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The Volatile Combinations
A combination of these two issues contributed to the flash crash ether (ETH) experienced in June 2017.
After a multi-million dollar market sell order was placed on the GDAX exchange, the value of ether dropped by more than 99.9 percent, from $317.81 to $0.10 within a second. The initial sell order dropped the price to $224.48, but this further triggered additional sell orders from customers who had stop loss orders and margin positions. Ether sales from the triggered stop loss orders further triggered even more automated stop loss orders, creating a cascading effect that sent the price of ether down to $0.10 within a second.
The ether market did stabilize soon after, with the price returning to more than $300, but this price volatility is one of, if not the, biggest barriers to widespread cryptocurrency adoption.
The average person doesn’t want to invest in an asset prone to large value swings, and until we find a way to stabilize the market, a global finance system built upon blockchain will remain a pipe dream.
For the foreseeable future, cryptocurrencies will continue to be traded on multiple exchanges with no single, stable asset keeping their value in check. That means overcoming the problems of fragmentation and liquidity will require a different solution, namely a cheaper and safer way to trade cryptocurrencies. that’s because despite massive growth in crypto markets, exchanges remain illiquid, fragmented, costly to trade on, and open to theft by hacking. By radically increasing the liquidity of crypto markets, a laying the foundation for their maturation as an asset class, and building the financial system of the future may be started.
Missions & Visions
A secure, efficient, decentralized and digitally native global financial system is being born on the blockchain. It will restructure global power dynamics and fundamentally impact tomorrow’s world. By joining it we all can facilitate the birth of this new financial system and to shape it for the common good.
By solving the problem of creating scarcity in a purely digital space without the need for centralized power to create trust and security, the blockchain enables a distributed market of value that makes it possible to automate most functions of the financial services industry in a more transparent, efficient, secure, and decentralized way.
Despite massive growth in crypto markets, exchanges and other market intermediaries remain illiquid, fragmented, costly to trade on, and open to theft by hacking.
What’s keeping cryptocurrencies from mass adoption?
Speculators flocked to Bitcoin and many of the alt-coins in hopes of getting in early and making a big exit, but everyday users haven’t warmed to cryptocurrencies.
There are many reasons why, but one of the largest barriers to mainstream adoption is the price volatility of cryptocurrencies.
The question is, why do the prices change so much in the first place? It comes down to supply and demand: Most cryptocurrencies have only a fixed total supply, and yet demand for the coins is uncertain and constantly fluctuating thanks to speculation.
The Need for Stability
The need for stability is not unique to cryptocurrency. Any currency needs to be stable in order to be used as a trusted medium of exchange. The more that prices rise and fall, the more ordinary people will shy away from using the coins for everyday transactions.
Whether they hoard the coins in the hope that prices will rise sharply soon, or they avoid using them altogether for fear that they will lose all of their value, people are not yet accustomed to seeing cryptocurrency as real money.
Worse, the unpredictability of prices wreaks havoc on regular money services, like remittance, currency conversion, and the use of ATMs. In order to use cryptocurrencies, businesses have to hedge their risks by charging exorbitant fees.
Bitcoin ATMs can charge up to 15 percent just to convert to fiat currency. This totally defeats the original purpose of cryptocurrencies, which was to offer a cheaper and more flexible alternative to other payment methods. With no advantage over government-printed money, why would the average person use them?
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