A possible recession may be good for cryptocurrencies
Among other things, many analysts think that cryptocurrencies have been developed as a possible response to a lack of faith in the current financial system. A possible recession and a lack of positive sentiment in traditional asset classes could translate in an upward trend for crypto-assets as an alternative investment, particularly considering the recent market value increases in a variety of digital coins.
It could happen that many traditional investors might turn to the dollar as a sanctuary during a crisis, although it is hard to say whether the circumstances of a future recession would allow the dollar to retain its status as the world’s ‘reserve currency’.
In the event of a new recession, within an environment characterized by global currency depreciation and expansionary monetary policy, a ‘flight to cash’ may not be seen as it was in previous recessions, according to some experts. In other words, if the dollar doesn’t retain its strength in the midst of a recession, then Bitcoin could very well go from strength to strength.
Abra Announces Restrictions on cryptos
In the United States, amidst the continued regulatory uncertainty and restrictions, Congressional hearings, and Trump’ comments on cryptos, mobile crypto wallet app Abra was forced to make changes that will inevitably impact its U.S. customers.
The company said they had to make these adjustments “in an effort to continue to be compliant and cooperative with U.S. regulations as they currently exist.”
Crypto Exchanges Are Benefiting from Algorithmic Trading
High frequency trading has been a topic of debate in large part because of a lack of precision and/or understanding by commentators even in traditional markets. HFT can be defined as automation of trading strategies enabled by computers to transact a large number of orders in fractions of a second.
Leveraging algorithms, high frequency traders analyze market conditions to manage risk and execute orders based on predefined trading strategies.
In general, automated market making and arbitrage strategies create greater efficiency in the market by integrating information into prices more quickly and efficiently resulting in narrower bid/offer spreads, improved price discovery, and fewer and more-fleeting instances of price discrepancies across markets when an asset type, such as bitcoin, trades on multiple venues.
A recent article published on Coindesk.com shows evidence that the cryptocurrency markets are experiencing all these benefits on the more reputable exchanges as a result of increasing HFT participation. In particular, the article writes that in the past 2.5 years, spreads have generally narrowed and become more stable, and price discrepancies across trading venues have become less dramatic and less frequent.