submitted by Bitoffer_Official to BitOffer_Official [link] [comments]
The year 2020 is unusual as the COVID-19 attacked, the economic growth slowed down while the international business was gloomy and the financial market became much more volatile. Under the situation above, panic has been the main emotion when people are calling for a stable investment with high returns urgently to grow their asset value gradually. After fully understanding this demand, BitOffer and Goldman Sachs Asian team launched the first cryptocurrency guaranteed fund. With 2-year preparation in strategic layout, BitOffer will build a luxurious asset custody ecosystem to provide customized wealth management products for whales and cryptocurrency enthusiasts.
Though most exchanges were focusing on spot trading and futures trading, BitOffer anticipated that the market of derivatives still had a huge blank to fill. Thus, the first Bitcoin American Options, Bitcoin Ups & Downs, Dual-currency, etc. were launched by BitOffer. As 2 years gone by, BitOffer has become the most renowned Bitcoin Options provider with 100 million USD trading volume that is created by 100 thousand worldwide members. Even though, those data never stops being refreshed.
Finally, most exchanges started noticing that the cryptocurrency derivative market still has a huge blank. However, the team of BitOffer saw something others never noticed again. As the economy developed, people’s net worth improved. Since then, the demand for asset management has been desired to a much more expected extent. Asset Custody will be destined in the future. Though, the annualized yield of the products which are provided by the banking, financial institutions, and cryptocurrency exchanges is normally low and floating. The demand for human beings cannot be satisfied.
Overall, on Oct 23rd, BitOffer and Goldman Sachs Asian team launch the first cryptocurrency guaranteed fund which gives a 20% annualized yield. As it guarantees investors’ original investment, it means the 20% APY can be made with 0 risks. The main strategies of the fund are Quantitative Arbitrage, Quantitative Hedge and High-frequency trading, etc.
Compared with other Competitive Products:
Asset Servicing on Huobi Global: 7% Annualized Yield (Non-guaranteed),
Binance Earn: About 6% Annualized Yield (Non-guaranteed),
COBO: 5% Annualized Yield (Non-guaranteed)
BitOffer Quantitative Fund: 20% Annualized Yield (Capital & Interest Guaranteed)
After a simple comparison, we can see the return of the BitOffer Quantitative Fund is 3 times higher than that of others. Moreover, to guarantee investors’ original investment and interests, BitOffer Quantitative team shall do great in Quantitative and Arbitrage.
Lucian, the Chief Analyst of BitOffer, said “QA Fund is the first step to the field of asset custody. BitOffer owns a leading R&D and risk-control team. When BitOffer just launched, we have set up the blueprint for future development. In addition, BitOffer does not offer OTC trading, which means that BitOffer will never trigger any regulatory issues in any country. At the same time, BitOffer uses multiple wallets which separated into Cold Wallet and Hot Wallet, which can efficiently protect users’ assets from any risk. BitOffer is one of the safest Bitcoin exchanges.”.
Until now, BitOffer has served 4,000 institutions and more than 100 thousand users with their professional asset custody. Besides, BitOffer also provided customized Bitcoin wealth management products for Bitcoin Holders. The Dual-Currency provided by BitOffer offers the highest APY (which reaches 1,000%) than that of the same product on other exchanges. Recently, BitOffer even cooperated with Goldman Sachs and launched BitOffer Quantitative Fund which guarantees investors’ funds and interest. In 2 years, BitOffer will keep building the most innovative asset custody ecosystem.
To seize the initiative, BitOffer will keep developing and improving its own technique and service. In the near future, BitOffer will also provide a One-stop STO service: users will be able to trade or complete asset custody on truly their own wallets. It would be the trend to obey the regulation policy, and also the trend of the cryptocurrency financial ecosystem. The STO market would be pegged with real assets, it shall be a potential market of which value cannot be estimated. On the occasion, BitOffer will become the leader of the whole cryptocurrency derivatives market.
Supposed You've researched the market price for the coin you want to buy and it is low enough, and you've decided the time is right to buy it. You immediately go to the Binance exchange and place your limit order, hoping that a slight price drop will allow your order to complete quickly.submitted by jakkkmotivator to thecryptobasic [link] [comments]
But wait ... what just happened? After placing your order, you notice another buyer place a large order with a marginally higher price, pushing your order below the queue.
He says "fair enough" as you decide to increase the bid price of your order to keep your order in the queue and once again your order is pushed downwards and new order just appears above your order and before you know it, that attractive pricing opportunity you wanted to take advantage of is gone.
Why did this happen? In other words, Crypto Trading Bots.
Crypto Trading Bots
What Is A Bot?A bot is an automated trading entity that is programmed to identify market trends and automatically execute trades. Using algorithms, these robot operators can replicate what human operators would do in response to various market scenarios. But crucially, bots can process information and make business decisions much faster than humans. And the bots they just keep improving.
They use a wealth of market data to examine trends, update their algorithms, and eventually make more informed and profitable business decisions.
Today, bots are used in many financial markets by high-frequency traders to exploit small price anomalies. Markets like currencies have undergone a bot revolution in recent years. The days of crowded commercial flats overflowing with merchants yelling "Buy!" and "Sell!" they are gradually becoming a thing of the past.
And e-commerce facilities and rows of computer servers have come in their place as automation takes hold.
Bots And Crypto Markets Are Perfectly MatchedBots are now proving to be especially popular within the crypto community, from sophistication from free services designed for everyone to more expensive subscription-based bots for professionals.
Crypto exchanges are proving to be the ideal playground for bots to expand their influence:
Unlike traditional financial markets that normally close evenings and weekends, crypto markets are open 24 hours a day, 7 days a week. This makes them ideal for automated trading: humans sleep but trading bots do not.
With some cryptocurrencies now tradable on dozens of exchanges, the abundance of arbitrage opportunities that have arisen can be exploited more efficiently by bots than by traders.
Last year, Bloomberg set the amount of automated Bitcoin trading on some exchanges to 80% of total trade volume. Bots could also be partially liable for the massive price changes we've seen in the crypto markets.
But what is certain is that a large number of exchange order books are being influenced by bot action. And these bots can produce merchants to buy at a higher price or sell at a lower price than they originally intended. It is often the case with limited orders that bots will be the lowest offer and/or demand prices on the market, and largely the rest of the order book.
Also, bots are annoying to deal with! Seeing that your offer is outnumbered almost instantly, and by a robot, not even another merchant, can be very irritating, especially if you place your initial order intending to capitalize on what you think is a 'wrong price' in the market.
Looking at market orders, you can also observe a series of bot orders of insignificant quantities that exist close to the market price, before the initial order of any true important quantity is further from the market. Again, bots are trying to trick you into placing a market order that fills up instantly, but most of which will be filled against the large order at a worse price.
Counter Crypto Trading Bot ActivityIt can be tempting to outperform the robots simply by resubmitting your limit order with a slight lowering the price although such a single trade strategy may not significantly harm your end-of-day earnings if you are a serious crypto trader who conducts multiple trades on multiple exchanges every day, these small but frequent annoyances will inevitably amount to considerable long-term loss.
As such, it may be preferable to keep your order at the price you originally intended. If there is at least some volatility in the market, then your order will complete if you are not in any particular hurry, it is also recommended to take a minute to observe the behavior of the order book. Often bot orders will appear and then suddenly disappear, or move around the book due to constant price adjustments being made. By trying to identify bot intentions, you can end up in a more informed position regarding how and when you place your order.
