Financial services firm, Wedbush Securities has been researching market forces and Bitcoin ecosystems for some time. In its recent report titled, ‘Embracing Volatility: Trading as Bitcoin’s First Killer App,’ the securities firm explains away the current weakness in bitcoin’s system as a necessary process to strengthening the infrastructure.
The author, Gil Luria comments that, “Volatility in the price of bitcoin should not impede retailer acceptance of bitcoin, in our opinion, as merchants and payment processors are entirely shielded, and we expect consumers will be shielded in the future.”
The industry itself will find solutions to such issues, is the underlying inference.
Two leading bit currency service providers, Coinbase and Circle, are known to be working on software which will allow solutions to fix the current patterns of ‘flash crashes.’
Luria also suggested that once the solution becomes commonplace, investors will then limit the liquidity in their online transaction to smaller-sized amounts.
But the bottom-line for the stakeholders of bitcoin currencies is to establish a system where volatility in markets co-exists with stable user experience for consumers.
The author adds that, “The connection between volatility and trading volumes is well established in equities and is beginning to emerge in bitcoin trading.”
Therefore, the current bullishness in bitcoin currency becoming the status quo, will be subverted by higher trading scenarios.
The report concludes that, “We expect this activity to continue to draw more sophisticated tools borrowed from the equities trading world – such as derivatives, margin trading and computer trading – all of which have contributed volatility in the equities markets.”
The timing of the report is not misguided, given the whiplash against margin traders in the past weeks. Both exchanges that were identified to have caused the alleged flash crashes have since dismissed such charges.