By Thomas Perfumo, Head of Kraken Strategy
As crypto’s influence grows, it’s clear that TradFi must adapt as 24/7 trading becomes a global and generational expectation.
Born for This: The Crypto Advantage
Cryptocurrencies are revolutionizing trading by allowing transactions to take place anytime, anywhere. This democratizes access, allowing a global community of investors to engage in transactions at any time.
Born in the digital age, the creation of cryptography takes full advantage of all the power and efficiency that a widely distributed Internet has to offer. Crypto doesn’t have to worry about the deep-seated difficulties in upgrading outdated semi-analog systems, because those systems simply never mattered to crypto in the first place.
Cryptocurrencies, freed from time zones and traditional market constraints, are redefining trading. They leverage technology to provide seamless access around the clock and provide a stark contrast to the limitations faced by traditional systems.
The oldest existing system: the disadvantage of TradFi
Traditional markets, such as stock exchanges, historically operate on set hours and are often completely closed on weekends and holidays. This limited access is increasingly seen as a disadvantage in a world where digital assets are constantly being traded.
The New York Stock Exchange (NYSE) was founded in 1792. The American president was George Washington. The French Revolution was in full swing. More than 230 years of law, structures and power relationships come into play whenever a significant change in its operations is contemplated.
Nonetheless, the NYSE is exploring the possibility of trading stocks 24/7, recognizing the growing demand for continuous market access. The world’s largest and most liquid stock market offers stocks that are largely owned by global traders and investors. Many must work in the middle of the night to accommodate the NYSE’s current 6.5-hour regular trading window of 9:30 a.m. to 4:00 p.m. ET. Of course, only Monday through Friday, and not even on U.S. federal holidays.
Traditional financial institutions, rooted in centuries-old practices, are struggling to adapt to the demands of continued commerce. The NYSE’s interim steps toward 24/7 operations highlight the growing pressure to evolve.
Philosophical and functional challenges of the transition
The transition to 24/7 trading poses significant challenges for TradFi, including resistance from its gatekeepers. High-friction, time-limited, slow-settling transactions maximize the power of intermediaries – like exchanges, brokers and clearing houses – who each have their own interests. Few benefit from crypto’s faster, seamless, instant settlement standards. A network of TradFi intermediaries and participants should agree to work together to ensure successful 24/7 trading.
Such technical and motivational complexities constitute major obstacles to the adoption of non-stop trading hours. The TradFi system relies on principles that inherently create friction, such as circuit breakers in equity markets or changes to “market standards” such as benchmarks, as evidenced by the slow transition from LIBOR at SOFR.
Making changes in an integrated system that is more than 100 years old poses systemic challenges. Even the above change, from one benchmark figure to another, threatened global functional integrity, according to the New York Fed: “The widespread use of LIBOR across all market segments made the transition particularly complex , because the disruption or discontinuation of LIBOR posed significant risks to financial stability as a whole.
The transition to 24/7 trading faces many philosophical and operational challenges for TradFi. The entrenched interests of intermediaries and the complexity of existing systems pose significant obstacles to implementing this change in the near future.
The self-interested inertia of an existing system
Another reason TradFi has relied on mechanisms that introduce friction to customers is that they help slow market activity, making it easier for intermediaries to protect their interests in times of market stress. walk.
For example, banks have historically slowed down physical services during withdrawal periods to avoid panic withdrawals. But the rapid bank failures seen in recent years, triggered by digital withdrawals, highlight the challenges of adapting existing systems for the digital age.
But a new generation of traders has never known anything other than a digital world that is instantly accessible, even on the go. As the expectations and demands of the global market evolve, TradFi will need to adapt to meet the current moment.
TradFi’s reliance on friction-inducing mechanisms reflects self-preserving inertia. In making a change, TradFi’s standard bearers will need to demonstrate allegiance to end customers rather than the middlemen who have always taken their cut. The “toll taker” will resist structural change, not least because its very existence is at stake. Crypto was built by the people to serve the people; he is not confronted with the same existential questions.
TradFi’s arduous road ahead
The 24/7 trading revolution has begun. The future of finance will belong to those who know how to adapt to this new reality. Traditional markets must rise to the challenge or risk being further eclipsed by the crypto world’s relentless innovations – including directly competing products like tokenized stocks traded 24/7.
TradFi’s future competitiveness will depend on its ability to integrate blockchain technology and seamless trading. The path forward will require replacing well-established systems and attitudes with new technologies that can provide the same level of accessibility and efficiency that cryptocurrency already offers.
These materials are intended for general information purposes only and do not constitute investment advice or a recommendation or solicitation to buy, sell, stake or hold any crypto-asset or to engage in any trading strategy. specific trading. Kraken does not and will not endeavor to increase or decrease the price of any particular crypto-asset it makes available. Some crypto products and markets are regulated and others are not; In any event, Kraken may or may not be required to be registered or otherwise authorized to provide specific products and services in each market, and you may not be protected by government compensation programs and/or regulatory protections. The unpredictable nature of crypto-asset markets can result in losses of funds. Tax may be payable on any returns and/or increases in the value of your cryptoassets and you should seek independent advice on your tax situation. Geographic restrictions may apply. View legal notices for each jurisdiction here.
