Exchanges Might not be Ready for a Bull Market
If you can cast your mind back to the pandemonium of the late 2017 bull market, then you’ll probably remember just how poorly many high profile exchanges were performing. For example, Bittrex chose to close its doors to new customer registrations during December. Binance did the same too, as did Bitfinex. Not just is it frustrating to be unable to sign up to exchanges during a bull run, but it is unprofessional and unsavory. It is embarrassing that the largest exchanges in the industry were unable to facilitate transactions and accommodate new users during such a momentous and ecstatic occasion. Behaviors like this are shameful for the community as a whole.
Can exchanges handle the next bull run?
It might seem strange to think about bull runs now, seeing as 2018 has been almost entirely encompassed by bear markets, but a huge incline in prices could really happen at any moment. The world of finance is confusing and often unpredictable, so we never know when the markets might favor the investor. If such an event is to happen again, we have to ask ourselves: will our exchanges be able to handle it this time?
The answer should be a resounding ‘yes’, as most exchanges which chose to stop new registrations later reopened them with a message informing users that their infrastructure is now more robust— however, the circumstances will be different this time. There are even more users to accommodate for now. Even during this bear market, people have still been pouring into the industry looking to invest. Ever since the 2017 bull market, cryptocurrency is discussed more often in the media, meaning that interest is still there, and is only growing. If a vicious and explosive bull market happened in 2018, would the main exchanges be able to keep new registrations open? The answer might be no. Poor infrastructure isn’t the only reason why new sign-ups stop— when new people join a crypto-to-fiat exchange the company needs to verify documents before they can grant them access. If there is an influx of sign-ups, and the exchanges are not prepared, then it can spell trouble. There is currently no reason to believe that the major exchanges currently have enough resources to facilitate proper document verifications should there be major interest in crypto again, meaning that a repeat of services temporarily closing their doors could happen.
Solutions to the problem of new sign-ups
There are a couple of ways to get around this issue. One of which is to join a decentralized fiat-to-crypto exchange. The act of decentralization means that (under certain circumstances) there is be no obligation for a service to verify the documents of its users. Bisq allows for decentralized crypto-to-fiat trades, and Streamity will too once it launches. Decentralized services make for a great alternative to their centralized counterparts as they are much less restrictive. At the moment, if you are looking for a centralized exchange which can handle a bull run, ETERBASE claims it can manage the situation. According to their white paper, they are an Electronic Money Institution (EMI) which has streamlined the process of signing up, meaning that even if there is an influx of new registrations, they will be able to accommodate for it.
While the exchanges listed have been designed to be future-proof, this should not detract from the situation. Major exchanges are failing to fulfill their role as a tool for newcomer and intermediates to trade. If the most popular exchanges cannot handle a bull run then it suggests that cryptocurrency, as an industry, is not ready for full-spread mainstream appeal. Hopefully, this issue gets solved in due time.