The emergence of bitcoin has greatly affected the financial market. However, most of the companies were too lethargic to accept the technology. Yet it is now luring MNCs from all over the world. Cryptocurrencies has changed the way people handled their money. It has provided with opportunities to have greater control over self-funds. But the present scenario of volatility has created disruptions.
According to analysts, this instability of cryptocurrency has been reduced to a great extent by the incursion of Wall Street cash into the virtual currency trading market.
According to the data presented by SFOX, a cryptocurrency trading firm, the fluctuations in the bitcoin prices have been settled and stabilized. Their justification to the cause is wall street’s interference in the crypto market.
The head of SFOX, Danny Kim said that the difference between exchanges of bitcoin used to vary upto 4.5% previously (before 2018). Whereas it has reduced to one-tenth of one percent recently.
A lot of institutions and investors have been indulging in the cryptocurrency market lately. To avoid any discrepancies due to overcrowding, Coinbase has designed a set of tools. Further, a report by Grayscale Investments displays the steady growth in capital as cryptocurrency funds in first half of 2018. It comes out that the majority of the fund holders are the institutional investors
Stability is beneficial
The increasing stability in the prices of bitcoins has enticed many investors and they are keen to adopt to the virtual market. While the investors wish to see the value of bitcoin to increase, lack of stability adds to their insecurities and fear to lose more. Sudden changes in prices can result in net losses rather than profit.
According to Kim, the advancement in trading technology has helped attaining stability for bitcoin. As these new developments benefits the high-frequency trading firms (HFTs), they invest more funds into the market; hence creating balance.
He stated that some HFT firms have been a member of the cryptocurrency committee since 2014.But the only cause of their reduced interest in investing was the lack of proper infrastructure and vulnerability to losses. Most HFT seeks for a FIX connection (an advanced type of connection to an exchange) at an exchange for convenient and efficient trading. But the crypto exchanges haven’t succeeded to offer FIX connectivity until recently.
Kim believes that ongoing technical developments will strengthen the consistency of bitcoin.
If this trend of continuous advancement sustains, the stabilizing of institutional investment will stretch beyond price spreads. Consequently, it can reach a point where bitcoin would look like the stable coins that people are looking to for payments. A point where it would justify the vision it was made with: a ‘Peer-to-Peer Electronic Cash System.’
It adds to a surprising fact as to how the financials big shots are contributing in stabilizing the bitcoin prices. Surely it is beneficial to companies and institutional investors as it promises big profits. But the questions of how the limited supply of bitcoins will influence future stability still lingers.