many crypto titans do not necessarily have cryptocurrency investments per se and act more as business builders. Many of them may eventually step away from the industry.
Meanwhile, they may instead be replaced by the big “buy-side” market players. Its the segment of institutions or entities that generate returns from investing in financial assets and typically consists of asset management firms, hedge funds, pension funds, or insurance companies.
“At the end of the day, all these crypto exchanges and service providers need clients to be really active. Over the years, we’ll probably see more investors becoming titans.”
And since the crypto industry tends to change every few years, Thielen hints at crypto-friendly jurisdictions, or wannabe ones, as the best places where new crypto titans may emerge.
He sees the capital of the UK as a potentially influential new player that should increase its market share in the crypto world soon but is currently under the radar.
London is the heart of a lot of institutional money and the middle of the globe. We might see some positive regulation there happening. London could make a big step in the space in the next one or three years.”
Veterans are More Trustworthy
The crypto landscape has visibly changed over the past five years as many “Stanford people” have entered the space. “A lot of them have been corrupted with all this money that has been involved,” admits Thielen.
But after multiple collapses and bankruptcies, a general understanding is forming, distinguishing those in the crypto industry for money and those who truly believe in it.
“There are a number of players that have been in the industry for ten years or even longer, and I think those are the ones who are potentially more trustworthy. They are here for the right reasons; they have voices. And it’s really a lot of common sense. And in hindsight, it was very easily identifiable,” concludes the author of Crypto Titans.
Learn more about crypto regulatory updates:
Read more about how metaverses survive the bear market: