Unraveling the Obstacles: The Top 5 Challenges of Crypto Trading in July
Undoubtedly, the emergence of the cryptocurrency industry has revolutionized the traditional financial markets, bringing with it new features like digital asset ownership, decentralization, and blockchain technology. Cryptocurrencies are still in their formative years and, as such, have some inherent challenges.
As the world continues to show interest in cryptocurrency trading, they begin to discover some of these challenges. One of these challenges is the trend known as the slow summer when cryptocurrencies experience lazy, hazy days without any clear catalysts to steer big price movements.
Since price movements are important for traders to make profits, trading in June becomes a problem. This article will discuss the top 5 problems cryptocurrency traders face in June, how it affects traders, and how Tradecurve aims to solve them.
Problems Crypto Traders Face In June
June marks the beginning of the summer months, where most countries take extended holidays. This generally leads to a slow down in the global economy, affecting the cryptocurrency market.
Because this happens every year, based on historical patterns we have identified five major problems cryptocurrency trading faces every year and proffered solutions that traders can use to avoid them. These problems are:
Trading Volume Plummets
Trading volume is a major factor that showcases the health of the crypto trading market. Basically, trading volume is a measure of how much a particular asset has been traded over a given period. Therefore, high trading volumes signify high market activity and that investors have a strong interest in the market. In addition, it also shows that there is a high level of liquidity, the ability of traders to buy or sell assets without causing huge price changes. As a result, exchanges with high trading volumes can easily handle large trading orders without impacting the price greatly.
However, low trading volumes often signify a lack of investor interest, which could be due to various factors. Some factors that might be responsible for low trading volumes on centralized exchanges include security concerns or breaches and high transaction fees.
Low trading volumes make the market more susceptible to price manipulation, as fewer trades mean larger single transactions can have a disproportionate impact on the market price, and this could affect traders.
Firstly, it would lead to price volatility, and reduce traders' profitability, making it difficult for them to execute trades, especially those dealing in large volumes. Currently, the trading volume in the crypto market is low.
According to The Block, in May, the monthly exchange volume of cryptocurrencies, representing the total spot market volume across various crypto exchanges, reached $439.42 billion. This figure reflects a decline of more than 27% compared to the April volume of $604.88 billion.
What Can Be Done?
An innovative solution to combat the dwindling trading volumes of cryptocurrencies in June is to find platforms that combine cryptocurrencies with other global markets. A great example is Tradecurve.io, which will offer a plethora of tradable assets such as stocks, forex, commodities, and Contracts for Difference (CFDs). Besides, the forex market is the largest financial market globally.
According to the 2019 Triennial Central Bank Survey of FX and OTC derivatives markets, it has a trading volume of about $6.6 trillion. Additionally, the Bank of International Settlements (BIS) postulates that the notional value of outstanding over-the-counter (OTC) derivatives increased to $632 trillion at end-June 2022, up from $598 trillion at end-2021.
With the introduction of forex trading, traders using Tradecurve can benefit from the world's largest and most liquid market. Furthermore, commodities trading will allow traders to diversify their portfolios.
With these diverse markets on one platform, traders are not limited to the cryptocurrency market's volatility. They can try other markets if they believe there are greater chances there. This variety and flexibility will attract more traders to the platform, increasing trading volume.
Crypto Liquidity Plummeting
Liquidity is another concept in crypto trading. It refers to the ability to buy or sell an asset in the market without causing wide price changes. A market with high liquidity has a large number of buyers and sellers, allowing for quick transactions without causing extreme price swings.
Traders and investors can encounter several difficulties when there is inadequate liquidity in the crypto market. High slippage, defined as the difference between a trade's expected price and the price at which it is performed, might occur. This can result in unexpected trading outcomes, which could lead to huge losses.
In addition, low liquidity can make it difficult for investors to buy or leave positions, particularly big ones, without impacting the market price. In the case of crypto exchanges, they may struggle to finance various types of transactions, including depositing fiat currency (such as USD or EUR), purchasing cryptocurrencies, trading assets, and withdrawing funds.
In 2022, several exchanges had to stop withdrawals because of low liquidity. They did not have enough assets in their reserves to fulfill withdrawals and later filed for bankruptcy.
What Can Be Done?
Interestingly, Tradecurve approaches the crypto liquidity issue in various novel ways. To begin, Tradecurve has proof of reserves to ensure that investors' assets are fully backed, and they can initiate withdrawals at any time.
Secondly, Tradecurve employs powerful order-matching algorithms to ensure that buyers and sellers can effectively discover matching orders. This minimizes the chance of unfilled orders and enhances the platform's overall liquidity.
Platforms like Tradecurve will be able to handle liquidity by handling institutional liquidity in June. This means that Tradecurve users can profit from increased liquidity when buying or selling assets.
Lastly, Tradecurve's access to several global financials increases the liquidity of its platform. Tradecurve draws a diverse range of traders with diverse interests by broadening the kinds of assets accessible for trading. This contributes to a consistent flow of trades, providing a healthy level of liquidity across all markets.
Despite the influx of trading platforms, one of the major issues that have plagued the cryptocurrency trading market lately is the high transaction fees. Fees are usually paid because blockchain technology powering transactions include complicated computer operations to validate and record. Some exchanges pay fees for trading, transfers, and withdrawals. For instance, most exchanges charge between 0% and 1.5% per trade.
