We know that cryptocurrency exchanges due to their main function, the trading, contribute to the development of a new digital asset industry. Of course, we can accuse them of being too much centralized, vulnerable to attacks and so on. But it is the trading of digital assets at exchanges that helps attract and invest billions of dollars in this area.
Binance launches the platform for IEO Launchpad, while Huobi exchange builds up the Prime platform, and OK conducts IEO at the Jumpstart platform of its own. All these messages have recently filled the media space, and it seems now that the main activity of the crypto exchange is to attract investment in new blockchain projects. Our society is forgetting that the main goal of crypto-trading platforms is dynamic trading. Due to this, the crypto industry begins its active development, recruiting more and more new users.
“The availability of crypto exchanges helps develop the industry, increases its popularity. The crypto currency exchange primarily means liquidity,” Mr. Andrey Podolyan, the founder of Cryptorg automated trade service, says. “A quick opportunity to buy or sell an asset plays an important role. Without this option, most cryptocurrencies are of no use to anyone.”
Crypto exchanges are much similar to both the currency market and the futures contract market. This is due to the fact that some digital assets work primarily as a means of the value exchange (bitcoin, for example), and others work as commodity futures (tokens of blockchain projects developing their platforms based on the blockchain technology).
Traditionally, the currency market is the largest in the world, exceeding even the stock market by its daily trading volumes. This market trades at $5.1 trillion a day, its key players are central and commercial banks, as well as investment and hedge funds, individual investors and corporations. The currency market gives you not just an opportunity to exchange one currency for another or make a profit through arbitrage transactions. It performs important functions that support the stability of the world economy. It includes an opportunity to cover against currency and credit risks, the diversification of foreign exchange reserves possessed by various nations and companies, and the field to adjust the exchange rate through interventions. The cryptocurrency market provides similar functions, with cryptocurrency exchanges as its major structural players.
“There is no market without liquidity. The market itself is always the exchange, purchase, and sale of certain values. The availability of crypto exchanges helps make cryptocurrencies an extremely liquid asset. It takes you just a few seconds to buy or sell cryptocurrency, enter this market or, alternatively, quickly exit it. This is what attracts traders, many of them come to this market with a longstanding experience with traditional assets,” Bitlish co-founder Mr. Sergey Esipov says. “The advantage of the crypto market is that it is open to a wide range of users, the entry threshold is extremely low.”
The entry simplicity to trade at cryptocurrency exchanges allows retail investors to become the most important participants in this market. According to the head of Binance cryptocurrency exchange, the share of retail investors accounts for about 60% of the trading volume on Binance. To start trading, a user in most cases only needs to go through a quick process of registration and verification and deposit either cryptocurrencies or fiat funds. It will take from an hour to a couple of days, depending on the method of depositing, be it a quick transfer of cryptocurrencies or a longer bank transfer.
“The crypto exchange market is actively developing now; lots of players appear with a wide range of services. Some offer high-risk margin trading, others include hundreds of blockchain project tokens in the listing. Someone accepts deposits in cryptocurrenciesonly,” Mr. Esipov notes. “Bitlish, for example, can accept fiat money deposits. It also provides a unique service of order books, where not only stock, but also off-market applications, known as OTC orders, inflow, and that allows you to make transactions and conduct arbitration at a more favorable rate.”
If we draw an analogy with the market of futures contracts, crypto exchanges here also perform an important function as they help hedge risks. Without risk management, there will be no sustainable development of the industry, especially if we are talking about the new emerging digital asset industry.