Of course, buying a bot yourself could also help. As more data is collected on the price behavior of various crypto assets, these machines will only evolve further and become even more sophisticated in their business competition.
But whatever you do, being aware of the existence and influence of bots will help you avoid getting carried away by a sub-optimal trading position.
submitted by bitmex_register to u/bitmex_register [link] [comments]
Founded by HDR Global Trading Limited (which in turn was founded by former bankers Arthur Hayes, Samuel Reed and Ben Delo) in 2014, BitMEX is a trading platform operating around the world and registered in the Seychelles.
Meaning Bitcoin Mercantile Exchange, BitMEX is one of the largest Bitcoin trading platforms currently operating, with a daily trading volume of over 35,000 BTC and over 540,000 accesses monthly and a trading history of over $34 billion worth of Bitcoin since its inception.
Unlike many other trading exchanges, BitMEX only accepts deposits through Bitcoin, which can then be used to purchase a variety of other cryptocurrencies. BitMEX specialises in sophisticated financial operations such as margin trading, which is trading with leverage. Like many of the exchanges that operate through cryptocurrencies, BitMEX is currently unregulated in any jurisdiction.
How to Sign Up to BitMEXIn order to create an account on BitMEX, users first have to register with the website. Registration only requires an email address, the email address must be a genuine address as users will receive an email to confirm registration in order to verify the account. Once users are registered, there are no trading limits. Traders must be at least 18 years of age to sign up.
However, it should be noted that BitMEX does not accept any US-based traders and will use IP checks to verify that users are not in the US. While some US users have bypassed this with the use of a VPN, it is not recommended that US individuals sign up to the BitMEX service, especially given the fact that alternative exchanges are available to service US customers that function within the US legal framework.
How to Use BitMEX
BitMEX allows users to trade cryptocurrencies against a number of fiat currencies, namely the US Dollar, the Japanese Yen and the Chinese Yuan. BitMEX allows users to trade a number of different cryptocurrencies, namely Bitcoin, Bitcoin Cash, Dash, Ethereum, Ethereum Classic, Litecoin, Monero, Ripple, Tezos and Zcash.
The trading platform on BitMEX is very intuitive and easy to use for those familiar with similar markets. However, it is not for the beginner. The interface does look a little dated when compared to newer exchanges like Binance and Kucoin’s.
Once users have signed up to the platform, they should click on Trade, and all the trading instruments will be displayed beneath.
Clicking on the particular instrument opens the orderbook, recent trades, and the order slip on the left. The order book shows three columns – the bid value for the underlying asset, the quantity of the order, and the total USD value of all orders, both short and long.
The widgets on the trading platform can be changed according to the user’s viewing preferences, allowing users to have full control on what is displayed. It also has a built in feature that provides for TradingView charting. This offers a wide range of charting tool and is considered to be an improvement on many of the offering available from many of its competitors.
Once trades are made, all orders can be easily viewed in the trading platform interface. There are tabs where users can select their Active Orders, see the Stops that are in place, check the Orders Filled (total or partially) and the trade history. On the Active Orders and Stops tabs, traders can cancel any order, by clicking the “Cancel” button. Users also see all currently open positions, with an analysis if it is in the black or red.
BitMEX uses a method called auto-deleveraging which BitMEX uses to ensure that liquidated positions are able to be closed even in a volatile market. Auto-deleveraging means that if a position bankrupts without available liquidity, the positive side of the position deleverages, in order of profitability and leverage, the highest leveraged position first in queue. Traders are always shown where they sit in the auto-deleveraging queue, if such is needed.
Although the BitMEX platform is optimized for mobile, it only has an Android app (which is not official). There is no iOS app available at present. However, it is recommended that users use it on the desktop if possible.
BitMEX offers a variety of order types for users:
Futures and SwapsA futures contract is an agreement to buy or sell a given asset in the future at a predetermined price. On BitMEX, users can leverage up to 100x on certain contracts.
Perpetual swaps are similar to futures, except that there is no expiry date for them and no settlement. Additionally, they trade close to the underlying reference Index Price, unlike futures, which may diverge substantially from the Index Price.
BitMEX also offers Binary series contracts, which are prediction-based contracts which can only settle at either 0 or 100. In essence, the Binary series contracts are a more complicated way of making a bet on a given event.
The only Binary series betting instrument currently available is related to the next 1mb block on the Bitcoin blockchain. Binary series contracts are traded with no leverage, a 0% maker fee, a 0.25% taker fee and 0.25% settlement fee.
Bitmex LeverageBitMEX allows its traders to leverage their position on the platform. Leverage is the ability to place orders that are bigger than the users’ existing balance. This could lead to a higher profit in comparison when placing an order with only the wallet balance. Trading in such conditions is called “Margin Trading.”
There are two types of Margin Trading: Isolated and Cross-Margin. The former allows the user to select the amount of money in their wallet that should be used to hold their position after an order is placed. However, the latter provides that all of the money in the users’ wallet can be used to hold their position, and therefore should be treated with extreme caution.
The BitMEX platform allows users to set their leverage level by using the leverage slider. A maximum leverage of 1:100 is available (on Bitcoin and Bitcoin Cash). This is quite a high level of leverage for cryptocurrencies, with the average offered by other exchanges rarely exceeding 1:20.
BitMEX FeesFor traditional futures trading, BitMEX has a straightforward fee schedule. As noted, in terms of leverage offered, BitMEX offers up to 100% leverage, with the amount off leverage varying from product to product.
However, it should be noted that trading at the highest leverages is sophisticated and is intended for professional investors that are familiar with speculative trading. The fees and leverage are as follows:
However, there are additional fees for hidden / iceberg orders. A hidden order pays the taker fee until the entire hidden quantity is completely executed. Then, the order will become normal, and the user will receive the maker rebate for the non-hidden amount.
Deposits and WithdrawalsBitMEX does not charge fees on deposits or withdrawals. However, when withdrawing Bitcoin, the minimum Network fee is based on blockchain load. The only costs therefore are those of the banks or the cryptocurrency networks.
As noted previously, BitMEX only accepts deposits in Bitcoin and therefore Bitcoin serves as collateral on trading contracts, regardless of whether or not the trade involves Bitcoin.
The minimum deposit is 0.001 BTC. There are no limits on withdrawals, but withdrawals can also be in Bitcoin only. To make a withdrawal, all that users need to do is insert the amount to withdraw and the wallet address to complete the transfer.
Deposits can be made 24/7 but withdrawals are processed by hand at a recurring time once per day. The hand processed withdrawals are intended to increase the security levels of users’ funds by providing extra time (and email notice) to cancel any fraudulent withdrawal requests, as well as bypassing the use of automated systems & hot wallets which may be more prone to compromise.
Supported CurrenciesBitMEX operates as a crypto to crypto exchange and makes use of a Bitcoin-in/Bitcoin-out structure. Therefore, platform users are currently unable to use fiat currencies for any payments or transfers, however, a plus side of this is that there are no limits for trading and the exchange incorporates trading pairs linked to the US Dollar (XBT), Japanese Yen (XBJ), and Chinese Yuan (XBC).
BitMEX supports the following cryptocurrencies:
Trading Technologies International PartnershipHDR Global Trading, the company which owns BitMEX, has recently announced a partnership with Trading Technologies International, Inc. (TT), a leading international high-performance trading software provider.
