In many quarters, cryptocurrencies are being touted for their incredible efficiency and transparency. We’re looking at how blockchain technologies can revolutionize transactions – how they can help with streamlining bank verifications, and how they can fight corruption and money laundering through transparent platforms.
What some don’t talk about as much is a set of liquidity problems that could become a drag on cryptocurrency adoption.
Take a look at this story from today at Cointelegraph, where Connor Blenkinsop goes over some of these issues that put a damper on crypto popularity due to practical logistical hurdles for investors.
Blenkinsop cites the case of Bitfinex, a major crypto exchange, where he says some users have “experienced long delays” when trying to get their currency out of the platform.
“(Bitfinex’s) concerning performance has drawn parallels with the fate of Mt. Gox …” Blenkinsop writes. “There have been calls for the exchange to be more transparent about its business practices in order to assuage the fears of concerned crypto holders.”
It’s true that users are attracted to transparency with crypto exchanges, but Blenkinsop points out that that’s not always the real problem in delays on liquidity.
“ In some cases,” he writes, “banks and financial institutions may intentionally block such transactions coming in from exchanges because it could put their license at risk or land them in hot water with regulators, resulting in eye-watering fines. This can be because they are obliged to verify identities and prevent money launderers or fraudsters from using their services.
In other words, the verification burdens and requirements on banks can lead them to put up their own roadblocks for cryptocurrency sales.
Think about owning a strange exotic asset like a rare piece of Asian jade or an African rhino. Suppose you have paperwork for your purchase, but you still have to go through bureaucratic channels to buy or sell. That’s the kind of scenario we’re dealing with here, and Blenkinsop suggests that these kinds of complicated issues require due diligence on the investor’s part.
“Like with any financial decision, it’s crucial to do your due diligence before committing to an exchange,” Blenkinsop suggests. “Don’t always go with the biggest platform. Instead, read impartial reviews from those who currently use a service — and always research an exchange’s approach to transparency, as well as the fees and waiting times they attach to withdrawals. Also, make sure your bank won’t go into a meltdown.”
If you’re thinking about getting involved in cryptocurrency markets, you may still have some attractive entry points right now. Just consider liquidity issues and how you will be able to manage and access your assets over time. If you don’t think about this prior to investing, no one else will do it for you!