Many crypto businesses are scaling at a rapid pace and are looking for more than one liquidity venue to meet their business needs. With this success comes the growing pains of managing multiple liquidity venues. These companies can certainly empathize with the immortal lyrics, “It’s like the more money we come across, the more problems we see.” For companies engaging with crypto, the opportunity cost of increased demand and expansion lies in the operational complexity associated with managing an ever-increasing stable of liquidity venues for potentially price-volatile assets.
And while crypto offers the potential for businesses to improve operations, diversify balance sheets and create new revenue streams, some companies may be hesitant to take on the added complexity of engaging and managing crypto.
Manage multiple liquidity points
Liquidity is an important contributor to a healthy business engaging in crypto – facilitating core treasury functions, enabling growth and protecting against risk. But to engage with crypto effectively, reliable and robust liquidity arenas are needed.
As a business dealing with cryptocurrencies, it needs to maintain proportionately higher levels of liquidity in order to optimize operations and sustain growth. To satisfy this demand, avoid disruptions and optimize prices, companies will often use multiple exchanges or marketplaces to build liquidity.
Nevertheless, each liquidity venue is dynamic with constantly changing levels of liquidity volume and varying rules of engagement. As companies activate more of them, the complexity of managing their assets across all these liquidity arenas can become burdensome.
Leverage crypto for business operations
Companies are increasingly leveraging crypto to improve business operations – reducing settlement times for merchants, diversifying balance sheets for assets and using crypto for payments.
For example, stablecoins are leveraged to settle payments with merchants 24/7/365, as crypto is not limited to banking hours. Some companies are also looking to have a breadth of assets on the balance sheet for diversification purposes. Accepting crypto as a payment method has also helped businesses generate additional revenue by attracting a new customer base and strengthening their reputation for innovation.
Choosing a crypto liquidity provider
For many businesses, choosing the right liquidity provider is critical to optimizing for price, especially for large volume transactions. The wide range of crypto exchanges, their respective engagement requirements and varying stages of maturity and sophistication can make this process complex and overwhelming – even for crypto-savvy businesses.
Like fiat liquidity venues, crypto exchange requirements can be onerous. For example, limits on large capital withdrawals require accurate and complex forecasting and order forecasting – a requirement that is magnified for global organizations. This often requires the employment and management of an expert or dedicated team.
Many crypto exchanges also require customers to pre-fund accounts prior to a crypto purchase. This can lead to large capital commitments, which tie up funds that can be used in other areas of the organisation. Crypto Payment Service Providers (PSPs) may be forced to go long on crypto assets when in reality crypto PSPs are only supposed to act as an intermediary, not an exchange or broker.
Similarly, the cost of withdrawals can be high for crypto PSPs and result in unexpected variations in price depending on the fiat pair. And unfortunately, there are many exchanges that do not optimize for payments to different countries.
Poor management of capital and risk requirements can lead to significant operating costs and challenges. Centralizing crypto assets in one place can reduce expenses but increase risk exposure. Conversely, distributing this risk across multiple crypto-liquidity providers can improve risk management, but can also result in increased administrative complexity and higher costs.
Supercharging Crypto with Liquidity Hub
Designed with these enterprise crypto needs in mind, Liquidity Hub leverages Ripple’s deep background in crypto, finance and cross-border payments to make crypto management efficient for any business through a simple, streamlined API.
By connecting to Liquidity Hub, customers can access a variety of liquidity sources without the requirement for capital-intensive pre-financing. The product uses smart order routing to source digital assets at optimized prices from a variety of venues such as market makers, exchanges and OTC desks. This makes it possible for businesses with large transaction needs, such as financial management, to realize significant savings.
Additionally, via Ripple’s product line, businesses can access optimized global payments to over 30+ jurisdictions, effectively reducing their fiat.
Ultimately, Ripple’s Liquidity Hub lowers the cost of liquidity for customers, maximizing the benefits offered by crypto without the administrative headaches. This solution really simplifies crypto liquidity management for businesses.
Learn more about Liquidity Hub or get started today.
The availability of Ripple’s products and services varies by jurisdiction.
