Many crypto businesses are scaling at a rapid pace and seeking out more than one liquidity venue to meet their business needs. With this success comes the growing pains of managing multiple liquidity venues. These businesses can surely empathize with the immortal lyrics, “It’s like the more money we come across, the more problems we see.” For companies that engage with crypto, the opportunity cost of increased business demand and expansion lies in the operational complexity associated with managing an ever-widening stable of liquidity venues for potentially price-volatile assets.
And while crypto presents potential for businesses to improve operations, diversify balance sheets, and create new revenue streams, some companies may be hesitant to take on the additional complexity of engaging and managing crypto.
Managing Multiple Liquidity Venues
Liquidity is an important contributor to a healthy business that engages in crypto—facilitating core treasury functions, enabling growth, and protecting against risk. But in order to engage with crypto efficiently and effectively, reliable and robust liquidity venues are needed.
As a business that engages with crypto scales, it must maintain proportionately higher levels of liquidity to optimize operations and sustain growth. To satisfy this demand, avoid disruptions and optimize pricing, businesses will often tap multiple exchanges or marketplaces to build liquidity.
Yet, each liquidity venue is dynamic with constantly changing levels of liquidity volume and varying rules of engagement. As businesses activate more of them, the complexity of managing their assets across all these liquidity venues can become onerous.
Leveraging Crypto For Business Operations
Companies are increasingly leveraging crypto to improve business operations—decreasing merchant settlement times, diversifying asset balance sheets, and using crypto for payments.
For example, stablecoins are being leveraged to settle payments with merchants 24/7/365 as crypto is not confined to bank hours. Some enterprises are also looking to hold a breadth of assets on their balance sheet for diversification purposes. Accepting crypto as a method of payment has also helped companies generate additional revenue by attracting a new customer base and enhancing their reputation for innovation.
Choosing a Crypto Liquidity Provider
For many businesses, choosing the right liquidity provider is paramount to optimizing for price, particularly 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.
Similar to fiat liquidity venues, crypto exchange requirements can be onerous. For example, limits on large capital withdrawals necessitate accurate and complex forecasting and order prediction—a requirement that is magnified for global organizations. This often requires hiring and managing an expert or dedicated team.
Many crypto exchanges also require that customers pre-fund accounts ahead of a crypto purchase. This can lead to large capital commitments, which tie up funds that could be used in other areas of the organization. Crypto payment service providers (PSPs) may be forced to go long on crypto assets when in reality crypto PSPs should only act as the middleman, not an exchange or brokerage.
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, many exchanges do not optimize for payouts to different countries.
Poor management of capital and risk requirements can lead to significant operational costs and challenges. Centralizing crypto assets in a single location may reduce expenses but increase risk exposure. Conversely, distributing that risk across multiple crypto liquidity providers can enhance risk management but may also result in added 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 every business through a simple, streamlined API.
By connecting with Liquidity Hub, customers can access a diverse range of liquidity sources without the requirement of capital-intensive pre-funding. The product uses smart order routing to source digital assets at optimized prices from a number of venues like market makers, exchanges and OTC desks. This enables businesses with high volume transaction needs, such as treasury management, to realize significant savings.
Additionally, via Ripple’s suite of products, businesses can access optimized global payouts into over 30+ jurisdictions, off-ramping their fiat in an efficient manner.
Ultimately, Ripple’s Liquidity Hub lowers the cost of liquidity for customers, maximizing the advantages offered by crypto absent the management headache. This solution truly simplifies crypto liquidity management for businesses.
The availability of Ripple’s products and services varies by jurisdiction.