Attention, crisis of e-currency liquidity!

First were skins and sheep, then ingots and coins… And further followed hard cash, bills, checks, cards, and at last, in the end of the 90-s modern creative mind has presented the world electronic money. But the exultation over the offered innovation technology lasted only 8-9 years. As beginning from 2004-2005 electronic finances industry has faced some problems, and crisis of electronic currency liquidity was about to happen. And the severe reality has show that the seeds sowed that time on the financial fields have sprouted. We came across with overestimation in the virtual economy. What a new bacillus has affected electronic money and where does an electronic financier go from here - we will try to find out below.

We don’t want to speak about closure of payment systems, blocking of accounts and other realities which have touched a lot of people due to the administrative actions that throw a spanner in the works of payment systems for the legalization of the latter. The case in point will be a decline of electronic money liquidity.

Today there is a situation when people have got a lot of electronic cash in their online accounts the value of which has decreased rapidly comparing to other electronic currencies and continues its downtrend. The apparent leaders of such tendency are doubtlessly Fethard and E-gold. We can say with a confidence that the liquidity crisis of these currencies has started after banning to withdrawal e-gold and Fethard in cash. Surely, these systems haven’t broken up yet but only because of one reason – there are too much funds in the accounts of users. Morbid optimism of all holders of the currencies mentioned above, and the most important, interest of exchange services with hanged balances prevented the headlong fall of e-gold and Fethard. But the further the life of one of the considered e-currencies began developing in its own way basing on external factors. Deterrent for e-gold were huge volumes of balances in the accounts of the users that hold the rate at 15-20% and don’t allow the speculators to decrease the rate. In case with Fethard the supposed theory also holds the rate but it is not so high due to the lesser balances. Today it is very hard to tell the cross-rate of fet-wmz as the analysis of sales on e-currency stock and average showings tell about 60% against wmz. This showing could be lesser but for a cherished date 09.09.08 – the date of supposed unblocking of Old Fethard. Theoretically it is possible to do in order to raise the dying currency, keep face and safe Fethard. But April news about blocking of the possibility to withdraw money from new Fethard suggests the idea that happy end is impossible.

What do all these mean for the virtual economy as a whole?

We are facing this even on the Internet. May be somebody does not want to admit the fact but even today many people are afraid of using electronic currencies. Surely, if your business on the Internet is based on the e-currencies you cannot fail using them, but unfortunately nobody guarantees that even the most “white” payment systems will not close withdrawal options in your account. Exactly for that reason today’s crisis of e-currency liquidity can cause distrust in all electronic currencies, and hence will lead to turnover decline and slowdown of virtual economy development pace. There will not be any rapid decline but there is an opinion that there will be a tendency to short the time for keeping funds in their accounts as well as balance decrease. And all of these will again affect electronic finances.

You begin thinking of it when you meet on the internet such posts on the forum as follows:

Considering that this post came from one of exchangers, which is famous enough on the market, we can say with a confidence that liquidity crisis can ruin a part of the players. The situation with e-gold is similar: this is bought with a great unwillingness even with a high interest. There is a kind of redistribution of money mass, which is filtered and consolidated more and more in the pockets of heavy players. From the economic point of view this can mean that sterilization process of the market that filters it out of e-gold and Fethard can be finished only when e-gold will completely leave the wallets of common people and accumulate in the assets of heavy players of markets – exchanger, and most probably in the assents of automatic exchangers. Such situation can lead to complete fall of demand for e-gold, and a definite group of exchange services will be obliged to declare default to e-gold itself despite the fact that e-gold has already declare that very default to itself long ago. Withering away of the definite segments of market

Fortunately this point can be useful for moral development of the Internet. Considering the fact that both e-gold and Fethard were serving not the “white” part of a business on the Internet, liquidity crisis of these currencies will lead to self-neutralization of those kinds of business. May be in that case we will get less spam with offer to buy for e-gold an access to cp sites.

What was payment system LibertyReserve three years ago? Nothing. What is a cause of a rapid rise of this payment giant? There can be a lot of answers but the most objective on is an empty niche after the end of e-gold era. The break up of this system has touched the Internet so much that the statements like the following one began appearing online:

The same tendency of rapid growth was inherited by webmoney, where the number of users began increasing for 1 mln approximately each 6 months. All these things happen not only because somebody should fill the left niche but also because of the fall of people’s trust in payment systems. Today people believe only verified, large systems that have shown themselves, even though they require from you some documents to manage your funds.

The situation with the currencies which rate is falling every day has led to the tendency of investing funds in the values liquid on the Internet, i.e. in purchasing of content, hosting, domains, sites, businesses and everything that can be liquid after the end of the crisis. It’s a great bitter to admit but it is a true tendency to purchase everything that has some value.

And at last the most banal consequence of electronic currency liquidity crisis is the withdrawal of electronic money by any means. Many people have concluded that it is equally not safe to keep money on the internet both in offline and online, however, encashment guarantees that money will always be with its owner.

So, today we can speak with confidence that the large amounts that have hanged in the accounts of users and which are mostly unsuitable for settlements from the point of view of their encashment, can plunge virtual economy into a deep crisis. However, we would like not to hurry up with pessimistic appraisals. All the threats considered by us above are just the situation occurred today. There are all the reasons to suppose that all the leaving payment systems will drag a part of Internet-business underground with themselves, and thus refresh a new image of the Internet. May be, tomorrow’s Internet will appear before us as a super-perspective field that hasn’t been ploughed by new payment systems which appear On the Internet every day.

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