Two days ago, traders lost more than $4 billion due to a sharp market crash triggered by numerous factors. Quotes of many coins dropped 10%-15% in a few hours, giving no opportunity to minimize losses or get away with it. Before the local crisis in late June, retail audiences turned away from the market owing to excessive volatility of cryptocurrencies. In addition to lack of regulation, volatility is the key problem of the cryptocurrency market. Accordingly, the fact that online broker Robinhood has launched a function to reduce risks from price spikes is crucial.
This function was introduced for long-term investors, who are the first to incur losses due to the volatility of coins. Its principle is to automate the purchase of a certain amount of cryptocurrencies with a set periodicity (daily, weekly, monthly). Users set the interval of purchases on their own. Consistent and regular investments become a habit, making assets grow over time and become less susceptible to value fluctuations. In addition, the online broker is dealing with an algorithm for cancelling orders if volatility increases.
The direct benefit of implementing this function is obvious - rise in income, as well as in the medium and long-term audiences of the cryptocurrency market. Reduced risk level leads to greater interest in financial instruments and, accordingly, growth and development of the entire industry. A similar function is provided by ETFs. They minimize risks in operations with cryptocurrency. More than 30 applications to launch ETFs in the US are currently pending with the SEC. Experts at Bloomberg and other major companies are confident that the first such institution in the US will launch as early as 21. Its obvious benefit will be a significant increase in the institutional audience, allowing the market to reach a new level of capitalization. First of all, this will apply to the market leaders - BTC and ETH. They continue to expand the presence of large companies.
However, amid the announcement of a new function from Robinhood, it marks the beginning of a new period that makes cryptocurrency transactions less risky. On the one hand, it makes the cryptocurrency market less volatile and provides perspectives on a wider audience. At the current stage, it will reduce the number of speculators and remove additional pressure on quotations while hitting new highs or holding support lines during a correction. At the same time, the spread of similar algorithms will mean the isolation of the largest coins in capitalization by increasing the number of institutional audiences. The percentage of large companies in BTC and ETH has reached an all-time high in the last three months, indicating the possibility of market manipulation and squeezing out the retail audience. This is evidenced by an analysis of bitcoin and ether metrics, according to which institutionalization has increased significantly over the past two years. Due to the introduction of new safe ways of cryptocurrency investing, the share of whales will grow and their influence on the market will become decisive.
The launch of Robinhood's new system promises many positives for the market in terms of leveling out the high volatility of cryptocurrencies. Besides, it will also significantly accelerate the process of institutionalization and the gradual monopoly of large companies in a certain list of assets. Moreover, with the growing income from digital coins operations, the process of taxation and state regulation of the cryptocurrency market will accelerate.