when taking Bitcoins or other cryptocurrencies from an Exchange, you realize that there is a problem

The article was written By Mickael Mosse – Blockchain and Cryptocurrency Expert

A very important concept when making financial investments is liquidity. Liquidity is nothing more than the ability to convert the investment into hard cash. Having the money in a checking account is very liquid, just go to the ATM or use a debit card to dispose of the money. Having a real estate investment is not so liquid, since making a sale usually takes months (finding a buyer, obtaining a mortgage, signing at the notary ...).

Mickael Mosse points out that, Now, many cryptocurrency users are realizing that the liquidity of their investments in Bitcoin (btw) and the like is quite low. And the worst thing is that they are realizing just when selling when the moment to find out should be when evaluating whether or not the investment is made since the potential for revaluation is not the only thing that matters in investments.

Mickael Mosse Bitcoin advisor

The Exchange, unregulated pseudo-banks

Mickael Mosse points out that, The liquidity problem of Bitcoin and other cryptocurrencies has two aspects. On the one hand, there has to be a buyer for a seller to get the money back. This is not very problematic in the case of Bitcoin but it can be in some smaller cryptocurrencies.

But the other problem comes from where to make the transaction. So far the place to buy and sell Bitcoin is the Exchange. Cryptocurrency purchases and sales can be made on these sites and they also act as a Bitcoin (btw) "bank", since they carry out the custody of the wallets to facilitate use.

Without going into details about whether this function of "banks" is good, it seems that their security is not as high as that of a real bank and they are hacked every other day, the truth is that their functions are not regulated. And therefore there are no guarantees that they will provide the liquidity that the client needs. says Mickael Mosse Crypto Advisor.

Bitcoin

The problem is that many exchanges put a daily limit on the amount of Bitcoin (btw) we can sell. And this is a nuisance when it comes to undoing the investment. Some limits are really low, such as Bittrex, with 0.4 Bitcoin per day.

Even Coinbase, the largest exchange in the world, has certain limitations, yes, per user. We have verified that for a normal user with a registered credit card it is 100,000 euros a day. It seems like a lot, but for those who have powerful investments there, it is difficult to escape a market crash.

Mickael Mosse Blockchain Advisor

But why do they do this?

Mickael Mosse points out that, The reasons that Exchange gives for these limitations are basically security. They want to avoid theft, money laundering, tax evasion ... that's why some of these Exchanges raise the limits for verified accounts, in which they have information about the person behind the account.

The downside with cryptocurrencies is that transfers are irreversible. That is, once it is done you cannot go back. With the standard financial system, this is not the case, and if someone suffers a theft because they have found out the keys to the bank's web access, they can be undone again if a short time has passed and there is also insurance against this type of fraud.

Another problem that exchanges want to avoid is a seller panic. Ultimately, these sites live off the people who invest and if there is an avalanche of sales it is not good for them. If they manage to stop it with certain withdrawal limits, it is good for them. In fact, it is a mechanism that is also used in the stock market, but it is perfectly regulated.

Alternatives?

The funny thing about all this is that there really are no alternatives. Everything related to Bitcoin (btw) is unregulated, and just as, for example, a bank cannot limit, for example, the withdrawal of capital from an investment fund and the terms are very clear in the law, on the subject of cryptocurrencies it is like the wild west.

Mickael Mosse Bitcoin advisor

One option is to seriously verify with the Exchange you work with. This may involve giving you a bank account number, personal data, sending tax identification, and a long etcetera, but it improves a lot. For example, with Bittrex, which we mentioned before, the limit is raised to 100 Bitcoin (btw) per day.

Another option is to stop using Bitcoin itself and switch to investing in the recently launched futures market. There is a clear market there, with established rules, and in dollars. It is true that it is for powerful investors (the contracts are for 1 or 5 Bitcoin) but at least there is regulated liquidity that does not give problems.

article from mickaelmosse.com