Taking into account the hindrances to Crypto Exchange Development
Though digital currencies have become the trendsetter now owing to a massive upsurge in its value, there are a couple of factors that can affect the business of Crypto Exchange development in the future.
Some of the hurdles are
Volatility – Since the leading cryptocurrencies such as Bitcoin and Ethereum keep on fluctuating, it has made them a risky investment tool. Characterized by rapid upswings and huge downswings, it has made transacting in cryptocurrencies a difficult task. The volatility is beneficial only to rich investors who have efficiently spread their holdings across a variety of digital assets. Amateur traders would find that the costs ultimately outweigh the benefits offered by Crypto Exchange development.
Increase in the number of competitors in Crypto Exchange development – With more cryptocurrencies entering the industry offering innovative benefits to investors, it has made the incumbent cryptocurrencies lose their ground in the market. This can lead to consolidation in the long run as some cryptos may fail miserably due to the huge pressure. Traders must watch out for some tokens as they have no utility value and are fraudulent. This will lead to suspicion among investors and they would carefully analyze the offerings made by firms before committing their money.
The growth of alternatives – There has been intense competition between established players and new startups in the crypto space. It all boils down to the trust imposed by investors and the leadership role played by the business firms. As trading volume breaks new records, issues such as higher transaction costs and slow networks spring up. Many startups are harnessing the power of blockchain technology to enhance the overall trading experience.
Adoption of digital currencies in the mainstream economy – Since cryptocurrencies pose a challenge to the existence of financial markets and banks, many institutions are accepting Bitcoin deposits and payments in cryptos. Futures contracts are also being offered in cryptocurrencies by NASDAQ. It has changed the holding pattern of reserves and the asset allocation model altogether.
Interference from the government – Government agencies are tightening the noose around cryptocurrencies by coming up with restrictive regulations. As more investors start accepting digital currencies as a mode of payment, the role of the government will become more crucial. While a blanket ban is not advisable as it would destroy a promising industry, rules promoting decentralization are the need of the hour.
Attacks from hackers – Since cryptocurrency exchanges rake in millions of dollars of profits, it has attracted the eye of hackers who want to siphon off the funds and data of users. Whenever such incidents occur, the prices of cryptocurrencies immediately crash. The market conditions are affected depending upon the popularity of the site that was attacked. It can lead to a complete system breakdown and affect the distribution of funds. To avoid security issues, exchanges must have multi-factor authentication and comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) guidelines. It must also provide timely alerts on suspicious activities that take place on the platform and implement secure transaction methods such as Escrow.
News updates in the media – A post on social media by a well-known personality in the cryptocurrency world can trigger changes in the value of currencies instantly. Before taking a decision, look at the authenticity of the statement that has been made. In an era of fake news, anything can be publicized in the media at any time to create a sense of euphoria. Do some fact-checking.
Lack of transparency – Many cryptocurrency companies do not disclose their offerings transparently to their target audience. Many investors are misled by the hype created by firms through their marketing strategies. The absence of professional standards and an ethical framework can ruin the whole industry. A uniform code of standards is needed to list only those coins that are reliable by conducting an in-depth analysis.
Poor liquidity – Though many cryptocurrency exchanges boast of possessing sufficient liquidity, there have been incidents where liquidity has not been up to the mark. This has resulted in canceled orders, price manipulation, and consequently higher listing fees to display tokens. Firms can boost their liquidity by token swap facility, low transaction fees, and remove low-performing cryptocurrencies.
Not updating to the latest technologies – Updating the efficiency of smart contracts, integrating different wallets, and introducing the newest features of blockchain technology in the daily operations are constantly needed for ensuring high-performance in the cryptocurrency exchanges. Platforms that do not upgrade themselves regularly will stay behind in the race.
Acceptance in the market – Though cryptocurrencies are witnessing an increasing number of user registrations and high trading activities, it is still not considered as a worthy investment alternative. Many investors consider it as an unstable tool due to frequent changes in its value and prices. People are not aware of the potential of blockchain technology and view it with a lot of skepticism. Acceptance can be boosted by having a user-friendly interface, a quick registration process, and top-notch security features.
With the increase in digitization and the need for decentralization, the business of Crypto Exchange Development has bright prospects in store. However, it must overcome the above limitations sooner than later.