The TT platform is designed specifically for professional traders, brokers, and market-access providers, and incorporates a wide variety of trading tools and analytical indicators that allow even the most advanced traders to customize the software to suit their unique trading styles. The TT platform also provides traders with global market access and trade execution through its privately managed infrastructure and the partnership will see BitMEX users gaining access to the trading tools on all BitMEX products, including the popular XBT/USD Perpetual Swap pairing.
The BitMEX Insurance FundThe ability to trade on leverage is one of the exchange’s main selling points and offering leverage and providing the opportunity for traders to trade against each other may result in a situation where the winners do not receive all of their expected profits. As a result of the amounts of leverage involved, it’s possible that the losers may not have enough margin in their positions to pay the winners.
Traditional exchanges like the Chicago Mercantile Exchange (CME) offset this problem by utilizing multiple layers of protection and cryptocurrency trading platforms offering leverage cannot currently match the levels of protection provided to winning traders.
In addition, cryptocurrency exchanges offering leveraged trades propose a capped downside and unlimited upside on a highly volatile asset with the caveat being that on occasion, there may not be enough funds in the system to pay out the winners.
To help solve this problem, BitMEX has developed an insurance fund system, and when a trader has an open leveraged position, their position is forcefully closed or liquidated when their maintenance margin is too low.
Here, a trader’s profit and loss does not reflect the actual price their position was closed on the market, and with BitMEX when a trader is liquidated, their equity associated with the position drops down to zero.
In the following example, the trader has taken a 100x long position. In the event that the mark price of Bitcoin falls to $3,980 (by 0.5%), then the position gets liquidated with the 100 Bitcoin position needing to be sold on the market.
This means that it does not matter what price this trade executes at, namely if it’s $3,995 or $3,000, as from the view of the liquidated trader, regardless of the price, they lose all the equity they had in their position, and lose the entire one Bitcoin.
Assuming there is a fully liquid market, the bid/ask spread should be tighter than the maintenance margin. Here, liquidations manifest as contributions to the insurance fund (e.g. if the maintenance margin is 50bps, but the market is 1bp wide), and the insurance fund should rise by close to the same amount as the maintenance margin when a position is liquidated. In this scenario, as long as healthy liquid markets persist, the insurance fund should continue its steady growth.
The following graphs further illustrate the example, and in the first chart, market conditions are healthy with a narrow bid/ask spread (just $2) at the time of liquidation. Here, the closing trade occurs at a higher price than the bankruptcy price (the price where the margin balance is zero) and the insurance fund benefits.
Illustrative example of an insurance contribution – Long 100x with 1 BTC collateral
(Note: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments.
The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,978, representing $1 of slippage compared to the $3,979 bid price at the time of liquidation.)
The second chart shows a wide bid/ask spread at the time of liquidation, here, the closing trade takes place at a lower price than the bankruptcy price, and the insurance fund is used to make sure that winning traders receive their expected profits.
This works to stabilize the potential for returns as there is no guarantee that healthy market conditions can continue, especially during periods of heightened price volatility. During these periods, it’s actually possible that the insurance fund can be used up than it is built up.
Illustrative example of an insurance depletion – Long 100x with 1 BTC collateral
(Notes: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments.
The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,800, representing $20 of slippage compared to the $3,820 bid price at the time of liquidation.)
The exchange declared in February 2019, that the BitMEX insurance fund retained close to 21,000 Bitcoin (around $70 million based on Bitcoin spot prices at the time).
This figure represents just 0.007% of BitMEX’s notional annual trading volume, which has been quoted as being approximately $1 trillion. This is higher than the insurance funds as a proportion of trading volume of the CME, and therefore, winning traders on BitMEX are exposed to much larger risks than CME traders as:
This system may appear controversial as first, though some may argue that there is a degree of uniformity to it. It’s also worth noting that the exchange also makes use of Auto Deleveraging which means that on occasion, leveraged positions in profit can still be reduced during certain time periods if a liquidated order cannot be executed in the market.
More adventurous traders should note that while the insurance fund holds 21,000 Bitcoin, worth approximately 0.1% of the total Bitcoin supply, BitMEX still doesn’t offer the same level of guarantees to winning traders that are provided by more traditional leveraged trading platforms.
Given the inherent volatility of the cryptocurrency market, there remains some possibility that the fund gets drained down to zero despite its current size. This may result in more successful traders lacking confidence in the platform and choosing to limit their exposure in the event of BitMEX being unable to compensate winning traders.
How suitable is BitMEX for Beginners?BitMEX generates high Bitcoin trading levels, and also attracts good levels of volume across other crypto-to-crypto transfers. This helps to maintain a buzz around the exchange, and BitMEX also employs relatively low trading fees, and is available round the world (except to US inhabitants).
This helps to attract the attention of people new to the process of trading on leverage and when getting started on the platform there are 5 main navigation Tabs to get used to:
In addition, BitMEX provides a variety of educational resources including an FAQ section, Futures guides, Perpetual Contracts guides, and further resources in the “References” account tab.
For users looking for more in depth analysis, the BitMEX blog produces high level descriptions of a number of subjects and has garnered a good reputation among the cryptocurrency community.
Most importantly, the exchange also maintains a testnet platform, built on top of testnet Bitcoin, which allows anyone to try out programs and strategies before moving on to the live exchange.
This is crucial as despite the wealth of resources available, BitMEX is not really suitable for beginners, and margin trading, futures contracts and swaps are best left to experienced, professional or institutional traders.
Margin trading and choosing to engage in leveraged activity are risky processes and even more advanced traders can describe the process as a high risk and high reward “game”. New entrants to the sector should spend a considerable amount of time learning about margin trading and testing out strategies before considering whether to open a live account.
Is BitMEX Safe?BitMEX is widely considered to have strong levels of security. The platform uses multi-signature deposits and withdrawal schemes which can only be used by BitMEX partners. BitMEX also utilises Amazon Web Services to protect the servers with text messages and two-factor authentication, as well as hardware tokens.
BitMEX also has a system for risk checks, which requires that the sum of all account holdings on the website must be zero. If it’s not, all trading is immediately halted. As noted previously, withdrawals are all individually hand-checked by employees, and private keys are never stored in the cloud. Deposit addresses are externally verified to make sure that they contain matching keys. If they do not, there is an immediate system shutdown.
In addition, the BitMEX trading platform is written in kdb+, a database and toolset popular amongst major banks in high frequency trading applications. The BitMEX engine appears to be faster and more reliable than some of its competitors, such as Poloniex and Bittrex.
They have email notifications, and PGP encryption is used for all communication.
The exchange hasn’t been hacked in the past.
How Secure is the platform?As previously mentioned, BitMEX is considered to be a safe exchange and incorporates a number of security protocols that are becoming standard among the sector’s leading exchanges. In addition to making use of Amazon Web Services’ cloud security, all the exchange’s systems can only be accessed after passing through multiple forms of authentication, and individual systems are only able to communicate with each other across approved and monitored channels.
Communication is also further secured as the exchange provides optional PGP encryption for all automated emails, and users can insert their PGP public key into the form inside their accounts.
Once set up, BitMEX will encrypt and sign all the automated emails sent by you or to your account by the [[email protected]](mailto:[email protected]) email address. Users can also initiate secure conversations with the support team by using the email address and public key on the Technical Contact, and the team have made their automated system’s PGP key available for verification in their Security Section.
