The latest report by Chainalysis shows how blockchain transparency of on-chain data can create new ways to reach users effectively.
The latest report by Chainalysis, the Guide to On-Chain User Segmentation for Crypto Exchange, discusses the importance for cryptocurrency exchanges to attract and retain users during the current crypto winter, and the trick to doing so is for exchanges to segment their users based on their behaviors and preferences.
By utilising the transparency of blockchains, exchanges can gather real-time data about their users’ holdings, transaction patterns, and product preferences to effectively attract and retain users via on-chain data-based user segmentation.
The data of on-chain users can be separated based on their cryptocurrency holdings and when they started using their wallets. This leads to the following six segments:
Early retail: Users who started before January 1, 2020, with holdings below $10,000.
Early professional: Users who started before January 1, 2020, with holdings between $10,000 and $10 million.
Early institutional: Users who started before January 1, 2020, with holdings above $10 million.
Late retail: Users who started on or after January 1, 2020, with holdings below $10,000.
Late professional: Users who started on or after January 1, 2020, with holdings between $10,000 and $10 million.
Late institutional: Users who started on or after January 1, 2020, with holdings above $10 million.
Most active wallets in a given week belong to the late retail segment, which means they are relatively new and have low balances. Interestingly, there are also more active wallets in the late professional segment than in the early retail segment.
This shows that many people have entered the cryptocurrency market in recent years and made significant investments, while some earlier users have either left, changed wallets, or adopted a passive long-term holding approach. Overall, late retail wallets make up the majority of all wallets by a large margin, but they have the lowest amount of capital.
The majority of Bitcoin and Ether held by personal wallets is owned by the newer groups of late institutional and late whale wallets. However, the focus is on how these segments interact with exchanges. Centralized exchanges earn money from trading fees, and we can assume that the total funds transferred from each segment to exchanges reflects the trading fees generated.
Since the beginning of 2021, late institutional wallets have sent the largest share of value to centralized exchanges at 23.6%. Close behind are late professional and early retail wallets at 18.8% and 19.0% respectively. Generally, there is a similar distribution of value sent to exchanges among the segments, except for late retail wallets (11.4%) and early institutional wallets (11.9%), which send a smaller proportion. Late retail wallets have less capital compared to other segments, while early institutional wallets have a smaller share of all active wallets, leading to this difference.
Download the full report from Chainalysis here.
