Can A Liquidity Marketplace Advance The Crypto Industry?

  • October 12, 2020
  • Bitcoin

There has been an increase in two-sided marketplaces out there as they help create a smart business model for buyers and sellers. These marketplaces have led to an increase in accessibility and promoted economic inclusions in previously deemed impossible markets. Such marketplaces have found their places in different business verticals such as stock exchanges, and it seems that the same model might bring about the much-needed change in the digital asset market.

 

Such new models do more than just bring sellers and buyers together. They create a new value system that allows sellers to increase their revenue and give the buyers access to modern capabilities. According to research conducted by CoreSight, it has been found out that two-sided marketplaces like Fiverr, eBay, Uber, and others are set to exceed the $40 billion in revenue mark by as recently as 2022. Another good example of this mix is Google AdSense. By allowing websites to monetize their audience through ads, Google has accelerated the growth of new businesses and formed an entirely new industry-leading business. This has helped small businesses advertise themselves and reach out to audiences that were completely out to reach for them before.

Cryptocurrencies were created with the main aim of empowering people with financial freedom. The Bitcoin system was designed to allow people to pay each other securely and accurately without the need for any intermediaries. Satoshi Nakamoto, the creator of Bitcoin, would have not even thought that Bitcoin would become a $200 billion market within a decade and that it would give rise to the creation of other digital asset exchanges for the exchange of digital assets. Even though these new exchanges have exponentially grown, it has led to the prevention of liquidity aggregation. This can lead to a number of different problems, such as a guarantee of price, transaction speed, priority of orders, reasonable spreads, and others. The liquidity might be a hindrance to the growth of the digital asset market.

With the popularity of crypto trading growing, and there is a great demand for liquidity, the two-sided marketplace might offer a solution to a number of problems that the market is experiencing. The working of crypto exchanges greatly depends on how people commit to a certain price for cryptocurrencies when buying or selling them. This will add liquidity and benefit the people. In addition, the market makers need to have the means to meet the trading volume and its capital. Here, the rewards for the people will be high as market makers will be allowed to bridge the difference and even spread their purchases and orders.

There is a greater need for capital, modern technology, and the necessary expertise to create and manage automated trading algorithms. These are the reasons why small players are being shut out from these exchanges and not able to participate. Thus, there is a greater need for two-sided marketplaces to help increase the cryptocurrency domain’s reach. The only way to bring about a major change is by enabling savvy retail investors to connect with different digital asset exchanges that need liquidity. Proper designing a two-sided platform will help investors diversify and even enter into new markets that were unreachable before.

It has been predicted that a well-designed two-way marketplace will allow market makers to issue their market-making opportunities on such platforms. It will lead to the investors enjoying much better prices for crypto, efficient execution of orders, and better fill rates than before. One such marketplace has the power to transform the digital asset ecosystem totally.

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