Unlock insights for the region’s rising crypto exchanges

The region’s crypto appetite is growing. In 2022, the Middle East and North Africa’s crypto transaction volume grew by 48 percent over the previous year’s activity, compared to 36 percent for North America.

This left MENA as the world’s fastest growing crypto market by transaction volume. It’s easy to see why. The expatriate communities of many of the region’s countries are also predominantly digital natives, allowing for a more accepting attitude towards the crypto proposition.

Governments of countries with large expatriate communities such as the UAE are also interested and exploring avenues for financial services such as remittances. After all, cross-border payments feed their GDPs.

For example, in Egypt, where remittance payments account for around 8 percent of GDP, the central bank is working with UAE-based authorities to create a remittance corridor between the two countries. And it uses blockchain technology to do it.

Saudi Arabia and the UAE are both top five countries by cryptocurrency value received between July 2021 and June 2022 and Dubai has become a major hub for crypto companies, now facilitating transactions throughout the region, including areas across Asia and Africa .

And right now, we’re seeing signs of the crypto winter thawing.

So how do exchanges survive and thrive in an increasingly competitive market? How do they appeal to the digital natives who are hungry for alternatives to traditional finance? How can exchanges win over the smart, discerning, digitally savvy wallet holders and gain market share? And how do they turn it into a good crop in the spring that follows the crypto winter?

Know your audience

When transaction volumes begin to pick up again, how do you come up with a winning strategy that will absorb a larger portion of that wave than others? By doing two things. First, recognize that not all users are the same. Second, use that knowledge and deploy the right technology that allows you to learn the behavior behind the wallets. In any other industry, greater insight leads to greater benefit. Why should it be any different in the crypto space?

The key lies in segmentation, a proven growth tactic in industries ranging from retail to banking. The principle is simple enough. You sift through data to find large groups with similar characteristics, needs, challenges and habits. You then craft a message that resonates with each group, thereby making each message more effective than the standard blanket marketing spiel. Industries are spending heavily on segmentation, mining data led by marketing and other business teams who are under pressure to ensure returns exceed investment.

This is where crypto businesses have an advantage. The inherent transparency of the blockchain allows exchanges to segment more effectively than other industries can.

In retail, for example, marketing teams must come up with ways to harvest data or risk waiting for the right data (or, indeed, enough data) to come to them. In the cryptocurrency world, a business can see the holdings, transaction activity and product preferences of its users and prospects in real time. Armed with that data, exchanges can make data-driven decisions that simply aren’t possible for those in other industries. They can strategize about where to focus their user acquisition and retention efforts more finely than a traditional bank or retailer.

Chain reaction

On-chain segmentation can use many different attributes to categorize crypto wallets, but let’s look at holdings and wallet age. And while you can come up with many different segmentations, here’s a practical example of how customers can be grouped into six different categories using these criteria:

● Our first will be wallets active before January 1, 2020 with holdings less than $10,000, and we will call them “early retail”.● The second is “early professional” (active before January 1, 2020 with holdings between $10,000 and $10 million ) .● Third is “early institutional” (active before January 1, 2020 with holdings of more than $10 million).● The fourth, fifth and sixth are “late retail”, “late professional” and “late institutional” – wallets with the same amounts as the subsequent “early” segments, but which became active on or after January 1, 2020.

Exchanges that look to the customer base in ways like, or similar to, these are more in control of their future than those that plow on instinct. Wallet-based user segments bring huge benefits to exchanges and the people who run them. By translating the activity observed in each segment, exchanges can come up with more effective acquisition and retention strategies.

Segmentation works well for exchanges that want to understand a little more about how their users engage with the blockchain. In just the six segments we have chosen here, we can appreciate the enormous differences that possessions and circumstances bring to the decisions made by crypto users – from the individual to the institution and from the veteran to the newcomer.

The inherent transparency of blockchains sets crypto companies apart from those in other industries. This is an incredible advantage for the region’s start-ups operating in this space. Strategy, marketing, product development – everything is enhanced by segmentation, leading to a maximization of the value of each user.

By also including proprietary data such as order book activity in the analysis, insights become even more powerful. As Web3 continues to emerge stronger, crypto will be a mine of value. Those who act on segmentation now have an opportunity to rise quickly and go far.

Nicola Buonanno is the area VP Southern EMEA at Chainalysis

Also read: Where is crypto headed in the next 5 years?