How Did the Multi-Trillion Dollar Trading Industry Change in DeFi Times?
The DeFi hype opened a more useful understanding of DLT power. But while everybody is hyping around lending money, there is a huge leap forward happening in the trading industry in parallel. The technical part with charting, alerts, indicators, and strategies is long covered by industry leader TradingView. However, we need to add 2 more crucial parts of the landscape into the equation to cover the full specter of services that used to be exclusively covered by brokerage houses: different types of trade executions and customer representation in the capital market.
It is well-known that an investor no longer needs a brokerage house to be able to access exchanges and execute trades on crypto markets. Yet, not so long ago, there were other pro-level trading services still absent from the crypto market. What is replacing the brokerage houses in crypto space today? Who is creating the crypto trading industry guidelines? And, is there something left for brokerage houses in crypto?
The computer revolution, 1980–2000…
Brokerage houses already had their computers and software that let them process more and more orders. As such, they were able to serve a wider audience of clients, smaller investors. These were the times when more people started investing. It is obvious why they couldn’t access the exchanges directly — because it was physically (or should I say — digitally) impossible.
Everybody had the interest to accumulate more money, investor’s money. And the laws already existed before — protecting investors, stating that only licensed people and organizations could access exchanges. Those organizations are called brokerage houses and licensed professionals, brokers. This means that they were the only ones that had the right to serve their clients with consultancy and execute trades at the same time.
And what was there for the clients to access directly — without a middleman? Only news media with financial content for a wider population and on the other hand balance sheets, rumors, and official authorities’ public papers for professionals.
The internet revolution, 2000–2010…
We had computers, brokers had computers, exchanges were running on computers, yet there was a bottleneck that prevented brokers to serve even more clients: time and execution of the process. The usual workflow by an investor was at that time: call your broker, get information on the current price, business Infos, internal Infos, etc. Then you decided either to buy/sell or do nothing, end of the call.
“At the beginning of the internet, clients were very quickly enabled to place orders by themselves directly with the usage of computer applications. However, most of them were for quite some time still calling us asking for Infos that were at that time already accessible via our software. It is hard for any kind of user to start using something new, even though it is better and faster. But slowly most of the clients stopped calling,” stated COO of PalmaBot.
And when the internet started it’s expansion, what brokerage houses did was nothing else but rearrange their software. It provided their clients with an order placement service without any mediation. This enabled more people to become traders where this function was within financial institutions reserved for professionals only. The laws remained, forcing investors to buy in/execute trades exclusively through brokerage houses. However, according to the law, this was needed to provide protection for clients’ funds by licensing entities (custody).
And what was there for clients to access directly — without a middleman? News media with financial content which, in this era, widely spread in different forms of news media platforms. The first widely adopted independent service, without the brokerage license (and without trade execution), that was able to do a breakthrough in the trading space was launched — TradingView.com! They saw the opportunity, enabled people to have free access to the market and the tool for doing technical analysis with alerts and other automation possibilities. Furthermore, with the social part of the platform, they ensured users spread the word organically, yet exponentially.
“The digital transformation has taken place and is becoming more and more present. It is just a question of how much we have become aware of it either on a personal or professional level as well as at the level of the society in which we live,” said Milan Horvat, CEO of FIMA.
The blockchain revolution, 2010–2020…
There are many reasons why we call it a revolution besides the fact that with it Bitcoin emerged as the first money that exists without central authorities. But in the scope of the trading industry, there is one special reason! For the first time in mankind’s history, it became possible for investors/traders to access exchanges directly — without going through the brokerage house process. Sure, we are talking about crypto exchanges. And Defi times just started to get more attention, no matter how broadly you define it.
So, what is there for clients to access directly — without a middleman — today?!
For charting and technical indicators, strategies, and alerts there is the already mentioned market leader with more than 50 Million active users monthly, TradingView. If you want a real-time crypto-pro trading technical tool with some advanced features like open interest, we suggest you try Coinalyze.net.
However, what traders miss in TradingView and other technical indicator providers are fundamental indicators with alerts. And this is where another market leader from Switzerland comes into the game, CoinMarketAlert.com. With their exclusive alerts, their goal is to make sure their users never miss a market move again.
“No more wasting time searching for the right wallet or the right exchange before being able to execute when the alert is received,” says Bertram Seitz, Co-founder of CoinMarketAlert.com.
Last but not least, we need to ensure that a trader in crypto can execute trades. And the problem here was that the only way you could do it was via crypto exchange’s mobile app or web-app. Yet, this did not satisfy the needs of traders. It is impractical, time-consuming and the opportunity has already gone. The most optimum way you can do trading, and this is what some brokerage houses enable, is with full connectivity: first setup alert, let it be technical or fundamental based, connect it to the trade execution tool, and automate or execute with a single click as the alert notification arrives. Meet another market leader, the trade execution leader — PalmaBot.com!
Their PalmaExecutor trade execution tool enables any TradingView, Coinalyze, or CoinMarketAlert indicator or alert or strategy to get connected with trade execution via a simple to use webhook technology. Now you can simply connect the alert, predefine a trade and as the alert notification arrives, easily execute the trade with a single click or even automate and manage on the go.
Yet, there is a portion that remains for the brokerage houses even in crypto space — custody, coin issuance, synchronization with regulatory bodies, primary market, portfolio management, etc. There will always be people that like to have their funds secured in a traditional way, secure holdings and transactions. And there are investors that don’t have time to watch over their assets. For those, there will always be traditional investment institutions. With one great benefit for all — more and more services will be available in real-time as the DLT continues to spread towards mass adoption. Not to forget, major banks already started to officially notice benefits of DLT: communication, real-time processing, etc.
It has become crucial for business success — especially in the trading industry. And we shall not forget about the DeFi hype which is bringing many new trading possibilities that are yet to be tested in the wider audience. Looks like the financial industry is thriving where individuals are getting access to more professional tools and services. Traditional institutions are following by showing how fast they can adopt, and new technologies are emerging almost on a daily basis. What an exciting era to live in, as crypto and traditional financial markets are beginning to merge in a historical digital era.
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