Are Bitcoin Exchanges 'Immature'?
An old-school technology company which was founded ten years before the Bitcoin white paper was released it now looking to help todayâs cryptocurrency trading platforms mature.
Based in the capital of Sweden, Cinnober mainly provides tech solutions to traditional stock and commodity exchanges around the world. However, this year it has seen a few deals with crypto startup. The most recent one is the Bitstamp exchange which announced this week that it will be the first in the space to use the vendors TRADExpress platform, alongside the likes of the London Metal Exchange.
Itâs likely that this wonât be the last crypto exchange to do so. Cinnober says that itâs looking for other potential partners in the market and sees about twelve that would be perfect fits.
The leader of Cinnobers cryptocurrency and blockchain division, Eric Wall stated in a recent interview that:
"The most suitable ones are those who are looking to participate in the transformation that the industry is going through. We can serve retail-only focused cryptocurrency exchanges, but the ideal customer for us is the one that is looking to cater more heavily to institutional investors."
Getting institutional traders as clients will be a vital part for cryptocurrency exchanges to carry on. Wall thinks that this will require significant adjustments saying:
"Cryptocurrency exchanges currently are extremely immature from the traditional financial markets perspective. Many of them lack basic knowledge of how to operate robust and reliable financial markets."
Especially looking at attracting more investors, crypto exchanges should provide the same functionality as traditional stock and commodity exchanges do. As Wall says, adding in trade compression, netting and clearing mean that cryptocurrencies can be traded like a typical financial asset.
With crypto exchanges, they are typically operated on a pre-funded basis, only allowing users to trade as much as they have on their accounts, while traditional financial exchanges use cleared trades when customers maintain collateral deposited with a clearinghouse.
Wall continued to say:
"Right now the cryptocurrency exchange market is very inefficient as there are no clearing technologies and clearing houses in place. We can help a cryptocurrency exchange become a real exchange that has a clearing module, so trading is more efficient for institutional investors."
What are your thoughts? Let us know what you think down below in the comments!