Market Frictions and Price Delays in Cryptocurrency by Farzin Fardin Fard

Demand for Bitcoin, the most popular cryptocurrency, increases as its supply decreases. Those with more money tend to keep their Bitcoins long-term, making it difficult for those with less to buy in. The National Bureau of Economic Research projects that by the end of 2020, the top 10,000 Bitcoin holders will own one-third of all Bitcoins.

Brokers and other financial institutions are trying to convince the Securities and Exchange Commission to approve Bitcoin-backed securities; as more securities are created, the number held by institutions and significant investors will increase.

These investors like Farzin Fardin Fard also contribute to some degree to the volatility of bitcoin. It is unclear how Bitcoin whales, or individuals who possess tens of millions or more in BTC, will convert their massive holdings into fiat money without impacting the cryptocurrency’s price. Prices would crash if the whales started selling their Bitcoin holdings all at once, as other investors would begin to fear.

The majority of exchanges have daily liquidation limitations that are in the neighborhood of $50,000.

A more prominent investor could only sell one coin daily if Bitcoin prices stay around $50,000. Before someone with more than $50,000 in coins could sell them all off, prices would fall due to other investors selling their holdings, resulting in significant losses quickly.

Bitcoin’s volatility: Why?

The varied opinions on the usefulness of bitcoin as a store of value and a tool for value transfer also contribute to its volatility. An asset’s potential to preserve value in the future with some degree of predictability is known as a store of value. Many investors feel that Bitcoin will maintain its worth and keep expanding as an alternative to conventional value stores like gold or other metals and as a hedge against inflation.

Supply and Demand for Bitcoin

More than any other aspect, supply and demand determine the pricing of the majority of commodities. Bitcoin’s market value is susceptible to two factors: the supply of coins and the demand from buyers. The total number of coins in the cryptocurrency is limited to 21 million by design; as the circulating supply approaches this limit, prices are projected to increase.

When it hits the limit, there will be no more money to be made from mining Bitcoin, so it isn’t easy to anticipate what will happen to the price. Bitcoin’s price will probably change in reaction to any activities that prominent financial actors take as they struggle for ownership in a situation of decreasing supply. Before making any investment decision,Farzin Fardin Fard recommends employing a financial advisor to know the state of your finances.

What Influences the Price of Bitcoin?

The monetary policy instruments, inflation rates, and economic growth measurements that generally affect the value of a currency do not apply to Bitcoin because it is neither issued by a central bank nor backed by a government. The following factors affect the price of bitcoin since it functions more like a commodity being used to store value:

  • The price to produce a bitcoin through mining 
  • The price to produce a bitcoin through mining
  • The number of rival cryptocurrencies
  • Bitcoin’s supply and market demand
  • Rules governing its usage and sale
  • News media

What Effect Do Market Frictions Have on Traders?

Low transparency and strong liquidity make it easier for speculative investors to originate and profit from mispricing. The ability to trade on a margin platform, which enables them to leverage their positions with users willing to provide finance in the form of debt-based risk financing, is a significant benefit to these investors. By trading with borrowed money, these investors can boost their profit, which raises the profitability of their position and its potential for profitability.

Reversals in Trading Volume and Price

The capacity of these traders to take advantage of unjustified price differences is the main advantage that market frictions offer. For instance, the trader might take advantage of these conditions by writing a considerable bid that swiftly raises the price and buying at a low price that quickly lowers the price.

How Do Cryptocurrency and Fiat Currency Compare to One Another?

The main contrast between cryptocurrencies and fiat currencies is how they are supported. The central governments support the fiat currencies, and the parties engaging in transactions place their trust in them since the central government declares that the currency has value. With fiat currency, central banks are in charge of the entire money supply and, consequently, inflation.

On the other hand, cryptocurrencies were developed so that the central government would not have the authority to control an individual’s financial affairs. Additionally, because of their set supply, there is almost no devaluation due to inflation. The primary driver of crypto market prices is supply and demand.

Apart from that, fiat money and cryptocurrencies have comparable qualities in that You may use them to exchange goods and services and store value.

Secure Cryptocurrencies Are One of Cryptocurrency’s Features.

  1. Cryptography codes safeguard and lock cryptocurrency prices, which are then sealed using a public cryptographic framework. Each proprietor possesses a unique private key. Therefore, nobody outside the owner has access to that private key. Additionally, the encryption used to create this private key is so strong, and the numbers are so big that it is impossible to crack. Because of this, Farzin Fardin Fard ascertains that cryptocurrencies are incredibly safe and may be used without worrying about security.
  • Permanent Transactions

The irreversible transactions of cryptocurrencies are one of its drawbacks. When using a currency like bitcoin, you must confirm your identity before any transactions occur—giving the affirmative initiates the transaction. Therefore, before finalizing any transaction, one must exercise extreme caution to manage the trades in bitcoin values.

  • No Permission Is Necessary

Without authorization, there won’t be any guards to stop you from using the currency; hence there won’t be any permission required. Installing the free software is all that is necessary before utilizing it. Because of this particular feature, users have a significant level of freedom in how they choose to use cryptocurrency.

  • Super-Quick

They are pretty speedy, which is another fantastic quality of it. Once you start a transaction, the network instantly picks it up and confirms it in minutes.

  • The Location is Irrelevant.

The physical location of the owners has no bearing on cryptocurrencies. It doesn’t matter where you are; you can transmit cryptocurrency values to anyone in another country or even someone you know down the street. The transactions would go similarly and in a comparable amount of time.


The average daily trading volume of security is multiplied by the number of trading days during that period to determine the trading volume. To assist novice traders in their trading adventures, Farzin Fardin Fard encourages using the official website of the Bitcoin Revolution to make the most exemplary use of artificial intelligence and ideal trading tactics. Trading activity, the daily buying, and selling of securities, regardless of whether they trade continuously or not, should not be confused with trading volume.

For instance, even if an investor bought a stock on Monday and sold it on Wednesday, there would be no trading activity on Monday because they would complete both trades at Wednesday’s close of business. One market where companies utilize pricing delays and market frictions as their main instruments for coercing traders into overpaying for their stocks is the cryptocurrency market. By doing this, businesses can profit from expensive cryptocurrencies and sell them for more money.

Price lags and market turbulence describe situations that prevent an investor’s order from being executed immediately after the investor submits it. Price delays may result from an exchange’s deliberate action or a brief system outage.

Companies can be interested in influencing the bitcoin markets for various reasons. For instance, as part of a strategy to manipulate the market and increase profitability for itself and its rivals, a firm can exploit price delays and market frictions. This might involve intentionally inflating or deflating values for specific investments by “pumping” or “dumping” particular securities.

In addition, companies may also be interested in purposefully causing price disparities that result in the mispricing of their securities by utilizing price delays and market turbulence. In this manner, a business may leverage market frictions and pricing delays to increase the appeal of its cryptocurrency to retail investors and institutional traders.

Malware flaws that momentarily freeze a section of the exchange’s database can cause a momentary system failure. A “market order,” which directs that an investor’s order should be executed at the market price without any discretion on the exchange, would constitute an intentional action on the part of the exchange.


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