The platform’s trading engine is written in kdb+, a database and toolset used by leading financial institutions in high-frequency trading applications, and the speed and reliability of the engine is also used to perform a full risk check after every order placement, trade, settlement, deposit, and withdrawal.
All accounts in the system must consistently sum to zero, and if this does not happen then trading on the platform is immediately halted for all users.
With regards to wallet security, BitMEX makes use of a multisignature deposit and withdrawal scheme, and all exchange addresses are multisignature by default with all storage being kept offline. Private keys are not stored on any cloud servers and deep cold storage is used for the majority of funds.
Furthermore, all deposit addresses sent by the BitMEX system are verified by an external service that works to ensure that they contain the keys controlled by the founders, and in the event that the public keys differ, the system is immediately shut down and trading halted. The exchange’s security practices also see that every withdrawal is audited by hand by a minimum of two employees before being sent out.
BitMEX Customer SupportThe trading platform has a 24/7 support on multiple channels, including email, ticket systems and social media. The typical response time from the customer support team is about one hour, and feedback on the customer support generally suggest that the customer service responses are helpful and are not restricted to automated responses.
The BitMEX also offers a knowledge base and FAQs which, although they are not necessarily always helpful, may assist and direct users towards the necessary channels to obtain assistance.
BitMEX also offers trading guides which can be accessed here
ConclusionThere would appear to be few complaints online about BitMEX, with most issues relating to technical matters or about the complexities of using the website. Older complaints also appeared to include issues relating to low liquidity, but this no longer appears to be an issue.
BitMEX is clearly not a platform that is not intended for the amateur investor. The interface is complex and therefore it can be very difficult for users to get used to the platform and to even navigate the website.
However, the platform does provide a wide range of tools and once users have experience of the platform they will appreciate the wide range of information that the platform provides.
Ariel Ling, co-founder and COO of BitMax, has shared her thoughts on the current state of digital assets and what to expect in the next years, what retail investor should take into account when buying any cryptocurrencie and the key factors that drive the value of the token/coin.submitted by BitMax_Support to BitMax [link] [comments]
Ariel Ling, BitMax COO
Why, when and how have you started your crypto journey?
I started my crypto journey at the beginning of 2018 when my long-time friend, the co-founder and CEO of BitMax.io, Dr. George Cao “pulled” me out of the traditional Wall Street and asked me to join him in launching this exciting venture. Three main drivers are 1) to learn more about blockchain technology and its transformational applications in different industries; 2) to leverage in-depth traditional finance expertise to improve overall crypto trading and exchange market structure for better efficiency and transparency; 3) to have a chance to work with a talented and driven team who share similar vision, passion and conviction to build a top global digital asset trading platform as well as a wonderful organization from good to great!
If your friend will ask you: should I consider cryptocurrencies as investment opportunity? What will be your answer? Will you recommend any specific digital asset?
Coming from traditional finance perspective, I would explain my thoughts process from three angles — 1) types of crypto or digital assets as the foundation for understanding; 2) whether they, are more for short-term trading or mid-term investment 2) what are elements for investment valuation and decision-making so our friends can assess and make decision for themselves.
First, in general there are three types of digital assets:
Second: is digital asset good for trading or investment? due to the nascent nature and very short history of market development with most of retail investors’ participation and lack of proper regulatory framework globally, there are quite some market manipulation, speculation and fraud activities in the current market, causing significant volatility and investors loss across all types within very short period of time. This made it very hard for any investors to assess the real valuation and momentum drivers behind those large swings. So at this point, I would think with its high volatility and risk, digital asset in general is more of very short-term trading product than investment vehicle. From liquidity perspective, major currency/coin-type will have more market depth across exchanges, hence more suitable for short-term trading-focused strategies.
Third, from traditional investment perspective, it is critical to assess digital asset investing from valuation and fundamental perspectives, such as business model, future growth, economic return vs. person’s risk tolerance and investment objectives. For major coins, especially Bitcoin itself with its longest history among all the digital assets, have started to provide certain payment function similar to fiat currencies in certain countries. Hence, there are more interesting dynamics to the Bitcoin investing based on one’s view of Bitcoin usage over mid-term horizon and the relative valuation vs its production (mining cost) especially with the price down to 3,500–3,650 USD. For security-type or utility tokens, the performance over short-to-medium term really comes down to combination of intrinsic value of underlying blockchain projects and token economics. Similar to Internet in 1990s, blockchain technology projects are still at the early stage of development and looking for meaningful and applicable use cases to bring real economic benefit from the economics and business model perspective, so it becomes very difficult to apply traditional finance valuation and assess the real intrinsic value of those projects. Recent market crash has brought many of those tokens down to near zero value. So the investment in those tokens are extremely high risk and everyone should be really careful and prudent in the evaluation of any specific projects for the decision-making and risk protection.
What is the story behind BitMax? Who are the foundefounders? When it was founded?
Q1 2018, Dr. George Cao and I founded Global Digital Mercantile (GDM), global operator of digital asset platforms, including BitMax.io based on Singapore for overseas markets and North America’s trading platform aiming for the first half of 2019. BitMax.io started public beta testing mid July, 2018, and was officially launched later mid August. On November 18th , we launched our mining mechanism, the industry very first transaction-mining & reverse-mining mechanism, which has made us the industry leading third-generation cryptocurrency exchange — after first generation of traditional exchanges like Binance, Gemini, Coinbase, etc. and 2nd generation of transaction-mining ones like FCoin, Bitthumb, etc.
Just a quick introduction of my partner. Dr. Cao studied Computer Science in the University of Science and Technology of China, and earned his PhD degree from the University of Chicago. Dr. Cao was the Founder and the Chief Investment Officer of Delpha Capital Management, LLC., New York, specializing in trading equity, ETFs and commodity future products in all major exchanges across the globe. He is also the founder and managing partner of Whitestone Investment Group, a New York based venture fund that invests in a large variety of startup companies that are in the high tech, fintech, big data and medical area. Before founding Delpha Capital, Mr. Cao worked at the Equity Division of Barclays Capital in both the New York and London offices. During that period, he oversaw equity electronic trading in the U.S., European and Asian markets. Prior to Barclays, he researched and traded U.S. equity as a Portfolio Manager at Knight Capital Group.
For me, I have built more than 18-year extensive experience in strategic planning, business development, financial risk management and regulatory implementation across major trading asset classes (Equity, FX, and Fixed Income) at several top global banks. Previous to jumping into digital asset trading, I ran USD liquidity and investment product for top financial institutions and corporate clients at tier-one global investment bank. Before that, I ran US Broker Dealer as COO and head of Business Development for Germany 2nd largest bank. Earlier from 2007 to 2012, I was global equity trading COO across Lehman Brothers and Barclays Capital, building out trading franchise and market making businesses globally. I have four degrees — graduated top of class from Nankai University with two Bachelor degrees in Finance and English Literature and got my MBA from NYU and Master of Mass Communication from University of Georgia.
Where is Bitmax located? Are you a distributed team or do you have an office to work together? How many people work for Bitmax?
Our global team of 50 members are based off two main location — New York with 20 members, including all the founding members, and Beijing with 30 members.
Would you be so kind to introduce briefly the core team members?
