Traditional Markets Collapsing! Is THIS a Part of the Solution?
When stocks, commodities, currencies and even investment-grade bonds plunge like they did today. Or …
When pro traders look at their Bloomberg terminals and yell out in unison, “Oh my God! The market is collapsing!” …
What does that really mean?
Most people think all it means is that PRICES are collapsing.
In other words, they think it’s all just a game of values.
“Some days the values go up and some days, values go down,” they say, shrugging their shoulders. “So, what else is new?”
What’s new is that …
When markets go down quickly enough, it’s not just the prices that can collapse. It’s also the market mechanism.
Like a barometer that blows up with excessive pressure.
Or mercury in a thermometer that freezes in absolute zero temperature.
Here’s what actually happens — and what’s happening in many supposedly liquid securities markets even as I write these words …
First, the difference between bids and asks goes haywire.
Liquidity disappears and trading dies.
Investors who want out get locked in.
Then, the MIDDLEMEN themselves drop out or face bankruptcy … or both.
This can be true in the stock market.
And it’s especially true in broker/dealer markets (such a government securities) where the middleman has to buy the securities wholesale for his own account … and then sells them retail.
Other than massive, emergency, government bailouts, there’s no immediate fix. And we’re not even sure government bailouts would do the trick.
There is, however, one long-term possibility that could help address this issue, or at least a big part of it. And it should be pretty obvious, especially for folks who understand Distributed Finance (DeFi). I’m talking about …
Cutting Out the Middleman
Never forget: When you buy stocks today, a whole parade of brokers, dealers, market-makers and custodians stand between you and the seller.
By contrast, blockchain technology (more broadly called Distributed Ledger Technology, or DLT) also enables you to safely do business with folks you don't know and have no reason to trust — without the fear of getting cheated.
That's because the blockchain automatically ensures the fairness and integrity of every transaction. And it does it far more securely than any army of overleveraged, undercapitalized middlemen.
The result is that, especially in this new crazy world of collapsing markets, traditional asset brokers will face fierce competition.
And already, upstart crypto asset exchanges are coming to disrupt their system.
Prime Example: Synthetix
Digital trading using Distributed Ledger Technology could become a financial revolution on a scale the world has never seen. It has the potential to transform the very nature of finance, money, trade and economics.
Consider Synthetix. This asset exchange shows it's not just traditional stockbrokers who are targets. Just about anything under the sun can be traded without middlemen on the Synthetix.Exchange. That includes gold, fiat currencies, all manner of crypto assets and, theoretically, even real estate.
Best yet, anyone with an asset to trade and an Ethereum (ETH, Rated “A-”) address can use Synthetix. And it works more or less like crypto assets we’ve discussed before, like DAI.
In the same way that DAI is backed by Ether (in U.S. dollars) …
And fiat currency in third-world countries are often backed by the U.S. dollar …
Every asset issued and traded on the Synthetix exchange is backed by SNX, its native token.
So, when you trade sAPPL or sXAU on Synthetix (the exchange's proxies for shares of Apple stock or gold) what you’re really trading are IOUs (called Synths), backed by SNX.
SNX tokens can be bought at Uniswap, or the following crypto exchanges listed here. And after purchase, remember to not let them just sit in your exchange account. For safety, please send them to your own desktop or hardware wallet.
And in case you don't already have a wallet that accommodates SNX, we suggest
Metamask — which is available as an extension to popular Internet browsers such as Chrome, Firefox and Brave.