Digital Currency Exchanges | Volume / Liquidity
13 May 2019
What are Digital Currency, (Cryptocurrency) Exchanges and how do Volume and Liquidity play a role?
I wanted to do this article on Exchanges for a few reasons. Two years down the line a lot has changed in this Blockchain Cryptocurrency space. I remember how scared I was when I went onto a crypto exchange the first time.
*Where am I sending my money?
*Will it get to where the guy in the YouTube video said?
*How easy is the trading UI, how real is the information like the volume and order book so that I can make an informed trade?
*How secure is the wallet?
*Will I actually be able to send any crypto tokens back to me if I wanted to exchange it back to fiat money?
*What will it cost to do that and what TAX implications will there be if I actually make money?
*What will my wife say when she finds out I’m playing with Crypto? What do your friends and family think about Cryptocurrencies?
But honestly, all these questions roll through your mind the first time you go on. I must say in two years the industry has really grown and matured. All my anxieties are gone, I hop on to the exchange I want to be on, conduct my business with ease and hop off. I don’t leave my money on the Exchange so if I merely wanted to purchase Digital Currencies I do so, send it to my Hard Wallet and my Investment is saved. If I wanted to trade on a pair I would place my Order and set an alert to manage the order if it got filled send it to my Hard Wallet and trade is complete.
My mistakes, lessons learned and research has given me this confidence to manage my Digital Assets with self diligence. It is here where you decide if you want to take charge of your own finances in a responsible manner.
Trading, however, is only one tool in the bucket to manage and increase one's Digital Money Portfolio and it can be risky if you don’t know what you are doing. Even if you do there are risks like Hacking attacks.
Binance one of the largest and most commonly used entry Exchanges was Hacked on 9 May 2019. Statements from the CEO Zhao Changpeng claim all funds will be returned. Deposits and Withdrawals have been placed on suspension for now.
“Cryptocurrency exchange Binance has reported what appears to be its largest hack to date. In a post on the exchange’s site, Binance’s CEO Changpeng Zhao said a single account was affected, leading to the lost of 7,000 bitcoin, valued about $40 million at the current price of $5,815
For the best research done on this Hack Attack, you can read here from Anthony Xie publishing on Hackernoon
I strongly suggest if you want to “trade” or just exchange/swap Cryptocurrency you have a look at Babypips.com and read through some of their articles to get a feel for the terms and chart ideas used in the trading world.
*Before we head into the article please know that the links contained in this article are a safe direct link to trusted resources and sources.
This is not financial advice, my articles are there for educational purposes in order to assist you in a decision you have already made.*
My Full disclaimer: #DISCLAIMER
I will from here on be referring to Cryptocurrency, Crypto, Digital Assets, Digital Money, Altcoins and Tokens as “Digital Currency”
A stock exchange or securities exchange is a facility where stock brokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments.
A cryptocurrency exchange or a Digital Currency Exchange (DCE) is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.
Research! A company that put together an Official Report on Volume on the DCE’s to the U.S. Securities and Exchange Commission (SEC) summarised it perfectly https://bitwiseinvestments.com. I will base my overview on what they presented in order to bridge this exciting world for our newcomers and reaffirm statistics for our more salted readers.
- The Report to the SEC in March 2019 is a comprehensive 226 slide presentation you can view here: https://t.co/DNw36VboPl
- The slides provide a great visual context of correct and incorrect data provided by Exchanges. The slides will also serve as a good educational reference for newcomers.
- The data is collected from 81 Digital Money Exchanges claiming a larger than 1Million Trading Volume in #BTC Bitcoin. The total real daily BTC trade volume: https://t.co/MQ4CD3K9hz
- You can see the daily BTC trade volume on these exchanges at https://t.co/MQ4CD3K9hz https://t.co/yLFiL8kQNn
Bitcoin price chart on 11 May 2019
The outcome of the report is dismal, at only 5% using the real volume on their platforms with the biggest reason why the falsified volume exchanges do this is to attract new listings. Listing fees can be very lucrative for Exchanges.
What does real volume mean to us? Well just like regular stock prices are affected by the volumes of stock being bought and sold, so is it the same for Digital Currency. The true volume will give us a good indication if the stock or in this case Digital Currency are being bought and sought after with the possibility of climbing prices or sold with low interest, hence low price action.
Volume is obviously not the only indicator but one of the first few we should look at.
For obvious reasons, this presents a problem if fabricated.
Only 10 out of the 81 make up the actual total volume of BTC >$1M real daily Bitcoin trade volume and they are:
Let's go to my trusted source to link us to these Exchanges Coinmarketcap
Binance, Bitfinex, Krakenfx, Bitstamp, Coinbase, BitFlyerUSA, Gemini, ItBit, Bittrex Exchange, Poloniex and Circlepay.