Both George and I are very proud of our 10-member founding team. Similar to us, they are all from Wall Street top firms like Morgan Stanley, Deutsche Bank, Goldman Sachs, Bloomberg, and top high-frequency hedge funds with deep experience in the fields of financial engineering research and development of large-scale quant trading infrastructure. Our educational background span across multiple prestigious institutions including Columbia University, University of Chicago, Carnegie Mellon University, and New York University in the United States, as well as Peking University and Tsinghua University in China. So one special thing about BitMax.io is that very few exchanges in the crypto trading space are built by solid team like ours with strong traditional finance mindset and trading background.
You’ve started BitMax during market downtrend in pretty competitive environment. What is your value proposition? Why traders should switch to BitMax?
I think BitMax.io is actually very special in this market, and our team is very proud of what we have built in the short period of six months. There are at least three reasons I think traders should chooseBitMax.io:
Second, our quant-driven tech platform. Our development members were all from high frequency and quantitative systematic trading shops. They definitely make sure the platform was resilient and it can actually handle billions of volume during the design and build. The platform resilience and scalability were fully being tested when we launched the transaction mining and reverse-mining. The first day, we actually had, within the first 24 hours, the trading volume of 1.6 billion in notional; and our system didn’t flinch, didn’t slow down, and didn’t shut down. This is very rare in any of today’s exchanges where you can frequently see the slowdown, the crash, and very slow user responses, especially with transaction mining exchanges.
Third, what we are extremely proud of and all the users can see, is our 24/7 customer services built upon the core Wall Street client-centric concept. Besides our customer support team who never sleep, George actually stands behind the platform almost 24/7 answering questions from the customers, seeking solutions for their issues, and providing the most responsive customer service for the entire crypto trading space.
BitMax CEO, George Cao, is often seen in official Telegram group answering different questions.
We constantly remind our team: customer first. When we design a product, when we launch a system, and when we look at user needs, we all look from customers’ perspective, from how we can protect the users. When we look at primary listing, we only select the high-quality projects because we want our users to have the best investment and trading experience on BitMax.io.
Are you satisfied with the current results of BitMax? Is transaction mining model giving expected volume? What is the % of traders using this model?
We are very pleased with current business development and delivery results from client acquisition and trading perspectives.
On the business development side, we completed the global setup for both 50-member team organization and comprehensive legal entity structure from Asia to North Americas in 2018, which laid down foundation and paved way for 2019 business expansion especially with US.
Since our platform launch in mid Aug, we successfully started Industry FIRST transaction mining and reverse-mining exchange and built out the most active global communities and users within four months in the bear market, with registered users more than 95k; average daily active traders more than quadrupled since the start of transaction mining; average daily trading volume of $465mm through the month of January and February in 2019. Those are extremely promising under this tough market condition.
From the composition of trading volumes, there are two parts — transaction mining which grows exponentially; second is organic, the regular trading which has experienced healthy increase as well because of all the listing activities and all the incentives we have. The regular trading takes about 5% of total trading volume, which is very good for an exchange which was launched in August and running right into the bear market.
What are the key factors that drive the value of the token/coin?
From traditional finance /investment view token economics is really a balance act between business / economic model and exchange market force, driven by three factors: intrinsic value and sustainability, supply and demand, and liquidity and depth.
First, from a traditional finance perspective, we need to look at the intrinsic value, the economic valuation behind a project. How does this project make money? Do they really have fundamentals? Do they really have a viable business model? Do they really have a solid user base for future growth? For example, our exchange business model is very simple. We are exchange; People trade on our platform. The more they trade, the more transaction fee the exchange collect — the revenue source. The exchange will last when people keep trading on the platform and the transaction revenue generated covers the operating cost of running an exchange.
Second, it is the supply and demand of token on the market — who will buy and for what purpose; who will sell and under what scenarios. For major currency coins like Bitcoin, people might buy and sell for potential investment or use in actual payment processing. For other types of token, it is more driven by short-term trading pattern and profit taking. So it is extremely important to set up certain token mechanism to support the equilibrium of supply and demand like how Central Banks manage the supply of currency in circulation through monetary policies.
Third, when the market force comes in, it comes down to the liquidity and depth. Exchange is about liquidity and market depth. That means there has to be enough of trading volumes at each pricing level for each token. For BitMax.io, we have very sophisticated market making model that is similar to Designated Market Maker model of New York Stock Exchange. We focus on providing liquidity and maintaining a fair and orderly market for those token listings who agree to engage our market making services.
Every exchange is looking for good projects in order to become a premiere market for this new asset. Can you name some projects that impressed you recently (even if you are not discussing possible listing with them)?
BitMax.io has strict listing requirements in order to identify high-quality projects for our users. Very proud that we have listed five industry star projects in the last several weeks, with more in the pipeline. All of them have the following attributes that made them successful — viable and profitable business model, growing user bases, strong community support, and comprehensive funding sources.
One of the shining examples is European project named LTO Network listed mid Jan. Its price has been steadily rising since then, as more and more people get to know their business model and more project support comes into the market place to buy the tokens — It uses blockchain technology to streamline a lot of legal processing for one of EU governments, which is very easy to understand its economic value from a revenue perspective. This is simply what people need to see eventually, clean and clear from business economic model perspective.
Let’s imagine a crypto market in 5 or 10 years. Can you make any prediction what the market will look like? What customers will expect from exchange in 5–10 years?
Based off my long-time experience in traditional trading, especially how equity market evolved last twenty years, I would imagine maturing market structure and entrance of institutional investors are key mandatory and healthy development of digital asset market.
First, As the market develops and expands globally, traditional institution participation is a must, in order to upgrade and strengthen the overall market structure and maturity, making it more transparent and resilient, and most importantly enabling the real broad-base adoption of digital assets. Most institutional investors, such as mutual fund, pension fund and other financial institutions, hold the majority of world investment assets, not individual retail investors. Only when those big guys join the market, will there be real revolutionary improvement and expansion of the digital asset just like any other financial markets.
Second, I would expect the market to become more structured with major building blocks for transparent trade life cycle processing and separate risk analytics supporting services. Current crypto trading market is very fragmented with exchanges taking on different roles of trading, wallet management, custodian, etc. Also the lack of clear and consistence regulation on market structure has led to many aspects of market inefficiency — inconsistent liquidity and depth, wide spread, high transaction cost, high volatility, speculation, etc. This definitely hampers the broader adoption of digital assets from institutional investors.
Forward looking, multi-tier structure under some level of regulatory framework with clear guidance is required for future maturing market. Similar to security market, there should be at least three layers of different and independent roles: the role of broker dealer to handle the client relationship with good KYC/ AML processes, retail clients, other financial institutions, blockchain players and to take client order as agent or dealer; the role of exchange to focus on listing and trading — liquidity provision and order matching; the role of clearing house to provide clearing and settlement and custodian on custody of assets with proper control and independence. It is very clean and clear with good check and balance in place.
What are the key challenges for 2019?
During our 2018 business planning, we clearly view 2019 to continue being full of challenges with market uncertainty from both asset price and valuation as well as regulatory development globally. In prep for that and further growth of our platform, we have laid out the following four main strategic objectives and they are all well underway:
With current market crash or correction, there are two possibilities from trading perspective — recovery depending on whether this is a V down or U curve. The U curve occurs when the market collapses, it takes a longer time for market to find the bottom and struggle to rise up. The V down is like a quick collapse — dropping down very fast and reaching the bottom, and then, with some catalyst event, either catalyst from market structure, or catalyst from the market expansion itself, suddenly it gives a boost and bounces right back up.
