Liquidity is one of the primary issues of most cryptocurrencies in the world. Cashing out your profits is becoming easier, but it’s still sometimes impossible to do it with smaller cryptocurrencies or large quantities of major altcoins.
Most people try to use the Bitcoin ATMs in their vicinity, but that is also quickly becoming obsolete as the mountains of cash they get is pretty hard to digitalise later on. Declaring those funds also exposes most to taxes that could sometimes number in 20% or even 55% in some countries like Japan.
Therefore, crypto investors are starting to look for new alternative liquidity sources on the web, be it e-commerce stores, game providers, betting websites or pretty much anything they could get their hands on.
But, the most common way of liquidating one’s assets is to diversify into traditional financial markets such as stocks, Forex, and commodities.
Traditional finance liquidity?
It doesn’t need to be mentioned that traditional finance is much easier to declare and much easier to cash out as well.
Sure you’ll have to wait for about a week for the funds to be transferred, but if you’re cashing out dozens of Bitcoins every day, then you’ll find yourself in a similar situation with mountains of fees.
What many traders do is they find a Forex brokerage or a CFD brokerage that accepts cryptocurrencies as deposits, liquidate their crypto assets, and maybe cash out 90% of it and leave the extra 10% as a “plaything” to generate more through alternative investments.
In the past, Forex and CFD brokers had a very serious advantage over crypto exchanges. And that advantage was leveraged trading. Meaning that traders could place trades much larger than their balance.
Now, however, most crypto exchanges have started adding margin trading options on their platforms and challenging their competitors. But when it comes to leverage size, the traditional financial companies are still on top.
For example, the most leverage you can find with crypto exchanges is around 100:1, while high leverage Forex brokers, as well as CFD brokers, sometimes offer 300:1 and more.
It’s sometimes impossible for traders to refuse such a large boon from a company, even if they distance themselves from the blockchain. For many, as long as they can cash out their profits, it doesn’t matter if they’re helping or harming the market and it’s completely understandable.
Keeping one’s assets in a crypto exchange’s hot wallet exposes it to dangers like hacker attacks and volatility. The alternative cold wallets expose it to volatility only. The only way crypto investors avoid volatility and “keep their profits safe” is by exchanging them into stablecoins, but that also exposes them to the risk of missing out during a market surge.
Overall, in order to be in the safest place possible in both financial and psychological manners, investors tend to prefer fiat currencies over cryptocurrencies.
In order to change such an adaptation somehow, many crypto companies are trying their best to come out with things such as crypto debit cards or exclusive partnerships with large platforms in order to promote crypto payments rather than fiat usage.
But the mass adaptation that we’re all looking forward to is still a few years ahead of us, and at this point using traditional financial platforms are turning to be the best alternative possible.