Bitcoin's illiquidity is going to be a huge problem when the bubble bursts
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A little over ten days ago, Bancor became the biggest crowd-funding project to date. That criticism focuses on the issue of liquidity, exposing either a gap in conceptual understanding of liquidity, bitcoin liquidity issues the need to adapt the term to the world of cryptocurrency.
Both gaps seem to create a cryptocurrency liquidity myth, which needs to be addressed. To tackle these gaps, it is necessary to define liquidity. Bancor tokens are as illiquid as many other tokens; Ether is illiquid — Ether trading woes yesterday on GDAX prove this point — and even bitcoin is illiquid. Selling any of those assets quickly without having their prices affected is a difficult mission to accomplish. Relative to fiat, or relative to bitcoin liquidity issues US Bitcoin liquidity issues to be more precise, cryptocurrencies are not nearly as liquid as we think they are.
Bitcoin, which bitcoin liquidity issues the most liquid cryptocurrency, can lose hundreds of dollars in price before a user can unload it if there is a massive sale.
This translates into losses of tens of percentage points for holders. But liquidity like many other such concepts, is relative; cryptocurrency liquidity is achievable to varying degrees and through different approaches.
It all depends on the vantage point. If we compare the role of bitcoin and Ether in cryptocurrency markets, to the role of the US Dollar and the Euro bitcoin liquidity issues traditional markets, then cryptocurrency liquidity can be defined under a more limited framework.
If bitcoin is the reserve currency of cryptocurrency markets, and Ether is the second choice after it, then it makes sense to talk about how liquid a token on the Ethereum network is. It is possible to then compare the liquidity of that token to the liquidity of another comparable asset that is not on the Ethereum network. In other words, Bancor achieved an unprecedented level bitcoin liquidity issues cryptocurrency liquidity from the very beginning.
Therefore, Bancor is positioned — ceteris paribus — to achieve the goals it set out for its token insofar as liquidity goes. The level of cryptocurrency liquidity that Bancor has, is relative. The point is that in the cryptocurrency market, any other comparable bitcoin liquidity issues or any new token, would be wiped out faster under similar circumstances. In a sense, Bancor provides a stop-gap mechanism to new tokens, while allowing market bitcoin liquidity issues to seek a balance hopefully above that mechanism.
This makes Bancor an interventionist token because it seeks to play a role in cryptocurrency liquidity when market forces fall below its stop-gap mechanism. This is the concept, the implementation via code and smart contracts is a different story. Nevertheless, critics tend to conflate the technical part that deals with implementation with the economic theory on which Bancor is based.
They then extend this interpretation to cryptocurrency markets, glossing over the many layers of cryptocurrency liquidity that really exist there. The debate then bitcoin liquidity issues one that should be taking place in 2 different spheres instead.
The first sphere, deals with the myth of cryptocurrency liquidity; the second sphere bitcoin liquidity issues with economic theory. Purists or more orthodox experts will never accept any kind of central authority intervening in a blockchain. In other words, they believe in the purest form of free market economics there is.
In such a world, Keynesian economics have little or no room to take root. Bancor is a purely Keynesian approach that requires a lot of intervention in the market to ensure a certain level of liquidity if there is a run on a token.
Taking a step back, and lowering the resolution on the debate to see more of the forest and less of the trees, there is a glaring detail in this debate that many miss. Central authority bitcoin liquidity issues after the DAO attack about a year agocreated what we know today as Ethereum, and gave way to the continuation of the old chain through Ethereum Classic.
This split is at the core of this economic outlook; Ethereum took the Keynesian approach to intervene when markets — or code — failed. Now it bitcoin liquidity issues greater liquidity than Ethereum Classic. The degree to which Ethereum liquidity might be greater than that of Ethereum Bitcoin liquidity issues, is fluid.
In the long run, the roles might be reversed, precisely because letting the markets run bitcoin liquidity issues course without intervening could be the ultimate cryptocurrency bitcoin liquidity issues booster. Cryptocurrency liquidity is thus too relative to be reliable for many investors. Bancor could serve to reassure some of those investors, generating in turn more investment and greater liquidity, at least in terms of Ether.
The next question would be how will prospective investors who are still on the fence, would react to a multi-layered cryptocurrency liquidity scheme. After all, in many cases it is necessary to go into bitcoin, to buy Ether, to buy the next token. If none of those assets is liquid enough in terms of USD, and each layer is less liquid than the next, getting more investors in will be challenging.
The solution might bitcoin liquidity issues to let the markets bitcoin liquidity issues their job, after all, bitcoin enjoys current liquidity levels because of the degree to which it is integrated with traditional economic systems.
Those economic systems in turn, rely heavily on the kind of Keynesian economics that bitcoin was built to provide an alternative to. This brings the debate back to where the spheres of the bitcoin liquidity issues of cryptocurrency liquidity and economic theory meet; it also uncovers the paradox that rears its head every time we discuss the virtues and shortcomings of cryptocurrency.
To be able to offer a viable alternative to a system successfully, you must embrace it. This is how bitcoin built on the shortcomings of the traditional economic system, but to gain the degree of adoption and liquidity it enjoys now, it had to embrace elements of the system it sought to reform.
To move from the Bitcoin Economy into the traditional economy, most mechanisms employ KYC requirements. Governments are also regulating the gateways into the Bitcoin Economy. This has made it more accessible to more people, thus more liquid. Cryptocurrency liquidity can move from the realm of the mythical into reality only if it embraces elements from the systems it seeks bitcoin liquidity issues change.
That bitcoin liquidity issues also why even the most purist of blockchain technology believers, measures wealth in fiat currency. You have completed some achievement on Steemit and have been rewarded with new badge s:. Click on any badge to view bitcoin liquidity issues own Board of Honnor on SteemitBoard. For more information about SteemitBoard, click here.
If you no longer want to receive notifications, reply to this comment with the word STOP. By upvoting this notification, you can help all Steemit bitcoin liquidity issues. The Myth of Cryptocurrency Liquidity. Is Cryptocurrency Liquidity Achievable?
How do we Achieve Cryptocurrency Liquidity? The Liquidity Devil is in the Details Bitcoin liquidity issues level of cryptocurrency liquidity that Bancor has, is relative. Why is Bancor Criticized then? Short and Long-Term Cryptocurrency Liquidity Taking a step back, and lowering the resolution on the debate to see more of the forest and less of the trees, there is a glaring detail in this debate that many miss. Cryptocurrency Liquidity is Paradoxical Cryptocurrency liquidity is thus too relative to be reliable for many investors.
Yes, but… This is how bitcoin built on the shortcomings of the traditional economic system, but to gain the degree of adoption and liquidity it enjoys now, it had to embrace elements of the system it bitcoin liquidity issues to bitcoin liquidity issues.
Authors get paid when people like you upvote their post. You have completed some achievement on Steemit and have been rewarded with new bitcoin liquidity issues s: For more information about SteemitBoard, click here If you no longer want to receive notifications, reply to this comment with the word STOP By upvoting this notification, you can help all Steemit users.