Volume vs. Liquidity
These two are often confused.
Digital Currency Trading Volume: Along with circulating supply and market capitalization, the volume is one of the most prominent metrics in Digital Currencies. The volume of a token listed on CoinMarketCap is quite simple. It’s the amount of the coin that has been traded in the last 24 hours.
Market Liquidity is a market’s feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset’s price. Liquidity is about how big the trade-off is between the speed of the sale and the price it can be sold for.
In my words
“The one won’t influence the other for better or worse. In effect, Liquidity describes how fast an asset or in our case Digital Currencies can be bought or sold and are the reserves it holds to back it enough?”
Here is some more good reading from our friends at Hackernoon.
https://hackernoon.com/some-thoughts-about-liquidity-and-security-tokens-d3c3f52b417a
This ties in perfectly with the “since I can remember” Tether #USDT Stable Coin debacle that has once again popped it’s head out with Bitfinex at the steering wheel. Basically, the question is, does Tether have enough funds to back it? So if you where to do a trade, your order gets filled, you place your profits in Tether, (the Stable Coin pegged with the US Dollar) and if your next move does not materialize you decide to withdraw your funds, but now you can't because Tether on that Exchange is Not Liquid, there are not enough funds to withdraw! Tether always seems to come out on top.
You must think now why am I considering putting my money into Digital Currency Investments, well Market Cap of course. It's not all doom and gloom though as Bitcoins Market Cap compares very well with a CFD like Gold. Recipe: Trading Volume is High, Bitcoin is enjoying a lot of transactions and the Total Market Value of Bitcoin is Rising.
In my opinion Bitcoin the Digital Currency Market Leader has to stabilize with a steady positive climb to ensure market stability and given the above factors, we should see a positive result for Digital Assets on Digital Asset Exchanges if they can provide the correct information to drive real adoption!
My initial article idea was formed around writing about the top Digital Currency Exchanges by Volume, (and I will go deeper into these Exchanges in upcoming articles), but as my thoughts took shape I found myself fortunate enough to meet up and have an interview with the CEO of the first Digital Asset Exchange in South Africa, VALR. VALR has formed a partnership with Bittrex and will soon launch a South African Rand in Digital Format, the #ZAR
This is very exciting for many of us who have had to use countless gateways over the last two years to be able to bridge ourselves with the Blockchain in order to acquire and or trade with Digital Assets. The fact that they have partnered with one of the top ten reputable Exchanges speaks countless words in their favor.
Registration does not take long. Complete your KYC and open your account with VALR. Rand deposits are coming soon and with a great Referral Program, I am sure On-Boarding will go fast as we ensure real Trading Volume.
Without further ado then, Farzam Ehsani | Co-Founder & CEO at VALR
#VALR #valr Q & A
#Q1 *How did you find the transition from the traditional financial markets to the Digital Currency world and Blockchain?
#A1 *Natural. Finance in one form or another has existed as long as humans have been around. Conceptually not much has changed but the tools that are used in finance have changed. Digital money, and specifically cryptocurrencies — which can be thought of as the use of cryptography to underpin money and assets — is just a natural evolution of our financial system towards a more frictionless one.
#Q2 *How did this come about?
#A2 *When I first heard of Bitcoin in 2012/2013 I thought it was a scam. So when one of my friends in San Francisco founded a startup in the Bitcoin space, I suggested that he should be doing more worthy things with his life. He was patient with me and explained the wonder of Bitcoin and Blockchain Technology to me. My interest was piqued. I started to do my own investigation. Once I started to understand what it was all about, I realized that this was a tool that could be used for the advancement of humanity. We are still in the early stages of its development, but there is no doubt in my mind that cryptocurrencies have a tremendous role to play in humanity’s future financial system.
#Q3 *How did you find the South African Government and SARS embrace your business and what registrations are in place to ensure a positive partnership for you in South Africa?
#A3 *The South African authorities have taken a very mature stance towards cryptocurrencies so far. They have advised the public of the risks inherent in cryptocurrencies that remain volatile, but they have also engaged in dialogue with the cryptocurrency community to better understand the space and create an environment where legitimate businesses can flourish. VALR has had several discussions with the SARB, FSB, FIC, and National Treasury and we have contributed to the framework that is currently being put in place by the Intergovernmental Fintech Working Group (IFWG).
#Q4 *Do you have any plans to work with the JSE?
#A4 *Not at present.
#Q5 *Bitfinex and Binance is currently a big topic in the Exchange landscape, how does this affect your business and what are your plans to turn these challenges into a positive for VALR?
