Swiss and Liechtenstein Crypto Assets Ecosystem Continues to Grow Despite Market Turmoil

Swiss and Liechtenstein Crypto Assets Ecosystem Continues to Grow Despite Market Turmoil

by September 28, 2022

In Switzerland and Liechtenstein, the crypto assets investment ecosystem continues to grow and mature, despite market volatility and declining trading volumes, a new report by the Institute of Financial Services Zug (IFZ) of the Lucerne University of Applied Sciences and Arts (HSLU) shows.

The second edition of the Crypto Assets Study, released earlier this month, gives an overview of the current state in the Swiss and Liechtenstein crypto assets investment ecosystem, delving into the key trends that have emerged over the past year and the developments that have been observed.

According to the report, the Swiss and Liechtenstein ecosystem for crypto assets has remained rather resilient in 2022 with new developments being recorded. In 2022, new financial products hit the market and more financial products were being made available to investors, especially in the form of indirect investment vehicles like exchange traded products (ETPs) and open end funds.

Since crypto-focused ETPs and open end funds first appeared back in 2018, they have continuously grown in number. The report notes the existence of a total of 114 ETPs and open funds domiciled, traded or available for sale in Switzerland and/or Liechtenstein, as of April 2022, underlining the popularity of these indirect investment vehicles among investors.

Number of individual ISINs of ETPs and open-end funds, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Number of individual ISINs of ETPs and open-end funds, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

A study of 32 companies in the crypto assets sector as part of the report revealed that Swiss and Liechtenstein companies offer diverse investment products and services for crypto assets, though the majority of players do focus on one or two product offerings.

Issuance and tokenization solutions, asset and wealth management, and brokerage were found to be the most common offerings, while lending services, on the other hand, stood on the other side of the spectrum and were provided by just a few companies.

Key activities of companies from factsheets received, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Key activities of companies from factsheets received, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Crypto trading volumes decline

These developments are occurring despite a volatile crypto market and declining trading volumes.

In April 2022, total assets under management (AUM) of ETPs and open end funds stood at around CHF 4 billion after peaking in November 2021 to a little over CHF 6 billion, a drop that’s consistent with the general price developments and market pullback observed in 2022, the report says.

Total assets of ETPs and open-end funds, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Total assets of ETPs and open-end funds, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Looking at trading volumes on SIX Swiss Exchange and BX Swiss, the two exchanges where investors can purchase crypto-related indirect investment products in Switzerland, the report notes that a total trading volume of CHF 6.5 billion between May 2021 and April 2022.

The sum represents a slight decline compared with the previous year where a total of CHF 7 billion in indirect financial products on crypto assets were traded between October 2020 and September 2021.

Market trades by month, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Market trades by month, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Trading volumes on centralized crypto exchanges have also decreased. Between May 2021 and April 2022, the total trading volume for direct investments in crypto assets on the top 15 largest centralized exchanges stood at an estimated at CHF 81.2 billion for Switzerland. In comparison, that sum amounted to CHF 92.6 billion between October 2020 and September 2021.

Between May 2021 and April 2022, Binance was found to be the largest crypto exchange platform in Switzerland, accounting for roughly 34% of the total trading volume of the 15 largest centralized crypto exchanges and 46% of the estimated Swiss trading volume.

An analysis of web traffic also showed that crypto exchanges FTX, CoinFLEX, and Kucoin had the highest traffic rates and therefore had been accessed the most from Switzerland during the period. This shows that they are among Swiss investors’ preferred trading platforms.

Annual trading volumes of the 15 largest centralised crypto exchanges, May 1, 2021 to April 30, 2022, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

Annual trading volumes of the 15 largest centralised crypto exchanges, May 1, 2021 to April 30, 2022, Source: Crypto Assets Study 2022, IFZ HSLU, Sep 2022

A troubling year

The crypto market has had a rough couple of months, with market capitalization plunging nearly 70% from its all-time high of US$3 trillion in November 2021 to now about US$970 billion, data from CoinMarketCap show. Bitcoin has lost more than 50% of its value since the beginning of the year, while ether has fallen 62%.

The nosedive comes amid a series of issues occurring in the industry over the past year. In May, Terra collapsed after its terraUSD (UST) and luna tokens lost nearly US$45 billion in value. Several crypto firms, including the now-bankrupt hedge fund Three Arrows Capital (3AC), had a large exposure to UST, leading to contagion across the broader crypto industry.

Celsius Network is another crypto company that filed for bankruptcy this year, owing customers around US$4.7 billion, according to its filing.

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