Many people predicted that 2019 would be the year of institutional investors entering the cryptocurrency space. Well, after a slow start, the flood gates appear to be opening. Consensus was abuzz with announcements from major household names like Microsoft, eBay, and Whole Foods. Bakkt may finally be launching as early as July. And (apart from another delayed Bitcoin ETF decision) even U.S. regulators appear to be thawing. But while institutional support is bullish for the ecosystem in general, at Digitex, we’re firmly focused on retail traders.
A Tidal Wave of Institutional Investment in Blockchain
Talk to anyone about what crypto needs to stay relevant, consolidate its place, and become a real contending force, and they’ll say it’s mass adoption. Then, they’ll probably point to the various stumbling blocks that remain before we reach that point.
The user experience still remains clunky and slow. Opening an account even on the friendliest of platforms is a hassle for many people. Security of funds is another major issue, and the concept of being your own bank is still terrifying to many. Then there’s the lack of regulation, education, and scalability required to take crypto to the mainstream.
We all know about how much room for growth there is in this space. And that’s exactly why crypto will benefit from greater institutional investment and support. Bakkt’s launch when it actually comes will be a turning point for the industry. At last, a tidal wave of institutional money actually entering the crypto market in the form of physically settled Bitcoin futures contracts.
Microsoft building on the Bitcoin blockchain is also potentially massive. If anyone has the power to bring blockchain technology to millions of corporate clients and eventually end users its the world’s largest software company.
And now Facebook is making up for lost ground announcing the launch of its digital currency network Libra and cryptocurrency GlobalCoin by the end of quarter one 2020, in a handful of select countries. That might just be the killer app that propels crypto to the masses.
In whatever shape or form, all these contributors to the space will help build out the existing infrastructure. They’ll help push for sensible regulation, greater security, a better user experience, and bolster awareness and trust in cryptocurrencies worldwide.
Why Digitex Doesn’t Want Institutional Traders in Our Exchange
There’s no doubt about it, institutional investment is good for the space and will benefit every player in it, including Digitex. However, when it comes to institutional traders, we’re happy for them to stay on platforms like Bakkt and CME.
Why? Because as soon as institutional players enter the market they have the power to move it. We’ve mentioned time and again that Digitex is anti-whale investors. We don’t want institutional investors who can make the DGTX price move with one large buy or sell order at the expense of the entire community. That’s why our Digitex Treasury token sale is capped out at 1 million DGTX per buyer.
That’s also why we’ve designed our exchange to have automated market makers to guarantee that we have tight bid-ask spreads and high liquidity. They’re bots that are designed to break-even–unlike institutional market makers who expect preferential treatment.
Every other major futures exchange provides incentives to traditional market making services provided by institutions. They’re either given reduced trading fees, faster trade execution, quicker access to key information, or even the ability to back out of trades within milliseconds of a bid being hit!
All this preferential treatment generates an unfair advantage over other traders. It pretty much guarantees their profitability at the expense of other market participants. It really doesn’t matter if the bid-ask spreads look tighter and liquidity higher since traders in this type of ecosystem are geared up for failure. They have a mechanical edge against them.
At Digitex, we’re working on providing a level playing field for all traders and entirely equal opportunities to make money. We’ll enable retail traders from crypto futures trading and traditional markets to trade commission-free and entirely fairly.
More Liquidity in the Pool Creates More Successful Traders
Because we are a commission-free exchange, we’re not constantly siphoning funds out of the liquidty pool in the form of commissions to pay for market makers or other operational costs of running an exchange.
There’s currently no exchange out there whose interests are as aligned with their traders. Any exchange using the commission-fee model, giving preferential treatment to whale holders and institutional traders, is actively against the interests of the rest of its traders.
As our CEO Adam Todd explains:
“Because we’re not constantly siphoning money out of the liquidity pool in the form of commissions and other hidden charges. That money stays within the exchange ecosystem where instead it is won by the successful traders.”
This also means that in our exchange, we’ll create a much higher percentage of winners than could ever be the case in fee-charging exchanges. So, while we welcome institutional investment and see its obvious benefits for the crypto community, we don’t want institutions in our exchange.