What Binance Changes Actually Mean: Crypto Boom
If you're wondering why this bull market has been all over the place it is because of the current state of confusion currently circulating on markets. It almost feels like the Crypto Currency market is edging to break away, and it probably is but there are a few things standing in its way.
On of those is the global regulatory sector muscling in on markets trying to shift how trading is done which is leading a number of leading exchanges to be a little... lost in their direction in how to get things done and what they need to do.
We can expect it to be sometime before this mess sorts itself out which will leave markets in a disarray and widespread confusion amongst investors leading to fear of lost funds. This fear impacts peoples ability to "ape" into purchases and hold back until there can be clear certainty.
We have seen XRP rise over the past few days since the ruling in New York however, the rise is limited as such due to the fact it is mainly being driven by the relisting of XRP on a number of exchanges such as Coinbase and Binance.
What's Happening With Binance's Latest Announcement
A recent announcement by Binance.US has left more confusion amongst the market with users thinking they are going to lose their funds or automatically have them converted into something else. To be honest, Binance's announcement adds more confusion to trading as it isn't all that clear for most people.
Afterall, most people are not interested in the intricate details of trading and just want to give money and get token. That's it. Simple, easy and effective trade. With the intention that their money will increase in years to come.
But Binance has clouded the sector by publicly stating that it will cease trading advanced pairs with USD for ADA/USD, BNB/USD, BTC/USD, ETH/USD, LTC/USD, MATIC/USD, SOL/USD, USDC/USD, VET/USD which has left people thinking they can't trade.
But what they mean is that there wont be pools of the tokens mentioned above with USD as the company is moving away from liquidity pairs and being just a straight buy and sell Crypto exchange.
Now this is really big news for a lot of reasons and one that will no doubt see fees rise but also reduce risk for investors and put a lot of that risk back on the exchanges.
Liquidity Pools the Investors Risk
Liquidity Pools (LP) are something we have touched on before and we discussed how the balance and imbalance of the pool impacts value of tokens. As more tokens are taken out they become more expensive and when more go in (sales) they go down.
Rapid purchases can cause massive peaks in price and then so can mass bank runs that leave LPs dry and dead this causes the majority of risk to be solely on the investor.
However, a lot of regulations coming in to play or being developed force centralised exchanges to purchase and own the digital assets they are selling. As we all know the "not your keys. not your Crypto" line. Many exchanges were relying on users to pool their tokens that would than be sold to others. So exchanges were not undertaking any risk.
This model was and is leading to significant barriers for those who lock their digital assets in without insurance or backed by anything and those who are buying it and leading to imbalances on what was actually available. Domino effects were occurring where a single collapse would see billions of dollars worth of assets erased.
How Will This Play Out?
The interesting thing that is happening is wondering how this will all play out because if exchanges are registered to buy and sell crypto only and not provide other services like liquidity pools (which will remain on decentralised exchanges such as pancake swap, Uniswap etc). They will be forced to create spot prices.
While there will be Decentralized Exchange (DEX) available centralised exchanges will need to compete with them. But it will mean centralised exchanges will need to put money up to buy Bitcoin to sell to others and they will need to have money to purchase Bitcoin and other assets back.
This will lead to a massive reduction in available digital assets because it isn't really good fiscal policy to offer anything and everything especially if you're not making money off it.
Money will potentially funnel down to the top 10 Crypto currencies while the rest begin to either disappear or have to come up with new business models to land sales.
It is definitely an interesting time and I am excited about the transition to crypto only sales because it will potentially lead to a stable and a bottom for the market and a reduction of risk due to it being transitioned to the exchanges.
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