#A5 *As with all industries, trust is a critical element of any business that aims to flourish by serving its customers well. In the cryptocurrency space, this is particularly important given the mixed record of actors in this space. There are still several people or entities that are taking advantage of unsuspecting customers. At VALR we see a tremendous opportunity to build an institution that is trustworthy and truly serves the needs of our customers. In fact, our name is derived from the word “values” (ethics) which informs every decision we make as a business. Given the security breaches in the industry, we have made every effort to make our platform as secure and robust as possible. Our cybersecurity team is headed by a seasoned expert from the traditional banking industry who helped build the online security systems of two of the largest banks in South Africa. We have engaged the services of 3 independent cybersecurity firms and experts to fortify our security as much as possible. We will be launching our BTCZAR order book in the next few weeks and are extremely excited to be bringing this to the public with a fee structure that we will soon announce which will cause a tremendous amount of excitement for our customers (and customers-to-be!).
#Q6 *With the current World regulatory implementations in mind, how do you see your platform complying and growing in the world Digital Assets landscape?
#A6*From day one we have anticipated that for any company to do well in this space they will need to comply with laws and regulations that pertain to many of the institutions in our financial system. This is why we proactively put in place an Anti-Money Laundering Programme and why we have invested a significant amount into our “Know Your Customer” (KYC) processes. We now have what we believe is the fastest KYC process in the industry, facilitated by AI and machine learning, where our customers can sign up and be verified in a matter of minutes without any human intervention. Only when something is flagged in our automated process do humans get involved. We hope to be creating a new standard for the rest of the industry (both crypto and traditional) to follow. The decision to anticipate and comply with regulations that affect the traditional financial industry has been a good one as the authorities have indicated that they will be requiring some of the same standards of crypto-businesses as they do from traditional financial institutions.
#Q7 *What are your views on the Cryptocurrency market looking into the rest of 2019?
#A7 *I’m very excited. The market capitalization of all cryptocurrencies has already gone up from $128bn to $188bn since the beginning of 2019 — nearly 50%. Despite the big decline in prices since the beginning of 2018, I expect the market to go from strength to strength but I don’t think we’ll see the end of the volatility we’ve seen for a long time to come. This is still an asset class in its nascent stages and the world is so divided in what the true value of these assets are. This will continue to have an effect on the volatility of the asset class.
#Q8 *How do you plan to draw Volume to VALR?
#A8 *First of all, we have needed to ensure that we have a platform that people like — from its design to functionality — it needs to be something that people like and want. Secondly, we will soon announce an incredible fee structure that will be the most competitive that South Africans have ever seen and will rival most of the international platforms that exist today. Stay tuned and follow us on Twitter (@VALRdotcom) to hear the latest! Thirdly, we already have some market makers on board who will bring the initial liquidity to VALR. Liquidity is incredibly important to any exchange so we have proactively tried to source this liquidity from the start. Fourthly, we have an API (Application Programming Interface) which will allow both humans and robots (“bots”) to trade on our platform. Lastly, we have the largest cryptocurrency offering of any platform on the continent (50+ cryptocurrencies and growing) through the partnership we have with one of the largest cryptocurrency exchanges in the world, Bittrex. In conclusion, we want to create such a compelling offering that if you’re a South African and you’re not on VALR, you really need to ask yourself why.
#Q9 *What incentives will you be introducing to On-Board traders?
#A9 *We have a great referral program that gives you a 15% discount on fees and a 10% commission for the multiple friends that you invite onto VALR. We have also introduced a first for South Africa (and much of the world) — we have negative maker fees! This means that if you’re a trader and you bring liquidity to our platform when someone buys from you or sells to you, we will pay you a proportion of the fees we receive for the trade. This has never been done in SA and we’re very excited about offering this to our customers. In essence, you can leave VALR with more than you came with. This is a stark contrast to the rest of the financial system where fees are often extremely high.
#Q10 *Which stable coin is VALR using?
#A10 *We currently offer TrueUSD (TUSD) on our platform which is a well regarded stable coin that is pegged 1-to-1 with the US Dollar.
#Q11 *How did you come about this incredible partnership with Bittrex and what plans do you have in place to grow this?
#A11 *Yes — we have a great partnership with Bittrex. The partnership allows us to bring international liquidity to the local market at globally competitive prices while leveraging some of the best cybersecurity practices in the industry (Bittrex was founded by 3 cyber-security experts). Currently, the liquidity on offer is for crypto-to-crypto purchases (i.e., when you use Bitcoin or Ethereum to buy one of the other 50 cryptocurrencies that we offer), but after we launch our local ZAR order books we will work on allowing customers to purchase any of the cryptocurrencies we offer directly with Rands.
#Q12 *Did you approach any other exchanges?
#A12 *No, although some of the largest international exchanges approached us. The Bittrex management team is a mature and experienced team that we felt would provide for a fruitful partnership. And so far it’s been just that.
#Q13 *When will you be allowing ZAR deposits?
#A13 *We hope to launch ZAR deposits and trading in the next few weeks, hopefully by the early part of June.
