Economic development, like human development, goes through growing pains. Through these pains we learn, through our learning we mature, and through our maturity we grow in self-awareness. Rinse and repeat. The crypto economy is no different. Each phase of growth since it started with Bitcoin brought with it new challenges which needed to be identified and creatively responded to. QUOINE, a fast-growing crypto/fiat trading platform (QUOINEX/QRYPTOS) and token (QASH) out of Singapore, is marking a new phase in the maturation process of the crypto economy. This article will briefly recap the problem QUOINE is positioned to solve — siloed liquidity — and what effects the resolution of it will bring — a reduction in altcoin dependency and a decrease in market manipulation.

THE PROBLEM OF LIQUIDITY

Let’s start with QUOINE’s understanding of the state of the cryptocurrency economy. They state the problem with formidable clarity:

“LIQUIDITY, the lifeblood of every industry, is the single most important element lacking in the crypto economy today.”

And so it is. Their use of the term “lifeblood” is of critical import. It implies that that which is most important to the crypto economy is precisely that which is most sorely lacking. What is the solution? In QUOINE’s own words:

“QUOINE is launching [LIQUID,] a single globally-sourced trading platform (World Book) with an associated suite of services (Prime Brokerage) that brings together the entire global network of cryptocurrency exchanges to enable the highest level of liquidity to all markets.”

Or, in a memorable summary by Andre Pemmelaar, QUOINE’s Chief Trading Officer, they are “de-siloing the crypto world’s liquidity”. Boom.

Now there is a decent amount of commentary amongst the QASH community about the company, its technology, and its market value; however, there is little in the way of what industry-wide effects the resolution of the liquidity problem will bring. And, to be sure, such effects are the raison d’être for solving the liquidity problem in the first place, given that the issues of altcoin dependency and market manipulation were caused by it. So, buckle up, QASH has more disruptive — or reformative, depending on your perspective — capability than you may think.

Liquidity Silos — https://liquid.plus

ALTCOIN DEPENDENCY AND MARKET MANIPULATION

Altcoin dependency

Simply put, altcoins are dependent upon Bitcoin because Bitcoin is viewed by investors as the most valuable, stable, and well-known. Altcoins are not pegged to Bitcoin — in the same way as, say, the HKD is pegged to the USD — but are de facto dependent because of the investment behavior of those speculating on emerging altcoins. It can be described as follows:

Bitcoin is known as a “take-profit coin” because most crypto trading revolves around it. On the one hand, investors speculate on promising low market cap altcoins in view of short-term gains, to then be consolidated into Bitcoin as part of their longer-term investment strategies. In this way Bitcoin is, quite literally, taking the profits generated from successful altcoin investments. Iterate this behavior across the altcoin market, and we see the price of Bitcoin rising at the expense of altcoin prices dropping. Mind you, it is counterintuitive for it to be this way, as a profitable altcoin should warrant greater investment and re-investment due to its positive outlook.

On the other hand, if cryptocurrency prices are dropping — due to market shocks, for example — investors tend to dump their positions of whatever altcoins they may have and buy inexpensive Bitcoins. This buoys Bitcoin and harms the altcoin market, as investors are assuming Bitcoin will weather downturns better than altcoins, regardless. Moreover, as the price of Bitcoin begins to rise due to such confidence, investors hop on the Bitcoin bull run, leaving altcoin prices to walk, crawl, or even wither and die. It needn’t be this way.

The final reason altcoins are dependent upon Bitcoin is because Bitcoin has the most fiat pairings on the most exchanges, thereby making it — surprise, surprise — the most liquid. This means that most altcoins, who do not share such liquidity, are sold against Bitcoin and oftentimes valued in relation to it. This only works to reinforce Bitcoin as the crypto economy’s quintessential token.

Market manipulation

One word: whales. No, not those lumbering underwater juggernauts.

Crypto whales, that is, investors with significant holdings in valuable crypto tokens, who are capable of manipulating, however unintentionally, market prices through the volume of their trading activity. Such investors, whether institutional or high-net-worth individuals, pose a challenge to nascent altcoins because the mere scale of their trades, ipso facto, can cause such altcoin prices to rise and fall dramatically.

If, for example, a Bitcoin whale sells a substantial position, this will not only dramatically affect the price of Bitcoin itself, but also send shocks through the altcoin market. Likewise, if large amounts of Bitcoin — or any coin for that matter — are purchased all at once by a wealthy investor. Thus, the issue is not so much the presence of whales, but the size of the splash they make; the more robust the crypto economy becomes through the unleashing of siloed liquidity, the less impact whales will have on the stability of altcoins.

Both altcoin dependency and the capacity for market manipulation are the result of siloed liquidity in the crypto economy. QUOINE is the breath of fresh air needed to revitalize a fragmented crypto investment landscape.

SOLVING THE LIQUIDITY PROBLEM SOLVES THE DEPENDENCY AND MANIPULATION PROBLEMS

Deep-rooted problems are often simple to state but hard to solve. QUOINE — here and here — has done an excellent job communicating how, and through what technology, they will solve the liquidity problem. But they deserve more credit than that. Let’s breakdown how their solving of the liquidity problem will eo ipso solve the dependency and manipulation problems stated above.

An increase in liquidity — in terms of fiat pairings and access to exchanges — will allow altcoins, if not all coins, to thrive or fail based on their own merit (independence). If all coins have the potential to challenge Bitcoin, say, markets will stabilize and volatility will reduce. Investors will think of altcoin investments more long-term and the investment consolidation of short-term altcoin profits into more established tokens will diminish. Promising altcoins will experience the bull runs they deserve, and the marketplace will become more dynamic overall. Liquidity should thus be viewed as an enabling mechanism. It unlocks potential. It creates opportunity. It generates wealth. It builds confidence among entrepreneurs and investors.

With greater access to the full range of tokens and exchanges, a number of positive results will follow:

The worldwide number of crypto investors will increase. The amount of investment capital in the crypto economy as a whole will increase. The amount of capital invested across the full range of tokens will increase. The impact of single trades will decrease. The ability for manipulation will be tempered.

It will result in more fairness, more profitability for more investors, and the advance of long-term investment strategies.

LIQUID, through their World Book and related technologies — matching engine, cross currency conversion engine, smart order routing — and QASH token, is positioned to energize the crypto economy to levels unprecedented — perhaps, as indicated by Mike Kayamori, the CEO of QUOINE, in an AMA on March, 28, 2018, to the tune of some USD 30 trillion or more. Uniting exchanges, empowering investors, liberating and creating capital, and mainstreaming through cooperation with regulators and the conventional banking industry is the way forward, if the crypto movement’s vision of independence, decentralization, and democratization is to be preserved and advanced. May they thrive through our support.

Please visit QUOINE, QUOINEX, QRYPTOS and LIQUID to learn more about the project.