By Alex Treece
In early 2021, bitcoin passed a $1 trillion in market cap for the first time, following months of landmark adoption milestones and surging interest. Increasing numbers of investors, big and small, consider cryptocurrency an attractive investment opportunity worthy of their time, attention and capital.
However, in one dimension, cryptocurrency remains lagging far behind: tracking accounts and holdings.
While the adoption of crypto has exploded - platforms that track your accounts and net worth have been inexplicably slow to adopt. Many of the major personal financial management (PFM) tools like Mint, Personal Capital and YNAB don’t currently support cryptocurrency, despite huge numbers of their customers holding or interacting with crypto.
Fortunately for consumers, this dynamic is changing, driven by new platforms and products that are aligned with cryptocurrency and making the necessary investment to support the technology.
Cryptocurrency Is Growing Fast
2020, for all of its turmoil, saw an unprecedented boom in cryptocurrency adoption. A Cambridge University study found that the number of unique cryptocurrency users on verified exchanges rose globally from 35 million in 2018, to 101 million as of Q3 2020. The popular exchange Coinbase currently lists over 43 million registered users alone. Considering this is only one of the many large cryptocurrency exchanges currently in operation, it isn’t hard to extrapolate that retail investors are beginning to invest and hold crypto in really large numbers.
There are also tens of millions (maybe hundreds) of self-custody wallets held off exchanges, where users are able to hold their cryptocurrency directly, without any third party. Collectively, these self-custody wallets hold hundreds of billions of dollars worth of cryptocurrency and represent a significant portion of crypto holdings overall.
Outside of cryptocurrency exchanges and self-custody wallets, there’s also an increasing number of fintech platforms that offer crypto products. Fintech juggernauts Robinhood, Revolut and CashApp all released crypto products in early 2018 that have since grown to millions of users. More recently, PayPal entered the crypto market and announced plans to also roll out the service on Venmo, one of the largest financial apps in existence.
A Distinct Lack of Integration
Unfortunately, there’s currently a lack of applications that include both cryptocurrency tracking as well as traditional accounts such as banks and brokerages. This means many investors holding cryptocurrency are forced to bounce between many different solutions to see all of their assets in one place.
Given the surging adoption of cryptocurrency, why does this gap exist?
One reason is that existing data aggregators, companies like Plaid, Yodlee and Finicity, don’t support cryptocurrency accounts. Many personal financial management tools rely on these aggregators to provide them with the balances and transactions history data they need to build their applications.
Another reason is that the applications themselves have been slower to adopt and accept cryptocurrency than their customers. The lack of third-party data aggregation support has certainly contributed to this, given adding crypto integrations may take more technical resources than other types of accounts provided though the existing aggregators.
Yet, as smart fintech companies realize this gap exists, they have started to work on crypto products to take advantage. Going forward, we’ll continue to see more fintechs and personal financial management tools offer the ability to track all your accounts in one place.
What’s Changing In 2021
Data aggregation is already a huge part of the financial technology industry. The ability to pull information from multiple sources is the backbone of almost every portfolio tracker already in existence.
It is already being predicted that 2021 will bring greater demand for fintech integration and interoperability. As cryptocurrency explodes in growth and continues to become a mainstream asset class, we will see cryptocurrency balances and transaction histories spread to every financial tracking tool in existence.
Fintechs and personal financial management tools that make the first moves into crypto will enjoy great advantages. For one, they will be in a position to onboard the very large and growing base of cryptocurrency users, which numbers in the hundreds of millions. They also will be able to offer a better product in the form of more comprehensive net worth calculations and a better overall view of users’ financial pictures.
Indeed, we’re already starting to see some of the early players in this new niche. Such as those on the data aggregation side offering APIs similar to Plaid and Yodlee, but for cryptocurrency. As well as those on the consumer application side, adding cryptocurrency tracking functionality into personal financial management apps so that their users can see all of their accounts and assets in one place.
These early adopters represent only the very beginning of this trend. As cryptocurrency continues to blossom, consumers will demand that their favorite apps support the assets they are interested in and hold.
About the Author
Alex Treece is the Co-Founder and President of Zabo, a financial technology and data aggregation platform for cryptocurrency accounts.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.