Four Major Hurdles That Cryptocurrency Must Resolve

Four Major Hurdles That Cryptocurrency Must Resolve

Crypto is a digital and hence virtual currency that serves as a means of trade and a store of value. The term “crypto” refers to the powerful cryptography at its heart, used to encrypt and validate all transactions. Cryptocurrencies are essentially entries in a global database known as a blockchain maintained by a network of machines running certain open-source software. Trading Bitcoin is one of the most profitable ways of earning online. So, open the bitcoin wallets page and start your trading journey.

The Four Biggest Hurdles

The four most significant obstacles that cryptocurrency must tackle before it can be recognized as a popular asset class are as follows:

1. Liquidity

Liquidity is one of the most significant barriers for institutional companies considering incorporating cryptocurrency in client portfolios because it affects market stability, best execution, and processing time. Suppose their trading team cannot easily switch into or out of an investment market. In that case, the company is less able to trade in it on behalf of their customers. According to Bradley Kellogg, Chief operating officer of Flyer, a technology provider that provides trading connections between buy-side versus sell-side companies as well as post-trade distribution facilities, equities can be exchanged instantly on each of the few US-based stock markets with a very tight bid/ask range.

The same cannot be said about cryptocurrencies, which have a very large range through the world’s 185 largely unregulated markets, he said. The spread is mostly attributable to a shortage of trade volume across all but the most common cryptocurrencies and a lack of infrastructure and coordination between exchanges and conventional electronic trading networks. However, Kellogg’s company introduced the Flyer Crypto Gateway earlier this year, a cloud-based network that links trading software directly to the major cryptocurrency exchanges, offering a standard framework allowing market data transmission, order routing, and post-trade processing.

2. Education

According to Adam Richard, Head of Distribution of investment bank Entoro Capital, the early adopters of either Bitcoin and crypto technology were mainly self-taught. However, the same individuals would also play an active part in informing the public about the benefits of embracing Bitcoin and cryptocurrency and engaging with them. And after a lengthy description, several people, according to Richards, still don’t understand it. Although he acknowledged that crypto isn’t easy to grasp, he also noticed that the US dollar is not easily understandable, but people also use it every day. Richard lamented that educating citizens regarding the value of digital currency is even more daunting as the media portrays Bitcoin and cryptos misleadingly.

3. Custody

The management and handling of private keys is one part of cryptocurrency that many people do not recognize. When anyone sells, shares, or receives Bitcoin (or any other cryptocurrency), they are given a special cryptographic code known as a private key. If these passwords are missing or removed, the digital money they refer to is still lost. They are technically not gone, and there is a complete record of them all over the blockchain. The money, though, is inaccessible without the keys. According to Woods, approximately 20% of all Bitcoin ever mined were missing since the owners misplaced their private keys. He found out that at the peak of the market during December 2017, that reflected $50 billion in revenue (only $12 billion now) that’d be lost forever. It’s like looking for hidden treasure but having misplaced the chart that indicates where you put it!

According to Woods, people are far less inclined to use anything of importance if they do not feel secure keeping it because there is no easy third party to safeguard it. This has delayed the acceptance of crypto technologies because consumers are naturally insecure about owning items of importance. Before the website and online brokerages, the only way to claim possession was to get a tangible stock certificate. Today, all data is digitally processed at a custodian bank such as BNY Mellon or State Street. Despite the fact that all of our transactions are held digitally, no current custodian accepts real digital currencies.

4. Accessibility

The usability barrier can be reduced to one aspect: translating fiat currencies (such as dollars, euros, and pesos) into cryptocurrencies. Coinbase is the most common crypto wallet, with a quick mechanism that allows users to buy one of eight cryptos using a US checking account or a credit card. However, despite the fact that Coinbase operates across about 33 countries and has over 20 million users worldwide, this is just a tiny portion of the overall amount of buyers and developers who may actually utilize cryptocurrencies. More conventional businesses are also interested in gaining access to cryptocurrency. Wealthfront, a Robo-adviser, recently revealed an integration with Coinbase, which will enable clients to see their crypto portfolios alongside their other assets.

Cristina Macias
Cristina Macias is a 25-year-old writer who enjoys reading, writing, Rubix cube, and listening to the radio. She is inspiring and smart, but can also be a bit lazy.