Since they arrived in the global financial arena, cryptocurrencies have been conquering the market at an impressive pace. In just a little over a decade, cryptocurrencies have managed to claim the status of one of the most discussed financial tools in the world. Bitcoin, the largest cryptocurrency, has shown a monumental growth record in the past year.
Although the US has provided legal sanctions to crypto transactions, many countries are yet to accept cryptocurrencies as legal tender. This, however, has not diminished its popularity in any way. With ever-increasing popularity, the price of bitcoin is on the rise, too, its present value being a little over $51000.
Since the hype over cryptocurrencies continues to increase, the number of people investing in this sector is also growing. These digital currencies have led to a series of changes in the stock market, becoming a cause of concern, especially for stockbrokers.
Bitcoin: Bad news for stockbrokers?
With the hype over digital currencies rising, many companies have begun exploring possibilities in this arena. Companies like Tesla, PayPal, Riot Blockchain, and Square have already made significant investments in cryptocurrencies. As such, the prices of the shares of these companies have been rising in the stock market.
It is a growing understanding among many experts that cryptocurrencies can disrupt the stock market, chiefly for the present-day online exchanges and brokers. This is because exchanges and brokers have to depend on a small number of active traders for the larger part of their revenue. Therefore, the loyalty of these traders and their repeated use of the services are essential for online brokers to thrive.
With all the craze and hype surrounding them, bitcoin and other cryptocurrencies are attracting a significant portion of the stock market’s loyal customer base away. Active customers are a precious resource for any online brokerage or exchange. That is because along with providing a regular revenue source, they also add liquidity to the system, reduce the risks and impact costs involved, and help discover better prices.
Despite being much riskier than stock investments, people are increasingly flocking towards websites like cryptosuccess of Bitcoin Smarter and other platforms that allow purchasing, selling, and trading Bitcoin. Here are a few reasons behind this phenomenon:
1. Increased user autonomy
Described by many as the future of finances, bitcoin provides greater user autonomy to users than any currency or asset. The most significant benefit of using bitcoin that draws investors towards it is its usability as a currency and an investment. Since any centralized agency does not regulate it, the users enjoy a much greater autonomy over it.
2. Safe store of value
Blockchain technology regulates the minting and use of Bitcoins in a highly secure manner. The ledgers of all transactions are public and cannot be modified.
3. High potential returns
Although bitcoin is very volatile as an asset and its value keeps changing frequently, the potential returns are very high. In a limited time, bitcoin has multiplied rapidly, appearing to be a profitable venture for investors. That makes the volatility exciting.
4. Ease of transactions
Bitcoin transactions are effortless and hassle-free since no centralized agency is involved. International transactions can take place without any overhead charges or transaction fees. Since bitcoin transactions are peer-based, it is much easier to buy or sell one’s assets compared to a stock exchange.
The regulatory laws of most countries restrict registered online exchanges from dealing in cryptocurrencies. That draws many investors away from them, further adding to the problem.
Online broking firm owners have been expressing their concerns on this matter for quite some time now. Unless the governments bend the strict trading laws and allow various stock exchanges to deal in bitcoin, the exchange and brokerage platforms will not be able to solve the problem. These platforms should acknowledge the potential of cryptocurrencies and harness it to their advantage instead of trying to combat it.