The reason behind the widespread interest in cryptocurrencies like the Bitcoin has been the decentralized nature of these currencies. Bitcoin is a peer-to-peer digital currency that ensures borderless transactions at much lower rates compared to regular transactions conducted by money-transferring services.
There are however quite a few key challenges and problems in Bitcoin trading. Not only do crypto exchanges offer different payment methods, fees, and policies but also vary in security features, functionalities and design. Here are some of the biggest roadblocks in Bitcoin trading:
- Perhaps the biggest problem you can face in crypto trading is security. While Bitcoin trading was designed to be anonymous and transparent, there have been many incidents of hacks and breaches that have made headlines. While technology keeps evolving, hackers also find more and more sophisticated ways to hack networks. The automated trading software applications like bitcoin era are labeled scam but one has to really test it before concluding upon reading the speculated market news.
- The key idea behind cryptocurrencies was to have a transparent system. However, most ICOs have turned out to be fraudulent and unsuccessful; even crypto projects that claim to be decentralized are in fact not. According to Yahoo Finance reports, almost 80% of leading 50 coins are limited to the top 20 wallets. Just like traditional economy, negotiations or collaborations in the crypto world are also controlled by power dynamics. Lack of accountability and transparency from reputed institutions may outweigh the pros of digital currencies and end up undermining blockchain use in other industries.
- While the ICOs had been introduced to lure investors, many of them resulted in scams. So, crypto exchanges on their part need to have stringent policies about including only those crypto coins that are reliable.
- When there is not enough liquidity in the market it causes imbalance and things spin out of control. When liquidity is cut down, the orders are not placed or run on time and large holders get the chance to manipulate prices. Market also becomes more volatile and prices keep slipping. Less liquidity will also make crypto exchanges having large liquidity more powerful. They will charge more to get the tokens listed.
- Some crypto exchanges charge users a flat fee, like 0.2% for each transaction. However, many others split trading fees into taker and maker fees.
- Most crypto exchanges currently are moderately regulated; this means that there remains scope for shady activities. Crypto exchanges are also believed to use trading bots for manipulating prices. For instance, Alex Kruger has exposed such an event on Bithumb that inflated trade volume on this exchange.
- It is believed that crypto transactions will be quick but there are possibilities of delays when users need to be protected against fraudulent transactions. If the exchange suspects that a user has not authorized a certain transaction, it can be held up.
- Finally, regulations should be there to ensure consumer protection and transparency. The absence of these is one of the biggest pitfalls of the crypto world. Both the ESMA or European Securities and Markets Authority and EBA or European Banking Authority have requested for regulations. The SEC or Securities and Exchange Commission in the US applies regulations to crypto projects since it regards this as another type of securities.