DUBAI / ACCESSWIRE / October 31, 2019 / We are in that phase in blockchain adoption where the topic of cryptocurrency doesn't not require a formal introduction anymore. Cryptocurrency is now an industry word across the financial sector and business environment at large. This is testament in an event which saw "Satoshi", the smallest unit of Bitcoinbeing added in the Oxford English Dictionary.
Data also shows that the number of bitcoin holders with over 1,000 BTC has surged since early 2019 amidst BTC price growth. Despite this exposure and adoption rate, cryptocurrency exchanges - both centralized and decentralized exchanges are not without its challenges.
Like every nascent market, there is a challenge of liquidity in crypto market. This makes it increasingly difficult for traders to carry out seamless exchange of assets. This drawback is evident ina survey that x-rayed the opinion of traders, it revealed that 36 percent of traders are heavily concerned about low liquidity across crypto exchanges.
Liquidity in simple terms refers to the extent to which an asset can be sold or bought at a fairly stable prices in any given market. Usually, lower liquidity could easily result in a more volatile market, this could cause prices to change more spontaneously; on the other hand, a higher liquidity creates a more stable market.
Consequently, the difference between the buy and sell price is significantly large in a less liquid market, this is a major difficulty for traders as they pay more for spread. In more extreme cases, lack of liquidity could create a scenario where the sell order is being matched by a very little amount of buy order.
Major Causes of Lack of Liquidity Across Crypto Exchanges
It is important to recognize that not all exchanges are the same, each one has different trading pairs and a distinct trading volume, hence a varying level of liquidity. A number of factors have been linked to the main reason why exchanges experience low liquidity, this could be traced to lack of exposures of some crypto exchanges, nevertheless, the major reason is chiefly tied to the listed crypto asset.
Over 3000+ existing cryptocurrency asset commands a different level of interest from investors, this in turn could translate into a lower liquidity for a given trading pair. This single reason has seen many exchanges delisting trading pairs which commands low volume.
The Burency Solution
In recent times, a lot of resources, research and development has been dedicated towards putting an end to this challenge, or better still, reducing it to the barest minimum. Emerging crypto exchanges are now focusing on building an enabling technology and profiling a sustainable approach to solving liquidity issues across the crypto community. One of notable mention is the Burency exchange.
Burency is a Blockchain company based in Dubai. With the recent blockchain adoption by the UAE government, the region is becoming the fastest growing blockchain hub, this gives Burency the needed advantage to gain widespread exposures.
According to its whitepaper, Burency exchange is the world's first fully-insured cryptocurrency exchange that brings transparency, liquidity, convenience and regulations for traders, investors and first-time users. Burency is focused on solving a wide-range of problems being experienced by existing crypto exchanges, liquidity is one of them.
In its approach, the company suggested that, low liquidity could be remedied by decoupling assets from BTC and ETH paring, while popular fiat currencies and stable coin paring takes their place. This, however, eliminates the backlogs of purchasing BTC or ETH before transacting a particular asset or token. BUY - the Burency token for example will have a fiat pairing which can be purchased by directly using fiat or credit card.
Burency is privileged to be insured by the Nebbex protocol. Nebbex is known to offer a full custody cold wallet storage solution for a multiple number of centralized exchanges by using a single KYC and AML protocol. By leveraging on this provision, Burency is able to tap into the liquidity and asset management that is housed within the Nebbex vault.
Burency exchange is set to be launched in the first quarter of the year 2020. At inception, the company has proposed to list top 50 crypto assets as they command a high level of interest among traders. This will in turn sustain a healthier liquidity of the exchange.
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