RE: Advertising Steem: My Vision for Steem
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It's nice that you touch the subject of speculators, even as lightly as you did. But in my opinion, the presence of speculators is a true sign that the underlying instument is stable or promising enough to attract outside risk capital.
Sure, we already have people playing the wide spreads, but true liquidity and stability should come from strong trading interest. The caveat is, like you said, sudden volatility may happen, but if the currency is established (ie backed by strong userbase, investors and sound businesscases), the spikes will be small and short-lived.
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Not sure I agree, true liquidity of euro and dollar comes from speculators or comes from companies accepting it as payment option and people using it?
Euro and dollar are reserve currencies and there's forces in play that create money flows whatever happens, but it's quite possible that speculators are the reason we can all enjoy so tight bid/ask spread on the EURUSD pair, also ensuring stable moving prices - money flows are calm and predictable.
I'm mainly pointing out that speculators create liquidity and protect the market from massive volatility spikes that are characteristic of new, undeveloped and low liquidity markets. Why would an businesses put their cash in a raw market that can spike or drop on a some large orders?
I'm not very good with words, so I'll drop this link which explains my thoughts: https://www.ninjatraderbrokerage.com/emini_trading_education/futures/hedgers_speculators_liquidity
If we leave major currencies out for a moment, and focus closer, there is a few great example on Steem-Engine's own token market - the splinterlands' DEC, compared to some others, is quite mature and stable market, there's constant buy and sell flows, and a while ago, i was taking advantage of it nicely, knowing that probably price won't move against me suddenly, leaving me caught with my pants down. Buyers catch falling knifes and sell walls forbid the price to run away and create a bubble. On the other side, look, for example at AFITX, driven higher (started trading at 10, dropped to 5, now back at 10) by sudden demand. It wont allow a serious buyer to buy at lower levels, because some thin orders are holding the market inflated, but buying up here makes no sense as one larger seller can clean up the orderbooks in one go.