Quoine: How Liquid Plan To Solve Volatility Problems And Provide Liquidity In Cryptosphere

in #quoine • 6 years ago (edited)

According to engineers, we cannot have a perfect system. Regardless of how effective a system is, there will always be some weak spots. There will be those parts that need continuous upgrading. When a new technology is created, although sometimes, it may look like it is perfect, as if it is coming from another planet entirely; that is because the new technology tends to solve some real life problems that the previous technology could not solve. However, as time goes on, and the people get used to using this new technology, it will not be enough to solve the ever-growing problems in human life. That is why technology just has to keep advancing.

Blockchain is an era-defining technology. There is no point in arguing with that. The world is evolving around it. There are so many business enterprises that have brought their services on to Blockchain technology than we can count and if we are to be pointing them out one after the other, I think it will get to a point where both the writer and the reader will get tired of it. That is how much this technology has grown. However, at the same time, there are countless conditions holding the Blockchain technology and cryptocurrency from reaching their full potential. While each of these drawbacks’ influence on cryptocurrency depends on how you want to view it, one that will always be seen in every aspect of this technology is volatility.

Value, they say is the strength behind any commodity where trading is concerned. In the ideal world, this value is driven by quantity and demand. The famous line is “the higher the demand, the higher the price”. Price talks much about the value. Although many believe this to be same in the cryptosphere but the reality we need to face is that in the cryptocurrency context, it is different. The demand may have some impact, of course, but what actually determines the value of cryptocurrencies are market sentiments which are driven by media and speculation.

One thing we need to get right is that volatility is not only affecting the value of cryptocurrencies. The reason why this feature of cryptocurrency is so phenomenal is because it leads to instability in the market. Bitcoin could be bought at $7,000 USD in the morning and the price drops to $6,000 just few hours later. That is not even the problem. Problem is, it may stay at that price or continue to drop and never get back to the price at which it was originally bought several months before. The thing is; nothing is guaranteed when it comes to crypto trading and that is why volatility will continue to be the major problem in the cryptosphere.

The lack of central regulation which makes cryptocurrencies decentralized systems may have its advantage as traders can trade directly with their trading pairs without the need of a third party or middlemen interference. This however has made the crypto world highly instantaneous and unpredictable. Since the focus was to create a world where markets are decentralized, the developers did not give much thought on the fact that the big guns that have lots of money at their disposal may have the ability to dictate the market prices one way or the other, and that contributes to the volatility of cryptocurrencies.

How about we take a look at some internal factors too? It is known that the market capitalization of a cryptocurrency has great influence in the volatility. How? We have highly active traders who are always doing one trade or the other with some market tools that can influence market conditions. Hence, these traders can have great effect on the crypto values. We believe that I am not the only one that is aware of the fact that Altcoins fiat value drops with respect to the rise of Bitcoin price. The reason is that most trades are done in Bitcoin conversion which will lead to lose of value of Altcoins. Whatever happens to Bitcoin has great effect on Altcoins in general.

One of the factors that are causing lack of liquidity in the crypto market is fragmentation. This is responsible for the split of Bitcoin, thereby resulting in the creation of Bitcoin Cash. Ever since then, the Bitcoin Blockchain has undergone over 40 forks, becoming more and more fragmented as time goes on. What we need to understand about this is that the more the market continues to be fragmented, the more the volatility’s influence grows.

In an effort to fix this ever-growing problem causing instability in the cryptosphere, the developers and owners of Quoine decided to create Liquid - a unified, globally-sourced trading platform that bridges the worlds of fiat and crypto. On Liquid, traders will be able to combine prices and liquidity of many different markets before placing sales or purchase orders. That means a trader can choose to trade with whoever he wishes without restrictions – a complete attribute of decentralization, on which Blockchain technology is built.

Liquidity will pave the way for decrease in volatility and provide stability in the crypto market – the leading reason for Liquid's existence. Combined, the world book and the associated suite of services on Quoine’s Liquid platform otherwise known as prime brokerage will provide the highest level of liquidity in the world.

Another non-trivial advantage of the Liquid platform is that there is an interwoven network connecting all major exchanges together. Hence, when one exchange is in crisis and loses liquidity, it can borrow from any other exchange within the network, thereby stabilizing liquidity in the crypto markets in general. This, of course will have great impact in the market values of cryptocurrencies.

There are three technologies that are going to be the factors here. One is the matching engine which will have the ability to take millions of transactions in a matter of seconds. Following this is the cross-currency conversion engine which is responsible for creating automated conversion of whichever trading pairs a trader wishes to trade with. The third technology is the smart order routing. Its main function is to boost the real time connection with the exchanges in the network.

We believe the cryptocurrency and Blockchain technology are doing great across the globe today. We still need to face the reality - the cryptocurrency daily trade is around $2 billion USD while the global fiat Fx market processes at least $5 trillion USD every single day. We have a long way to go and if we are to continue to cover more ground just like we did in 2017, the volatility issues need to be resolved and there is a need for high liquidity.

We cannot dwell in the glory of the past. This year has not been too good for crypto traders but with Liquid platform, the tide may be turning to our favor sooner than expected.

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Disclaimer

The information contained here shall not be used as a guide in your next crypto trade. The writer is not a financial advisor but a crypto trader just like you. Information presented in this blog is for educational use only.

#liquid #qash #blockchain #trading
6 years ago in #quoine by
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