Resolving the Challenge of Liquidity

cablest (27)in #cryptocurrency • 3 years ago

Introduction

Liquidity is a common challenge in most business settings. A concise description of liquidity refers to the extent to which the market forces will permit assets or commodities to be purchased and sold at a steady price. Most markets always want to avoid experiencing low liquidity because of its effect on the price of assets or commodities. When the liquidity of an asset goes low, the prices begin to fluctuate, thereby resulting in a volatile market. This usually occurs when there is the placement of large orders of an asset and the demand becomes high, hence, it causes a drastic change in the price. Conversely, when a digital asset or token experiences higher liquidity, this evolves to a less volatile market, and the fluctuation of the prices are not drastic or sudden.

The Challenge

Digital assets and cryptocurrencies are easily affected by liquidity and this why their prices fluctuate invariably. Presently, the most liquid asset is cash. Regardless of the type of government currencies, whether US dollar, Euros, or British Pounds, the value does not fluctuate drastically. For instance, When an investor or trader performs a transaction of 1 million Euros, the market can process such a transaction without the market price of the Euros changing suddenly. Likewise, the cost of processing the transaction and the value of such currency is known to the trader at the time of performing the transaction.

However, this does not apply to digital assets. Performing a similar transaction as described above with Ethereum or any other cryptocurrency will cause a huge and obvious effect on the value of such currency. The price of the currency at the start of a transaction may likely not be the same after such a transaction. In like manner, the cost of performing transactions is also subject to sudden changes.

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This happens because the cryptocurrency market does not have enough liquidity. Cryptocurrencies are usually traded on an exchange platform and there is often a specific volume available for trading on each platform. When this specific amount of digital asset finishes, the price of the asset changes. Sometimes, the buyer may have to purchase the asset for a percentage increase of about 1 – 10%.

Blockchain projects with low liquidity and vulnerability to fluctuations in the price of their

cryptocurrency often find it difficult in attracting investors and traders. The reason is that low liquidity repels business innovators and users who intend to invest in such projects. Therefore, in a bid to keep their investors and attract potential customers, certain blockchain companies and exchanges often publicize spurious liquidity. This affects the customers and the transaction orders performed on the platform. Users are exposed to varied risk factors, the exorbitant cost for financial assets, order failures, and the absence of transparency in the exchange.

In the blockchain industry where there are multiple projects and businesses, attracting investors and traders to join and participate in your network can be a daunting task. Every project requires the expertise and proficiency of experts and professionals to develop a platform that can remain sustainable and create value and revenue for users and owners respectively. When this is done, the effect of experiencing low liquidity is minimized. BintexFutures has competent team members that have developed a network to function without the event of low liquidity.

The Solution

Any blockchain-based network that wants to enhance its mass adoption and sustainability needs to improve the liquidity of its decentralized exchange platform. While we cannot overlook the fact that the liquidity of an asset is caused by several factors, preventing low liquidity can be realistic and achievable. More so, if we can simplify and breakdown the entire process involved in performing monetary transactions using cryptocurrencies, then resolving the issue of liquidity might be easier.
With the vast mass adoption of blockchain technology and cryptocurrency, It is almost certain, with little doubt, that transactions and trading involving digital assets will continue to occur on various blockchain exchange platforms for a reasonable and considerable time in the future. And while this continues, the tendency of any asset keeping their price in check is minimal. Hence, any network that intends to resolve liquidity challenges and overcome market fragmentation must create and develop a unique solution. This is what BintexFutures has done.

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The major player in BintexFutures plan to address liquidity is their token, the BNTX token. The smart token of the network has the capacity to improve and accelerate the liquidity of the platform by exchanging multiple coins. The BNTX tokens will be adopted into the decentralized exchange platform of the network, and this will enable investors to change their assets into BNTX instantaneously. A transaction fee will be deducted for these instant trades and will be settled only in BNTX tokens to ensure the usage of the tokens and increase liquidity. This will help retain a large volume of the tokens within the exchange.
For other tokens and coins, BintexFutures will check their volume trading and validation if it will add them to the platform, this is to ensure the system liquidity.

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