When it comes to Cryptocurrency Investing, there are no rule books to follow to get rich, that’s mostly because there’s not much of a pattern in most of the alt-coins. In the first week of the new year 2018, the Cryptocurrency investors experienced a bloodbath, thanks to Coinmarketcap and the Koreans.
For a very long time, few countries have dominated the usage and trading of cryptocurrencies and if you list them in the order of their influence, Japan comes first and followed very closely by South Korea. Due to the recent government clampdown, it became very difficult to buy or trade large amounts of cryptocurrencies in Korea, this made the prices of various cryptocurrencies go up 20-30% more than what they are traded elsewhere in the world.
Since tens of exchanges trade the same cryptocurrencies across the world and the prices on them vary because of various geopolitical factors, the majority of the investors and the media rely on few websites like CMC to track the average price of a certain digital currency. Due to the difference in prices across various exchanges, a typical average of the prices across exchanges will not reveal the true price of a digital currency. This forced the website, Coinmarketcap to remove the Korean exchange prices in their global average and the result is the bloodbath what you see today. Below is the list of how top 10 alt coins are performing today.
Filled with millions of new cryptocurrency investors and adventurous day traders who panic at the very first sight of a red number, the markets are not strong enough to withhold a slight issue like today.
Case for Local Exchange Rate
Bitcoin is originally intended to replace FIAT as the decentralized and anonymous digital currency but is now plagued with a slow network which processes transactions at a snail pace and costs more money than probably what FIAT transfers would cost. If a cryptocurrency is heavily used as a medium of exchange then a consistent global average price matter, but all you see at the moment is tens of altcoins with no real products or implementations trading in billions of $$$ every day.
Whether we like it or not, the major current use case for cryptocurrencies at the moment is speculation and trading. Until the ecosystem gets more mature, a global average price doesn’t really matter or makes sense and what ideally we should be looking at is the cryptocurrency prices on the exchange you hold your coins or trade regularly.
More often than not, the exchanges which operate in the same geographical area tend to be trading at a similar price, so an exchange focussed price tracker or a geography-based price tracker would be an ideal solution. If and when the ecosystem gets matured, the underlying digital currencies will diverge into a price pattern irrespective of the location.
This will also help not scare away new cryptocurrency adopters who started embracing various altcoins for short and long-term investments by insulating them from the geopolitical FUD. But, are the markets ready for such a drastic change, is the question, What do you think?