According to www.cryptocoincharts.info, the coin count stands at 3366. With so many coins on the market, the market itself becomes illiquid, completely stagnant.The highest bid is far from what the next seller is will to trade for. A prudent move if you're the seller, but the odds of this transaction taking place is rare. Perhaps with exception, I have only seen one exchange, "Kraken.com" that offers an "at market" buy/sell option along with a myriad of other conditions. If you're not familiar with this method, it allows one to place a sell or buy order at a certain price and condition and then forget about it. The exchange trades what it can according to your conditions and the remaining order remains on the books until a corresponding trade becomes available.
Currently, individuals control the price and they may not be willing to budge. Market makers would hold a large pool of the coin, and manipulate the spot price based on demand, hoping to spur buyers and sellers to move slightly, increasing liquidity. This liquidity reassures a "seller" that there is a "buyer" in the market and vice-versa. In this case, a market makers would buy and sell in the market using an automated algorithm so that a continuous flow is created.
Since many developers simply create the coin, set it up with exchanges and then forget about it, there is no more emphasis on marketing the coin and its potential value. As a result, many of these coins just fizzle out and are never heard from again. That's bad for business and the coin market in general. Furthermore, it takes away liquidity from the truly useful coins, the ones that solve problems and further technological innovations.
So who are the market participants? Miners provide the exchange network but have to pay the bills, so they sell as soon as possible. Developers dip out as soon as possible to cover expenses and make a small fortune. Merchants are mythical beings who accept a cryptocurrency for a product or service, albeit, much like unicorns. Traders just buy and sell for a profit, nothing more. Market makers if we had any…specialize in adding liquidity by creating liquid order books. Exchanges provide a platform or arena for all of this to take place. Pumpers buy large quantities of the coin, pump it until the price goes sky-high and move on to the next coin. And there's the Holders, the ones left after the pumper has gone, the market has dried up and still, no merchants will accept their altcoin. Wait, I forgot venture capital groups who only did it for money anyway, like hookers.
That said, most coins are a complete waste of time and money for the coin enthusiast. As a matter of fact, if no one is growing the number of merchants willing to accept the coin, there is absolutely no reason to buy it. We've sat here for years with people spouting off about the merits of Bitcoin and how it's going to be really popular and profitable…I don't see that happening anytime soon. Outside of the bay area, I have yet to see any merchant that will accept Bitcoin. You would need a search engine just to locate one so it's really about ubiquity.
Solution: If you want to go through the process of building a coin, the developers should spend more time on developing the merchant network. Trying to add exchange liquidity alone will not help the problem. Instead, the solution will solve liquidity problems.If we want a stable economy and means for transferring value, create the merchant network first. Start with the mom and pop stores first and install a miner in every single one. Now we will have created a mining network that is more reliable and cost effective as the mining profits can go to pay for the miner and electricity. No charge backs mean the merchant can keep an additional 15% on what they earn. They can eliminate monthly point-of-sale equipment fees and 3% transaction fees charged by the credit providers. That's it. We can end the fed by growing our merchant base. One coin will do just fine.
Now smash that upvote button please? :)