Despite current challenges in the crypto market, global interest in cryptocurrencies has continued to rise. At last count there were 2076 coins and tokens on the market. Coinbase also reports that 70,000 to 100,000 new crypto trading accounts are being opened every day on their platform.
This stupendous rise has mainly been the result of the efforts of early proponents and builders of the blockchain technology who have strong convictions regarding their ideology. Idealists, liberalists, cypherpunks, and independent thinkers have been at the forefront of developing the technology and ensuring that people realize its potential. Additionally, the current use cases of cryptocurrencies have continued to generate more interest in the technology.
Are current money-making methods in crypto slowly dying?
The most popular methods for making money on the crypto market – mining, day trading, and ICO flipping – have already been exhausted. As a result, there are little to no new ways to pique the individual’s interest in digital currencies. More importantly, people now have limited ways through which they can store and preserve their assets. In this regard, a comprehensive solution needs to be developed if the market is to grow and achieve wider acceptance.
Risk diversification is another issue plaguing the market. Without diversifying risk, investors may lose interest in the market since it is easy to lose one’s assets and investments. At present, the most preferred method of diversification is having a portfolio of more than one digital currency. For instance, an individual can have both Bitcoin and Ethereum in their digital currency portfolio. However, since both currencies are interconnected, instability and volatility that have been common occurrences in the market recently, will affect them both. Therefore, the diversification approach may not be suitable in the long term since it is now likely that both currencies (Bitcoin and Ethereum) can be affected at the same time.
Investing in Initial Coin Offerings is another approach that has been used by individuals to diversify risk and expect high returns. While there have been a number of ICO projects since 2017, now known as the “Year of the ICOs,” it is now estimated that 78% of them were scams. Fraudulent ICOs have been on the rise since individuals are promised a good return on investment. However, very few have succeeded in paying their investors’ money that has been promised. Therefore, while ICOs make it easy to earn money from digital currencies, current trends show that most of them fail to deliver in the end.
Additionally, the return on investment in cryptocurrencies has been a matter of speculation rather than deliberate strategy. This is to say that there is no guarantee or surety that the high returns will likely be achieved due to lack of regulation and insurance as is the case with traditional investments. Even worse, the speculation could go a different way where decline, rather than growth, is anticipated. Growth that is tied to a deliberate strategy can guarantee a return on investment.
Attempts to solve the problem of cryptocurrency volatility have been made through the creation of stablecoins. Stablecoins are designed to minimize price volatility by pegging their value on fiat currencies and exchange-traded commodities. However, the solution works only on the currency plane. As a result, other benefits such as having access to financial instruments and banking services cannot be enjoyed.
Why aren’t crypto exchanges able to provide enough liquidity?
Thousands of businesses across the world are accepting crypto payments for their services. There is absolutely nothing that you cannot buy with good old Bitcoin these days. With thousands of people flocking to create accounts on crypto trading platforms, why is the lack of liquidity still plaguing the majority of more than 200 crypto exchanges around the world?
All of the above-mentioned challenges – along with high transaction fees, poor security and non-availability of fiat gateways to on-ramp new customers – hamper seamless trading in cryptocurrencies. The challenges of the crypto market may have inadvertently started a vicious circle. The problems will turn potential traders away along with their money (that could have brought liquidity).
Can an exchange pool solve the liquidity problem?
Unless a radical approach is developed, the problems will not only persist but will eventually worsen. This will clearly jeopardize crypto adoption in the long run. In a refreshing development, the Blockchain Exchange Alliance (BXA) has partnered with ONEROOT to develop a technology to create a network of decentralized and centralized exchanges that will share a single, large liquidity pool and order books within the BXA ecosystem. To begin with, BXA is the controlling shareholder in Bithumb, Korea’s largest, and the world’s preeminent, crypto exchange. Bithumb is also a member of the BXA ecosystem. It brings along with it its massive liquidity pool. BXA has acquired licenses in multiple jurisdictions around the world, including the United States, Australia, Peru, New Zealand, and Canada, to open a network for DEX and CEX.
“We aren’t fighting fiat. We realize that the crypto movement has a lot to gain if it partners strategically with the fiat-powered system. And that is why we are creating multiple fiat-to-crypto exchanges with many currencies as the backbone of a global payment network,” says Dr. Byung Gun Kim, global co-CEO of BXA.
“BXA is not just solving the biggest problem of crypto trading platforms globally but is also creating an integrated digital asset financial institution. We are creating technology that seeks to blur the lines between fiat and crypto,” says Tony Sun, Chairman of the ONEROOT Foundation and BXA global co-CEO. ONEROOT is the blockchain technology service provider. BXA is the largest institutional shareholder of ONEROOT.
While cryptocurrency exchanges have sprung up left, right and center without regard to the challenges already facing the larger players, it is time for a fundamental shift in thinking. Getting on the crypto bandwagon is one thing. But doing precious little to ease trading is another. It is time for exchanges to pool their resources and create a seamless entity that provides massive liquidity, cuts down on arbitrary pricing and provides top-notch security measures to protect traders’ assets. Only then can we expect more traders to enter the crypto scene thereby creating a substantial capital influx into the markets.
Date: january 18, 2019