#Q14 *Luno is the biggest competition in South Africa, what are your plans to top them?
#A14 *We believe that we are still in the very early stages of the cryptocurrency market taking off both in South African and around the world. We are intently focused on expanding that market and creating a product that we want our customers to love. As I mentioned earlier, when people see our offering, we want their reaction to be “Well, why am I not yet a VALR customer?”, or even better, “That’s why I’m a VALR customer!”
That is incredible Farzam I am certainly very excited to be a part of your Exchange, VALR’s success.
Some advice from me: “I think that once you get over the anxiety of being a newcomer that you should start enjoying what you are doing on these exchanges. Yes, it is money and money matters are serious but remember, go play around with small amounts first, Digital Assets are bought in decimals, so you can practice with $10. Get yourself familiarised with the idea of trading first, what it actually involves and the different platforms UI’s. Find a maximum of 4 Indicators you understand and learn how to interpret them on the chart. In the beginning, you’ll be indecisive and pull in and out of trades and that’s fine too, you are learning. Later you will start putting together spreadsheets of trades, your entry/exit levels and making desitions to cut losses or stick it out when you get trapped by a candle stick’s wick when it took out your stop while you were sleeping.
The majority of Charting practices gets done on Tradingview. This is where you plan your trade and then go onto the Exchange and implement it. 90% of them uses Tradingview’s charts on their platforms.
Now it's my turn and just to relax things a bit, here are my favorite Exchanges. My main reason for on-boarding these are Passive Crypto Income #pci
#1 Kucoin because they have a great spread of Digital Currencies available to me and the Companies Coin Kucoin Shares ( KCS ) is a Passive Crypto Income #pci Coin, so if you hold KCS you will receive a dividend to the % you hold out of a 50% pool from overall trading fees.
KCS is a ERC20 Token on the Ethereum Blockchain, giving me further exposure to Ethereum. I look at them as a young Binance. They run a lot of competitions and incentives and have recently been very progressive in partnerships with business groups.
Decentralized Exchanges ( DEX )
#2 WhaleEx
?WhaleEx is a fast up and coming DEX DAPP on the ESO Blockchain. In my pursuit to form part of the Blockchain Ecosystems, I enjoy a DEX like this where they have #pci incentives so that I can easily try to increase my EOS holdings.
They have a KYC you must complete and you need an EOS Account. I run my EOS DAPP’s through Scatter on Windows. They have a great support team on Telegram that will assist you with on-boarding.
Learn more about DAPP’s here on dapps.com providing data on Ethereum, EOS, Tron and STEEM.
DAPP’s are the replacements for App’s on Decentralized Blockchains
#3 WAVES Platform Blockchain
WAVES has its own built-in DEX for all the tokens built on their Blockchain. In the WAVES Wallet, you can lease your Digital Currency for #pci and you get Airdropped tokens from various projects which is tradeable for WAVES on a regular basis.
Kyber Swap alternative to trading is Swapping Digital Currency in a decentralized fashion so your Digital Currency is always yours within your own wallet.
A Great example is Lothlor.com a company that uses the Kyber Technology to open and close positions in order to increase the value of the Companies Token, LOT. You can read all about that in my previous article: Lothlor the Digital Asset Custodian Fund
Peer to Peer ( P2P ) I use the Enjin Wallet that has KyberSwap integrated.
And there you have it, hope you enjoyed this article, certainly lots to understand and very exciting news about South Africa’s first fully-fledged Digital Currency Exchange VALR.
About the author Morne Olivier
Freelancer in Digital Marketing and Content Creation for Blockchain.
In addition to having had the privilege of owning my own businesses, working in the Agricultural sector including Supply Chain management, I have also in the last few years served the Retail sector, a full loop from beginning to end.
Since 2017 my Entrepreneurial spirit has led me to become a passionate student of the financial world and Blockchain Technology. As an Entrepreneur, I am a firm believer in getting my hands dirty by getting involved in all aspects, diligently educating myself in the process.
My current focus is on Blockchain because of its unique evolutionary timeframe.
I share my passion for Creative Blockchain Marketing with like-minded individuals from diverse backgrounds around the world.
Today I am one of a minority that understands how Blockchain Technology will become part of society. It’s a unique privilege and even more so because of my way in sharing the information to the laymen.
I am here to cultivate relationships for a global team and ecosystem where every member’s contribution benefits the other.
My CV in the Blockchain space will speak for itself when you visit my Social Media Platforms and Medium Blog. I further have an extended range of Social Media accounts on various other Blockchains like Steem, EOS, Ethereum, TomoChain which I actively run as Passive Crypto Income #PCI projects.
Please feel free to contact me via my LinkedIn feed for any questions you might have.
#morneolivier
Important Links to know about me:
UPDATED 11/04/19
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