I was re-watching a 1987 classic as “Wall Street” and I was reminded of how uncontrolled markets can indeed be manipulated. In the movie, Bud Fox used his network within the finance industry to manipulate stock prices by inflating prices first and dumping them shortly after.
Of course, this was a move to stick it to his former mentor, Gordon Gekko. I would hate to be the poor sucker who happened to have an itchy trading finger and lost a lot of money.
The problem with Free Markets is that not every player has good intentions. As Milton Friedman, the father of free markets, said
“The most important single central fact about a free market is that no exchange takes place unless both parties benefit.”
As a cryptocurrency buff, it is not uncommon for people like me to talk about decentralization. And as a millennial, I thrive in cooperative environments where sharing is the norm.
However, let us not be mistaken: absolute freedom is not viable. Limits and restraints are necessary to prevent a few rotten apples from exploiting the system. This is why today, despite many great ICOs coming to the market, careful consideration is required to avoid becoming victims of a scam.
What I fear the most are unregulated crypto markets where we see so-called “pump-and-dump” groups speculating on token values to enrich themselves at the expense of the masses who participated with enthusiasm in the public sale.
Crypto enthusiasts love to speak about decentralised exchanges that work on a peer-to-peer basis to reduce the chance of market manipulation.
However, such system is not fault-free. For instance, what happens when there are no buyers and no market makers to ensure that the token value does not fall below a certain level? Does this create an illiquid market as a side effect?
Personally, I am an advocate of a controlled crypto environment. Without suffocating regulations, but with the right amount of checks and balances. Cryptocurrency and blockchain in general have a lot to give to the world. We just have to give them enough room to grow.
Right now, Singapore is headed in that direction. Not outrightly banning cryptocurrencies, but taking a gradual stance towards acceptance with regulations slowly coming into play.
PLMP Fintech is in the process of attaining a license from the regulators in Singapore to issue Security Tokens. If you would like to know more, visit our website and social media to remain updated on our latest news and activities.