Cryptocurrency markets may find a solution to its recent slump by lowering fees.
- Cryptocurrency may be able to benefit from lowering transaction fees as a means to stem the negative effects of the coming Crypto Winter, a term for the gloomy months ahead.
- “We’ve watched the total market cap of Crypto assets decline from more than $2 trillion to roughly $1 trillion just over the past year. It’s certainly been a bumpy ride and the future for many players in the Crypto ecosystem will be determined by how they navigate the cold months ahead,” says Yahoo Finance.
- “Small investors can pay a steep price for the privilege of trading Bitcoin and its many digital brethren. The range of costs, from network fees to commissions or spreads for using an exchange or brokerage app to trade, look like cents on the dollar but can be many times higher than what it costs to trade stocks or move money,” says The Wall Street Journal.
Binance.US, a major Crypto exchange, cut fees for specific trades and has been noted by analysts to be the only tracked exchange seeing regular daily volume growth in the most recent corner, WSJ reports.
Why it’s important
Getting Crypto into a more stable place could position major currencies as a safe bet as the stock market continues to tumble and fluctuate.
This would help its reputation, following the past year of Crypto fluctuations, with major assets like Bitcoin and Ethereum, generally seen as safer and less volatile, have respectively lost 70.3% and 71.2% of their value since November 2021.
“Central banks started raising rates to fight inflation, and the dollar strengthened significantly, seducing investors as the ultimate safe haven. At the same time, the economy began to sour and those new investors who still viewed Bitcoin as a risky asset exited in droves. The crash caused a wave of bankruptcies among young companies like Crypto trading platforms,” says CNN Business.
“Another Crypto boom might lower the pressure on fees. It might also draw in more competitors. Fidelity Investments is already weighing adding bitcoin trading to its retail platform, the Journal has reported. Mergers to gain scale—both within Crypto and across to traditional players—could be the key to better economics, as it was in traditional brokering,” says The Wall Street Journal.
Backing up a bit
As we previously reported, the Fed’s new interest rate hikes have also contributed to a decline in Crypto markets.
The Federal government has also been attempting to crack down on Crypto. A recent court order from the Department of Justice to the IRS has authorized actions against individuals who fail to report and pay taxes on their Crypto earnings.
The White House has also pressured the U.S. Securities and Exchange Commission to further tighten regulations on Crypto in an attempt to crack down on abuse and fraud. Federal Reserve Chair Jerome Powell joined in the criticism too, declaring on Tuesday that stablecoins ought to be more tightly regulated.