Levelling the playing field for small exchanges is crucial for the cryptocurrency industry to continue innovating, according to Broctagon Fintech Group CEO Don Guo.
Currently, the largest exchanges dominate market share in terms of trade volume for a number of reasons including brand awareness and a lack of price disparities.
But in spite of that Guo believes that the small exchanges need to keep going as incentivise all companies to provide a better service.
“History has taught us that monopolies are the enemy of free market competition. If traders only have a few viable options for transacting, then those companies aren’t incentivised to provide better or more efficient services.” He said.
Guo continued: “The banking space remained much the same for decades until challenger banks came along. These new players provided a cheaper alternative which was more attuned to the needs of modern-day users, forcing banks to up their game by providing more diversified offerings and increasing their digital capabilities.”
'More cities are looking into using #blockchain technology in their operations, such as Decentralised Identity (DID)," said Don Guo, Broctagon's CEO. How do you think blockchain for smart cities can help current situations such as #COVID19? https://t.co/7FueP4pXKv #coronavirus
— Broctagon Group (@BroctagonGroup) March 23, 2020
However, one of the key issues that small exchanges are faced with is a lack of sufficient liquidity, although according to the Broctagon CEO this can be solved by using the model from traditional markets.
“Smaller exchanges can take inspiration from the traditional financial markets. In Forex, for example, trading venues need to turn to solutions such as smart order routing to get the best possible price for a currency pair. These companies can also utilise tactics like market making in order to increase liquidity on their own exchange.” He added.
“There is no reason this can’t be applied to crypto. If smaller exchanges are facing liquidity issues, these solutions are essential in order to allow them to compete with the top of the industry and maintain the market innovation which comes with healthy competition.”
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.