For market recovery, besides all the investment and economics elements I’ve discussed above, I believe one critical factor is the regulatory development especially clear guidance from key regulatory bodies of those major financial markets such as US, UK, EU, etc. on those key building blocks I mentioned in the maturing market structure. Once those in place, more traditional institutional investors will be ready to get in and hence boost the liquidity and valuation of the digital assets. That is the new beginning of digital assets being accepted as part of Main Street investment globally.
https://preview.redd.it/6in97egosnx31.png?width=800&format=png&auto=webp&s=d2e4d1b052b295cb3da49f604fab7a6113321210submitted by reslavr to u/reslavr [link] [comments]
I wrote this lecture on the methodology of successful trading, and more specifically on tactics, strategies, subtleties and recommendations, based on 2 years of work on Bitmex, Binance, Gate, Okex bitcoin cryptocurrency exchanges in real combat conditions. Guided by this technique, I managed to earn 500% in excess of the deposit for 7 days of trading (i.e. I increased the deposit amount by 5 times!). These are not fairy tales, but reality, that is, confirming statistics of exchange transactions on the account of the crypto-exchange.
I believe that the knowledge provided in this course will help a beginner to master successful trading only if the course is not only read, but also outlined. It will be important to follow punctually, commenting on your actions in your notes.In separate consultations, I could give personal instructions on the nuances of technical analysis on various timeframes, signals on entry points, information on trade automation software (algorithmic trading robots), and other tools useful in the work of a trader. But, despite a lot of additional software, my experience has shown that the most effective speculation model on the cryptocurrency and stock exchange, which everyone chooses for themselves based on practical experience, is directly in the online trading mode on exchange terminals. Each exchange is good in its own way, but also has its drawbacks. I chose the best solution for myself and am sure that this is temporary. Perhaps in the future there will be more progressive decentralized exchanges with good liquidity and they will replace the existing platforms managed by market leaders.
Various digital designations, such as: — in what percentage of the deposit do you enter into a particular transaction; — where to put stop limit or market (Market) (market) orders (and whether to place them at all), where to exit the transaction and how. Again, I note that all the selected values are usually individual and depend both on the time trading intervals (TimeFrame) (1m 3m 15m 1h 3h 4h 6h 1 d 1w 1m) and on the deductible amount of the bet in % percentage of the amount of your deposit.
It is important to remember that trading in the cryptocurrency market is a high-risk investment activity that everyone chooses and carries out at their own risk. Remember that with a big bet on the whole, as they say, a patty, and even with 100x-500x leverage, you risk losing your entire deposit right away. An exchange machine or a well-tuned and trained professional broker robot does not cost anything to go against the trend with a tidbit — easy prey. Do not be hamsters i.e. naive simpletons — do not merge the deposit into zero due to elementary greed, incontinence, ardor and other factors that contradict the qualities that a professional trader needs to succeed in trading, namely: cold-bloodedness, endurance, accuracy, punctuality, tact, quick reaction , the ability to quickly enter numbers and timely press the desired buttons.
You ask me: “Hey … guy, you are so smart … I wonder how much you earned from trading or how much you earn or why you don’t do it yourself … why do you need competitors?” — I will answer you: it is no secret that AI (artificial intelligence) has been working on the exchange for a long time and it is constantly improving, but this still does not prevent a person from continuing to beat him. I hope that in the future this trend will not stop otherwise — we have disappeared. And as regards competition — do not worry so much for me, because there is still a trading idea, program or terminal that I have not yet implemented and not reported in this guide after its publication and, perhaps, it will not deprive me of future trading opportunities.So, the instructions that I follow in the process of trading cryptocurrencies on the exchange terminal in online mode.
In fact, any market situation should be beneficial for you due to successful risk management*!*For successful online trading, it is very important to use candlestick and technical analysis*, which help to more accurately determine the entry point to the transaction (purchase or sale).*You cannot act at random when the market is hard to predict and often ready to follow your footsteps.If you lose, then I do not recommend immediately going to recoup*, because trade should ultimately be break even. In ardor, you are likely to enter into an unsuccessful deal and lose even more than before. This situation will make you very sad, so do not make this mistake. She is famous.*Use a modern powerful laptop or desktop computer with a convenient side numeric keypad, a large screen and a convenient manipulator (mouse) so that when you press the buttons you have as little physical braking and stops as possible. Practice in advance to work in the browser on the exchange terminal without making a deposit on futures trading from the exchange wallet. This training practice will reduce your losses.Hello from Ukraine, Kramatorsk city ( “War is peace / freedom is slavery [and] ignorance is strength.”)
Reslav Cryptotrader (if you need find me look around — me be i near ;).
To be continued…
Nowadays, money strives to be counted more and more. Using the information technology of databases with indexes, it has become possible to automatically and instantly capture and display the information that was previously collected by entire departments of the state within a month and after manual entry was displayed on the screens of industrial monitors and public television. The era of the Internet has come, the time of the accessibility and decentralization of information.
Today we see stock chart quotes of stock prices of leading world companies online. Everyone has the opportunity to invest their money in these stocks and earn on the difference in exchange rates of their value. A speculative market was formed on this basis, where leaders appeared who were able to act most efficiently and, accordingly, earn money. Many specialists are studying the nature of success in speculative markets.
Many works on methods of achieving success in trading are morally obsolete due to the emergence of new technologies for calculating and controlling the money supply, for example, such as Bitcoin. After all, back in 2009 for 1309.03 BTC they gave 1 dollar. Today 1 BTC costs $ 9,000. This is due to the fact that since the appearance of bitcoin has never been hacked and the technology has shown its reliability and consistency, as a measure of the money invested in it. I will not go into the details and subtleties of Bitcoin technology, but I will note one thing — this is cryptographic software that was used in the banking sector as Swift payments, but transformed into a P2P peer-to-peer network of private computers, as a result, like Bittorent, it became public, hard controlled, commons. Bitcoin provides for a complexity bomb, which complicates each year, and therefore makes it more expensive, its limited production, and this is one of the main reasons for its rise in price. As well as the fact that Bitcoin is convenient for storing funds, as it is liquid and it can be easily sent without quantity restrictions and with high transaction (transfer) speed. All details about Bitcoin are available in open sources and you can find out everything about it on the Internet, as well as the alternative coin market (altcoins / coins), such as Ethereum, USDT (dollar tokens confirmed by a US company with real dollars in bank accounts) etc.
Around this market of bitcoin cryptocurrencies, the same speculative matrix (network / exchange) arose as around ordinary currencies and created such a strong competition for traditional assets that many governments adopted it and began to use and implement technologies that arose in their turn base. Cryptocurrencies or blockchain (cryptographic chain / blocks / chain) began to be introduced in public sectors of the economy for calculating and controlling public commons, such as electricity, land, etc.
Further, on the basis of this market, the need for regulation arose and the US authorities were very worried about the uncontrolled development of technology, on the basis of which a news background (negative or positive) arose, which powerfully affects cryptocurrency rates. In the era of information, this network began to act as a money pump, skillfully pumping money from the hands of inept speculators into the pockets of experienced traders.
As a result of reading a lot of books, watching various telecasts in the industry of bitcoin trading analytics, I came to the conclusion that successfully trading cryptocurrencies is akin to art and as statistics have shown, only 20% in 2–3 years are able to consistently earn money, and of which, in turn, only 2 -3% become billionaires.