However, these expenses can be on the high side, especially during periods of high demand or network congestion. Besides, they can cut into traders' earnings. Even minor changes in fee structures can substantially influence the overall profitability of those who regularly trade, especially those expecting large trades.
Furthermore, these high costs might be a barrier for newbies entering the cryptocurrency trading market, particularly those with limited resources wishing to make smaller trades. Besides the issue of excessive fees, it is also difficult to predict the fees on some exchanges as it always fluctuates. This could hinder the trading experiences of users in the long run.
What Can Be Done?
This solution is fairly straightforward, as traders prefer platforms with the cheapest fees and commissions. Tradecurve has promised to lay the issue of high fees to rest by offering competitive, cheaper, and more predictable fees.
The platform will use strong and efficient blockchain technology to reduce transaction costs. The exchange will also launch a tiered fee structure, with lower prices as a user's trading volume grows.
This system will reward active traders with lower fees and discounts, which encourages greater trading activity and increases overall market liquidity. Also, Tradecurve is very transparent about its fee structure, as fees are clearly stated on its website.
Due to Tradecurve's transparency, traders can correctly forecast their possible trading fees, allowing them to make informed trading decisions and receive higher profits.
Lack of Transparency
Transparency is an essential feature in any financial system, including crypto trading platforms. Lack of transparency in cryptocurrency trading can come in different forms, including unclear trading algorithms, hidden fees, unreported order matching processes, and even ambiguous regulations on subjects like privacy, assets reserves, and security measures.
Because of this lack of transparency, traders might not be aware of certain policies. This can discourage both new and experienced traders, weakening their faith in the whole crypto trading environment.
In addition, a lack of openness raises the possibility of unfair practices or manipulation. Without full sight of all transactions on a platform, for example, 'front-running' might occur, in which those with advanced information of orders can trade ahead of those orders to benefit.
While centralized exchanges provide benefits such as fast transactions, most of them have come under scrutiny for inadequate transparency and possible security flaws. Some traders and investors have lost their assets to fake crypto exchanges.
In 2022, several centralized exchanges were not transparent about their asset reserves and liquidity until they filed for bankruptcy. Afterwards, it was discovered that some of them had misused investors' funds for personal gains.
What Can Be Done?
Fortunately, Tradecurve is a transparent trading platform and has promised to launch a proof of reserves infrastructure and allow self-asset management. Traders with self-asset management have direct control over their funds and can safeguard their private keys instead of them being in an exchange-controlled wallet. This method considerably improves security because traders do not rely on the exchange's security procedures.
However, self-asset management might be difficult for less technically knowledgeable traders. To solve this, Tradecurve provides extensive instructions and assistance to help traders understand and execute self-asset management.
The platform also promises to separate users' funds from that of the company to prevent misuse of funds. The second option, a proof of reserves infrastructure, offers an auditable record of the exchange's overall reserves. Traders can independently verify that the exchange has enough assets to pay all of its liabilities and liquidity to enable transactions and withdrawals.
Compared to other centralized exchanges, Tradecurve is among the few that will offer real-time, blockchain-verified verification of the platform's total reserves. This means that users can inspec the liquidity of the platform at any time, improving transparency and trust in the exchange's financial status.
Meanwhile, Tradecurve has promised to be transparent about its other operations. To begin, all fees for withdrawals, trading, and other activities are clearly stated, ensuring that traders are notified before any increment.
This transparency allows traders to assess their prospective profits precisely, creating trust in the platform's pricing. Additionally, Tradecurve's order matching mechanism is open and transparent. The platform employs powerful algorithms to ensure fair and efficient matching of buy and sell orders, and all users are aware of how this process works.
Despite the decentralised nature of cryptocurrencies, privacy issues continue to be a major issue in cryptocurrency trading given the recent regulatory sweep going on in the crypto sector.
To meet with regulatory criteria such as Know Your Customer (KYC) and Anti-Money Laundering (AML) rules, centralised exchanges frequently ask users to submit personal information which ought include names, identity cards, addresses, and even biometric data in some cases.
While these precautions are important to prevent illegal activities like fraud and moeny laundering, they also cause privacy issues. Data breaches, which have been a reoccurring issue in the digital age, could occur on these exchanges, exposing users' sensitive information to third parties.
Furthermore, most users are drawn to cryptocurrencies because of the privacy it offers compared to regular banking systems. Asking for personal details of users undermines the anonymity enjoyed by crypto enthusiasts.
What Can Be Done?
Tradecurve is building a platform with a major focus on user's privacy. While it still adheres to relevant KYC and AML standards to preserve the platform's integrity, it employs stringent data security procedures to secure users' personal information.
Tradecurve secures personal data with modern encryption technology, two-factor authentication, ensuring that even if a breach occurs, the information is unreadable to unauthorized parties. The platform also utilizes strong firewalls and conducts security audits on a regular basis to uncover and resolve possible bugs and vulnerabilities.
Furthermore, Tradecurve adheres to the concept of data minimization, which means that it only gathers the information necessary to comply with regulatory requirements. Moreover, Tradecurve's data gathering and usage practices are open and transparent.
It gives users insight and control over their personal information by providing explicit information about what data is gathered, how it is used, and how it is protected. Lastly, Tradecurve's self-asset management capability helps to improve privacy.
Users do not need to submit their wallet data with the exchange because they hold their own private keys, thereby securing their financial information from possible exposure.