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What kind of tech powers the NYSE? (Getty Images)
Fundamental technology issues in the crypto market is a huge problem. Last summer, Coinbase’s GDAX allowed the price of Ethereum to crash to $0.10. Someone accidentally fat- fingered their million dollar order and stop-loss orders were automatically executed. Had a simple technology like “circuit breakers” been in place, huge losses for Ethereum holders would have been prevented.
The flash crash of Ethereum is an extreme case, but “stop-loss hunting” is common practice. It’s a strategy that forces holders out of their position by driving the price of a cryptocurrency down temporarily. Unsuspecting holders who have a stop-loss set to protect themselves on the downside will execute their orders. Traders who initiated this will now profit from the decline as the price will increase back to true intended levels.
An exchange temporarily halting trades is common practice on Wall Street when certain conditions are hit, like a 20% price increase or decrease in a five-minute time window. Exchanges for cryptocurrencies don’t have the technology in place to detect and halt trading when they see such market manipulating activities.
Financial Information Exchange
The trading infrastructure of Wall Street dates back to 1992. A protocol was developed for financial information exchange (FIX API). It routed equity trading data between broker-dealers and institutional clients. Before this, information was communicated over the phone. In the crypto market, having a universal FIX API would allow institutional money to enter the market. The ability to access all cryptocurrency markets at one integration point is critical. This is what they’re used to and what they’ve been doing for 25 years.
Bitstamp and GDAX have both launched FIX APIs. One company called XTRADE is building one too, but they are taking it one step further make it easier for major institutions and hedge funds to enter the market. They are providing a single point of access to aggregate liquidity across all exchanges. You will see the best available prices and XTRADE will route your order appropriately.
Fragmented Prices
Prices for cryptocurrencies are frequently different from one exchange over another. Korean exchanges like Bithumb or Upbit is trading Bitcoin at $10,900. Binance is trading for $10,200. Wall Street was fragmented like this too, way back in 1972. The SEC began facilitating a national market system soon after. The Regulation National Market System (Reg NMS) was established in 2005 to ensure investors received the best price execution.
There is no regulation for this in the crypto market, but the general public does have access to the data via sources like CoinMarketCap.com. However, if you were looking to purchase a specific token, you would have to look for which exchange had the cheapest price. Then you’d also have to open up an account, fund it and then purchase. By that time, the best possible price could be on another exchange. Institutional traders would balk at this.
Trading Platforms
All the crypto exchanges today are web-based software. However, professional traders use quite customized, very robust and high-performing desktop applications. They want orders to be entered fast and executed with low latency, to the magnitude of 100x faster. Speed gives them an edge in handling millions of dollars in orders. This type of software is not available yet for the crypto market. Every single exchange is web-based. While this makes it easy for retail investors to trade, these platforms are too slow for the professionals.
We need companies like Bitstamp and GDAX working on the FIX API. And we will need companies like XTRADE who will take that data and implement the fastest possible trading platform that can execute orders on any exchange. Institutional money coming into crypto will bring us into the next stage of mainstream adoption.
Also on Forbes:How Blockchain Can Empower Content Creators
">What kind of tech powers the NYSE? (Getty Images)
Fundamental technology issues in the crypto market is a huge problem. Last summer, Coinbase’s GDAX allowed the price of Ethereum to crash to $0.10. Someone accidentally fat- fingered their million dollar order and stop-loss orders were automatically executed. Had a simple technology like “circuit breakers” been in place, huge losses for Ethereum holders would have been prevented.
The flash crash of Ethereum is an extreme case, but “stop-loss hunting” is common practice. It’s a strategy that forces holders out of their position by driving the price of a cryptocurrency down temporarily. Unsuspecting holders who have a stop-loss set to protect themselves on the downside will execute their orders. Traders who initiated this will now profit from the decline as the price will increase back to true intended levels.
An exchange temporarily halting trades is common practice on Wall Street when certain conditions are hit, like a 20% price increase or decrease in a five-minute time window. Exchanges for cryptocurrencies don’t have the technology in place to detect and halt trading when they see such market manipulating activities.
Financial Information Exchange
The trading infrastructure of Wall Street dates back to 1992. A protocol was developed for financial information exchange (FIX API). It routed equity trading data between broker-dealers and institutional clients. Before this, information was communicated over the phone. In the crypto market, having a universal FIX API would allow institutional money to enter the market. The ability to access all cryptocurrency markets at one integration point is critical. This is what they’re used to and what they’ve been doing for 25 years.
Bitstamp and GDAX have both launched FIX APIs. One company called XTRADE is building one too, but they are taking it one step further make it easier for major institutions and hedge funds to enter the market. They are providing a single point of access to aggregate liquidity across all exchanges. You will see the best available prices and XTRADE will route your order appropriately.
Fragmented Prices
Prices for cryptocurrencies are frequently different from one exchange over another. Korean exchanges like Bithumb or Upbit is trading Bitcoin at $10,900. Binance is trading for $10,200. Wall Street was fragmented like this too, way back in 1972. The SEC began facilitating a national market system soon after. The Regulation National Market System (Reg NMS) was established in 2005 to ensure investors received the best price execution.
There is no regulation for this in the crypto market, but the general public does have access to the data via sources like CoinMarketCap.com. However, if you were looking to purchase a specific token, you would have to look for which exchange had the cheapest price. Then you’d also have to open up an account, fund it and then purchase. By that time, the best possible price could be on another exchange. Institutional traders would balk at this.
Trading Platforms
All the crypto exchanges today are web-based software. However, professional traders use quite customized, very robust and high-performing desktop applications. They want orders to be entered fast and executed with low latency, to the magnitude of 100x faster. Speed gives them an edge in handling millions of dollars in orders. This type of software is not available yet for the crypto market. Every single exchange is web-based. While this makes it easy for retail investors to trade, these platforms are too slow for the professionals.
We need companies like Bitstamp and GDAX working on the FIX API. And we will need companies like XTRADE who will take that data and implement the fastest possible trading platform that can execute orders on any exchange. Institutional money coming into crypto will bring us into the next stage of mainstream adoption.
Also on Forbes:How Blockchain Can Empower Content Creators
Read Again Broooh https://www.forbes.com/sites/shermanlee/2018/02/27/why-wall-street-trading-technology-needs-to-enter-the-crypto-market/Bagikan Berita Ini
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