I bring to your attention a technique by which you can enter the ranks of these 20% successful traders and possibly, jointly, open the door to those notorious 2–3% successful traders who are fortunate enough to touch the notorious golden fleece and discover the world of unlimited financial opportunities.
All knowledge is available in open sources and collected by me in the book “Basics of Bitcoin Trading from Reslav” (2019), most of them are available.
submitted by GTE_IO to u/GTE_IO [link] [comments]
News by Coindesk: Max Boonen
Carrying on from an earlier post about the evolution of high frequency trading (HFT), how it can harm markets and how crypto exchanges are responding, here we focus on the potential longer-term impact on the crypto ecosystem.
First, though, we need to focus on the state of HFT in a broader context.
Conventional markets are adopting anti-latency arbitrage mechanismsIn conventional markets, latency arbitrage has increased toxicity on lit venues and pushed trading volumes over-the-counter or into dark pools. In Europe, dark liquidity has increased in spite of efforts by regulators to clamp down on it. In some markets, regulation has actually contributed to this. Per the SEC:
“Using the Nasdaq market as a proxy, [Regulation] NMS did not seem to succeed in its mission to increase the display of limit orders in the marketplace. We have seen an increase in dark liquidity, smaller trade sizes, similar trading volumes, and a larger number of “small” venues.”Why is non-lit execution remaining or becoming more successful in spite of its lower transparency? In its 2014 paper, BlackRock came out in favour of dark pools in the context of best execution requirements. It also lamented message congestion and cautioned against increasing tick sizes, features that advantage latency arbitrageurs. (This echoes the comment to CoinDesk of David Weisberger, CEO of Coinroutes, who explained that the tick sizes typical of the crypto market are small and therefore do not put slower traders at much of a disadvantage.)
Major venues now recognize that the speed race threatens their business model in some markets, as it pushes those “slow” market makers with risk-absorbing capacity to provide liquidity to the likes of BlackRock off-exchange. Eurex has responded by implementing anti-latency arbitrage (ALA) mechanisms in options:
“Right now, a lot of liquidity providers need to invest more into technology in order to protect themselves against other, very fast liquidity providers, than they can invest in their pricing for the end client. The end result of this is a certain imbalance, where we have a few very sophisticated liquidity providers that are very active in the order book and then a lot of liquidity providers that have the ability to provide prices to end clients, but are tending to do so more away from the order book”, commented Jonas Ullmann, Eurex’s head of market functionality. Such views are increasingly supported by academic research.
XTX identifies two categories of ALA mechanisms: policy-based and technology-based. Policy-based ALA refers to a venue simply deciding that latency arbitrageurs are not allowed to trade on it. Alternative venues to exchanges (going under various acronyms such as ECN, ATS or MTF) can allow traders to either take or make, but not engage in both activities. Others can purposefully select — and advertise — their mix of market participants, or allow users to trade in separate “rooms” where undesired firms are excluded. The rise of “alternative microstructures” is mostly evidenced in crypto by the surge in electronic OTC trading, where traders can receive better prices than on exchange.
Technology-based ALA encompasses delays, random or deterministic, added to an exchange’s matching engine to reduce the viability of latency arbitrage strategies. The classic example is a speed bump where new orders are delayed by a few milliseconds, but the cancellation of existing orders is not. This lets market makers place fresh quotes at the new prevailing market price without being run over by latency arbitrageurs.
As a practical example, the London Metal Exchange recently announced an eight-millisecond speed bump on some contracts that are prime candidates for latency arbitrageurs due to their similarity to products trading on the much bigger CME in Chicago.
Why 8 milliseconds? First, microwave transmission between Chicago and the US East Coast is 3 milliseconds faster than fibre optic lines. From there, the $250,000 a month Hibernia Express transatlantic cable helps you get to London another 4 milliseconds faster than cheaper alternatives. Add a millisecond for internal latencies such as not using FPGAs and 8 milliseconds is the difference for a liquidity provider between investing tens of millions in speed technology or being priced out of the market by latency arbitrage.
With this in mind, let’s consider what the future holds for crypto.
Crypto exchanges must not forget their retail rootsWe learn from conventional markets that liquidity benefits from a diverse base of market makers with risk-absorption capacity.
Some have claimed that the spread compression witnessed in the bitcoin market since 2017 is due to electronification. Instead, I posit that it is greater risk-absorbing capacity and capital allocation that has improved the liquidity of the bitcoin market, not an increase in speed, as in fact being a fast exchange with colocation such as Gemini has not supported higher volumes. Old-timers will remember Coinsetter, a company that, per the Bitcoin Wiki , “was created in 2012, and operates a bitcoin exchange and ECN. Coinsetter’s CSX trading technology enables millisecond trade execution times and offers one of the fastest API data streams in the industry.” The Wiki page should use the past tense as Coinsetter failed to gain traction, was acquired in 2016 and subsequently closed.
Exchanges that invest in scalability and user experience will thrive (BitMEX comes to mind). Crypto exchanges that favour the fastest traders (by reducing jitter, etc.) will find that winner-takes-all latency strategies do not improve liquidity. Furthermore, they risk antagonising the majority of their users, who are naturally suspicious of platforms that sell preferential treatment.
It is baffling that the head of Russia for Huobi vaunted to CoinDesk that: “The option [of co-location] allows [selected clients] to make trades 70 to 100 times faster than other users”. The article notes that Huobi doesn’t charge — but of course, not everyone can sign up.
Contrast this with one of the most successful exchanges today: Binance. It actively discourages some HFT strategies by tracking metrics such as order-to-trade ratios and temporarily blocking users that breach certain limits. Market experts know that Binance remains extremely relevant to price discovery, irrespective of its focus on a less professional user base.
Other exchanges, take heed.
Coinbase closed its entire Chicago office where 30 engineers had worked on a faster matching engine, an exercise that is rumoured to have cost $50mm. After much internal debate, I bet that the company finally realised that it wouldn’t recoup its investment and that its value derived from having onboarded 20 million users, not from upgrading systems that are already fast and reliable by the standards of crypto.
It is also unsurprising that Kraken’s Steve Hunt, a veteran of low-latency torchbearer Jump Trading, commented to CoinDesk that: “We want all customers regardless of size or scale to have equal access to our marketplace”. Experience speaks.
In a recent article on CoinDesk , Matt Trudeau of ErisX points to the lower reliability of cloud-based services compared to dedicated, co-located and cross-connected gateways. That much is true. Web-based technology puts the emphasis on serving the greatest number of users concurrently, not on serving a subset of users deterministically and at the lowest latency possible. That is the point. Crypto might be the only asset class that is accessible directly to end users with a low number of intermediaries, precisely because of the crypto ethos and how the industry evolved. It is cheaper to buy $500 of bitcoin than it is to buy $500 of Microsoft shares.
Trudeau further remarks that official, paid-for co-location is better than what he pejoratively calls “unsanctioned colocation,” the fact that crypto traders can place their servers in the same cloud providers as the exchanges. The fairness argument is dubious: anyone with $50 can set up an Amazon AWS account and run next to the major crypto exchanges, whereas cheap co-location starts at $1,000 a month in the real world. No wonder “speed technology revenues” are estimated at $1 billion for the major U.S. equity exchanges.
