What Cryptocurrency Can Learn From Wall Street
The groundbreaking potential of the cryptocurrency space has been well-documented over the last couple years. The maverick-like nature of the new industry is refreshing, and its non-conforming characteristics appealing. Yet, even the most radical innovations and industries can learn from their more established, monolithic counterparts that have come before them. When it comes to crypto, one of the primary sectors it can model is one of the largest, stablest sectors on the planet: Wall Street.
Instead of reinventing the wheel, taking the best practices from the financial industry and tailoring them to this emerging space can truly take the technology to infinity, and that’s exactly what we’re determined to accomplish here at XTRD. Based on our years of experience in the financial sector, we are applying proven, battle-tested practices that Wall Street has to offer and integrating them into our suite of products designed for the crypto space. By unifying crypto exchanges with our software, big players such as hedge funds, financial institutions and algorithmic traders can finally get fully immersed in the industry, resulting in high liquidity and lower fees for end users.
On that note, here are 4 of the biggest lessons cryptocurrency can take from Wall Street.
1. Unification Means More Money
Unifying crypto exchanges won’t only be advantageous to the large institutions involved, it will also benefit all other parties across the board through lower fees, faster trades and much more. Additionally, with less market volatility, parties with much bigger pockets will begin to invest and trade throughout the space. With more money being circulated throughout the industry, the floodgates of the mainstream adoption of cryptocurrency will be opened. This will lead to unprecedented opportunities for individuals from all walks of life in the form of new business ventures, investment opportunities, startup funding and more.
2. With More Money Comes More Security
Unfortunately, good intentions don’t always equate to good behavior. With complete decentralization and a lack of oversight in crypto, corruption becomes much more likely. Whether in the form of unscrupulous attackers hacking into a user’s wallet or a company having the ability to charge exorbitant trading fees for their coin, little can be done given the low volume of buyers, sellers and key decision makers within the space. In fact, according to research conducted by the University of Singapore and the University College of London, out of 1 million smart contracts examined, 34,000 were found to have vulnerabilities, making it clear that security needs to be a priority for crypto.
As more financial institutions begin investing in crypto, these same institutions will want to protect their assets, and will more than likely go to extraordinary measures to ensure their assets are secure. This will likely equate to more scrutiny, technological advancements, and checks and balances put in place in order to maximize protection of a user’s coins.
3. Leveraging a FIX-based API
In 1992, Bob Lamoureux and Chris Morstatt developed a monumental technology that replaced the clunky, manual communication traditionally used in equity trading with electronic communication, beginning with Fidelity Investments and Salomon Brothers. This enabled seamless communication and allowed data to help make optimal trading decisions for buyers and sellers across different markets. FIX API is a proven method of connecting markets that has become the industry standard since its inception.
Yet, despite the widespread popularity of the crypto space, no FIX equivalent exists to bridge the gap. This is one of the problems we’re addressing here at XTRD. With our low latency, FIX-based API, crypto markets will finally be able to be connected in one convenient place.
4. These Problems Will Not Go Away
Ignoring the problem of saturation with no real order or organization altogether will not make the issue disappear. According to Investing.com, as of May 2018 there were over 1,600 cryptocurrencies listed on the market, and this number only grows larger with each passing month. Without a proper, all-encompassing solution to the high volume of coins, liquidity will continue to remain low as the number of buyers and sellers remains relatively small.
The solution here is simplicity. With simplicity and consistency in a market comes less volatility. In conjunction with lower volatility, adoption rates will increase as well, making it clear that the faster crypto exchanges are unified, the easier the industry will be able to soar to new heights.
The cryptocurrency industry is a lot of things: exciting, promising and innovative. Yet, one thing it certainly is not is streamlined, efficient or user-friendly. By the same token, the speculative nature of the market has made it clear it’s far from perfect. By applying a handful of the most reliable practices of Wall Street to cryptocurrency, the industry’s full potential will be able to be unlocked, and previously immeasurable opportunities for people across the globe will be made possible.