The golden age of crypto trading might already be over

A trader from BGC, a global brokerage company in London's Canary Wharf financial centre reacts during trading June 24, 2016 after Britain voted to leave the European Union in the EU BREXIT referendum.Russell Boyce/Reuters

• Bitcoin traded at wildly different prices during the month of December, but things have calmed down in the New Year. 
• That means crypto traders are making less money from taking advantage of different prices on different exchanges. 

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The crazy good times for cryptocurrency traders might be over already.

December was a huge month for cryptocurrency trading. Bitcoin hit its all-time high above $19,000 and daily volumes for crypto-trading soared over $50 million for the first time. It was also a golden age for arbitrage trading. 

Arbitrage is when a trader buys an asset trading in one market at a lower price and then sells it at a premium on another market. During bitcoin's run-up to $20,000 (and subsequent sell-off) in December, bitcoin was trading at wildly different prices on the main US exchanges.

The spread, or price difference, between GDAX and Kraken, another exchange, was more than $1,000 on December 10, according to data provided by CoinRoutes. For much of December, bitcoin was trading at a big premium on GDAX compared to the other US exchanges and spreads north of $500 between some exchanges were very common. 

The new year, however, has ushered in a new era of much tighter spreads between the main US exchanges. 

"GDAX is more or less normal and there is no obvious exchange driving the price higher," Dave Weisberger, CEO of CoinRoutes, told Business Insider

The question is whether these spreads will blow out again the next time there's another bout of wild volatility.

"Volatility has been relatively lower – often arbitrage opportunities appear when the market is in a big rally or sell-off," Garett See, chief executive at DV Trading, a cryptocurrency trading firm, told Business Insider.

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But John Spallanzani, a trader who is set to join Miller Value Partners, told Business Insider that the December golden age of arbitrage trading will likely never return. 

"We may not see the huge spreads between countries and exchanges that we saw in 2016 and 2017 ever again," Spallanzani said.

"That arb boat has set sail," he said. 

That's not to say that crypto markets are suddenly all in sync. But things are much more muted. More often than not, there's a $100 spread, according to CoinRoute's Weisberger. 

"Prices across the cryptocurrency market tend to be dislocated and fragmented," Bobby Cho, the head of OTC trading at cryptocurrency trading firm Cumberland, said of the current environment. "If you ask ten different people about the price of some of the most liquid cryptos, like bitcoin or ethereum, you will still get different answers."

Still, capitalizing on arbitrage opportunities is sometimes easier said than done in crypto, which is known for its immature market infrastructure. If two exchanges show different quotes, it is for a limited quantity and depends on whether a trader can access the exchange and the trade settling.

Exchange latency, the speed at which information is communicated between exchanges and trading firms, is far slower in crypto than it is elsewhere on Wall Street.

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