For a crypto exchange, to reside in a financial, non-cloud data centre with state-of-the-art network latencies might ironically impair the likelihood of success. The risk is that such an exchange becomes dominated on the taker side by the handful of players that already own or pay for the fastest communication routes between major financial data centres such as Equinix and the CME in Chicago, where bitcoin futures are traded. This might reduce liquidity on the exchange because a significant proportion of the crypto market’s risk-absorption capacity is coming from crypto-centric funds that do not have the scale to operate low-latency strategies, but might make up the bulk of the liquidity on, say, Binance. Such mom-and-pop liquidity providers might therefore shun an exchange that caters to larger players as a priority.
Exchanges risk losing market share to OTC liquidity providersWhile voice trading in crypto has run its course, a major contribution to the market’s increase in liquidity circa 2017–2018 was the risk appetite of the original OTC voice desks such as Cumberland Mining and Circle.
Automation really shines in bringing together risk-absorbing capacity tailored to each client (which is impossible on anonymous exchanges) with seamless electronic execution. In contrast, latency-sensitive venues can see liquidity evaporate in periods of stress, as happened to a well-known and otherwise successful exchange on 26 June which saw its bitcoin order book become $1,000 wide for an extended period of time as liquidity providers turned their systems off. The problem is compounded by the general unavailability of credit on cash exchanges, an issue that the OTC market’s settlement model avoids.
As the crypto market matures, the business model of today’s major cash exchanges will come under pressure. In the past decade, the FX market has shown that retail traders benefit from better liquidity when they trade through different channels than institutional speculators. Systematic internalizers demonstrate the same in equities. This fact of life will apply to crypto. Exchanges have to pick a side: either cater to retail (or retail-driven intermediaries) or court HFTs.
Now that an aggregator like Tagomi runs transaction cost analysis for their clients, it will become plainly obvious to investors with medium-term and long-term horizons (i.e. anyone not looking at the next 2 seconds) that their price impact on exchange is worse than against electronic OTC liquidity providers.
Today, exchange fee structures are awkward because they must charge small users a lot to make up for crypto’s exceptionally high compliance and onboarding costs. Onboarding a single, small value user simply does not make sense unless fees are quite elevated. Exchanges end up over-charging large volume traders such as B2C2’s clients, another incentive to switch to OTC execution.
In the alternative, what if crypto exchanges focus on HFT traders? In my opinion, the CME is a much better venue for institutional takers as fees are much lower and conventional trading firms will already be connected to it. My hypothesis is that most exchanges will not be able to compete with the CME for fast traders (after all, the CBOE itself gave up), and must cater to their retail user base instead.
In a future post, we will explore other microstructures beyond all-to-all exchanges and bilateral OTC trading.
Fiber threads image via Shutterstock
Last December the Blockchain Transparency Institute released a shocking report that indicated that over 50 exchanges were engaging in washing trading in a bid to benefit themselves at the expense of aspiring token projects. Wash trading is a form of market manipulation where the investor sells and buys the same financial instruments so that they can create misleading artificial activity in the marketplace.submitted by EnriqueZGZ to u/EnriqueZGZ [link] [comments]
Some of the reasons why individuals and businesses would feel the need to engage in the activity include; to artificially increase the trading volume, therefore, giving the impression that the instruments are more in demand than they actually are. The other main reason is to generate commission fees for brokers so that they can compensate them for something which can’t be openly paid for.
The institute began to report on suspected wash trading activity that was taking place within the crypto market back in August 2018. Before releasing the report, the institute spent months 📷perfecting their algorithms, and they expressed confidence in the data that they had acquired.
The main aim of various cryptocurrency exchanges that were caught engaging in the activity was to lure interested crypto projects to list their tokens on these platforms which are quite lucrative as we will see later on.
The report took a deeper dive into the specific trading pairs that are listed on various exchanges which showed clear signs of wash trading. The BTI team used algorithms to analyze the data after countless hours of watching order books, speaking to market makers, trade surveillance consultants, high-frequency traders and analyzing volume data points.
Interestingly, the researchers were able to identify four different bot strategies that have been employed by exchanges to inflate their volume numbers. They discovered that some of the bots were set to different trading pairs depending on the time of the day and the settings were changed depending on the current volume trends or the hype that surrounded a given token within a given period.
Who is and Who isn’t Wash Trading?The researchers evaluated the actual volume of the top 25 Bitcoin trading pairs as reported on CoinMarketCap.com and found shocking results. Over 80 percent of the pairs actual volume was under 1% of what they reported on CMC. Surprisingly only 3 of the top 25 pairs were found not to be wash trading their volume. The tree included Binance, Bitfinex, and Liquid.
Some of the biggest and well-respected exchanges were behind the illegal activity, and the institute had to move OKEx to its exchange advisory list as they found all their top 30 traded tokens to be wash traded. According to the report, the Hong Kong-based exchange appears to have benefited the most from the coinmarketcap.com referral traffic as even after their volume was adjusted they still ranked in the top 10.
Another exchange that was found to be wash trading the volume numbers of its top 25 pairs was Huobi however to a lesser degree than OKEx. Also, the top 25 trading pairs of HitBTC had evidence of wash trading as well, and the exchange was also added on the Advisory List.
Bithumb was also found to be wash trading after many suspicions in the past. The exchange was primarily wash trading Bitcoin Gold, Dash, Monero and Zcash. But, the top wash traded coins on the exchange appeared to change depending on each month.
As for the top ten BTC trading pairs according to adjusted volume Binance leads the way followed by Bitfinex and Coinbase Pro is third on the list. However, the list contains three wash traders who have managed to benefit from bad acting.
Why Are Exchanges Wash TradingThe reason why the majority of exchanges surveyed were engaging in wash trading was to inflate the trade volume data. An act that can mislead crypto traders and crypto projects about their liquidity and the number of users they have. The inflated figures are particularly crucial to the exchanges when it comes to luring cryptocurrency projects to list their tokens on the platforms at high prices.
As BTI found out listing fees are big business for these exchanges. According to information the institute had received from many tokens within the cryptocurrency space, the average crypto project spent over $50,000 last year in listing fees alone on exchanges that have been added to the Advisory List.
The fees add up to an estimated $100 million stolen from the crypto ecosystem in 2018 alone. Given that over 50 exchanges are wash trading over 95% of their volumes, the activity is a 500K a year scheme. Interestingly, some of the exchanges made over one million dollars last year from collecting the listing fees.
Now, BTI advice any crypto project to contact the organization if they encounter any exchange that is requesting large listing fees especially those put on the Advisory List. What’s even more disappointing is that many of the exchanges exist just to collect the listing fees as their bots run the platforms.
BTI also offers data on what is deemed as fair listing fees for exchanges that are not using wash trading bots. The fees range from 2BTC up to 75 BTC.
Moving forward in 2019 BTI plans to release its Initial Investor Security Report which will highlight the current state of security on exchanges and also suggest ways these platforms can make both current and future investors feel more safe with their funds. The report will also include the security ratings of all exchanges that are not currently on the Advisory List.
The institute has also promised to continue to collect the accurate volume data on the individual pairs in a bid to curb further manipulation. It will also contact all exchanges to ensure that they implement the best security controls as they hope to see negative media reports on stolen funds decline.
The Advisory List contains 84 exchanges including the likes of Bithumb, OKEx, Huobi, HitBTC and many more.
Anyone interested in the correct volume of any trading pairs from any exchange can contact the Blockchain Transparency Institute for the full report.
Full article in: https://icodog.io/analysis/over-50-exchanges-are-wash-trading-95-percent-of-volume/
By Basil from icodog.io
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