Perhaps no new technology up to this point has received as much backlash and criticism as crypto. Ponzi schemes, excess energy consumption, environmental damage, and many others have contributed to this. However, these challenges don’t affect the users’ enthusiasm; instead, they fuel it! Cryptocurrencies work similarly to a flower, breaking their way through the asphalt. Their determination to survive is so powerful that they can overcome any obstacle standing in their way.

Rethinking the role of cryptocurrencies

Right now, in a time of escalated geopolitical tensions, as well as unrest in both the stock and currency market, is when we see crypto’s most valuable advantage – independence, most clearly. The ability to save and protect your funds while managing assets safely is vital considering the current restrictions. Having access to such a potent tool essentially creates an entirely new financial system that the world can lean on, along with a stable global currency. Considerable crashes of various currencies worldwide (see the picture) demonstrate the full scale of offset into crypto, with the volume of funds still increasing. There is a significant trend of turning cryptocurrencies into a fully-fledged financial instrument working under its own regulations, which are based on the consensus of the people rather than the will of the authorities. Further evidence of this is the vigorous flow of funds from centralized exchanges to DEXs. In the last six months only, this transition has doubled in speed, and I predict that we will only see a further increase in the near future.

The market. Small steps to get matured

Traders still make up the main driving force of the market, with 70-90% of the total crypto trading volume consisting of HFTs and MMs. Following these guys and their evolution on the crypto scene is vital as it allows us to understand what to expect further down the line. First, it is driven by large CEXes that started to care not only about the trading volume – push traders to trade more, but also to create matured market for other customers. So the exchanges focus now on keeping the tide price spread, providing liquidity to different layers of the order book, etc. Second, comes from developing exchanges. This part is growing fast and using captive MM to generate profit. Of course, no competition is possible there. You will never beat the internal team, no matter how genius your trading strategy is. However, there are some changes too. Some of the developing exchanges started allowing external HFTs to trade with proper conditions on profit sharing. This proves that the market is tight, and only the best strategies can survive. Another vivid market trend is MM for particular listed coins. Coins need to hire MM to support the order book, volume (sometimes even wash trading), and K-line. The market for this kind of service is still quite shady, and nobody discloses anything there. However, the price for MM is getting down dramatically. It has plummeted from 20-50 KUSDT/m (in 2017) to 1-3 KUSDT/m (+some profit sharing). So it is another proof that the time for wild profit out of nothing is over, and now it is the time for professional services only.

Digital Banks

The banking industry isn’t currently having the best of times. Aside from the familiar problem of liquidity and overuse of assets, to which the system was more or less able to adapt, there is a visible trust crisis today. There is a growing number of regulations, inspections, bans, and subsequently more reasons to seek alternative methods of controlling your finances. The popularity of operations in cryptocurrency is growing exponentially, offering efficient alternative solutions. However, the world of classic fiat and cryptocurrency continues to coexist. The appearance of methods to bridge the gap between fiat and cryptocurrency still cannot answer the question: why do we need two separate financial systems in the first place? It is evident that eventually, the world of finance will shift to a sole financial system with cryptocurrency (at least technologically) playing a significant part in this new system. The baseline of the new financial system is actively forming as a digital bank. In this present moment, there is an accumulation of so-called “critical mass” made up of various components of the future concept of a digitized bank. The speed at which this is advancing allows us to predict that this system will be brought to light this forthcoming year.

Vladimir Demin. Co-founder, FLy