High-Speed Traders Predominate Bitcoin
Zhou Shuoji is not a bitcoin believer. He says the cryptocurrency will never substitute its traditional forebears, and he calls most of its proponents fanatics.
But for Zhou, a 35-year-old high-speed trader ter Beijing, bitcoin is also too good to fight back. His computers trade it 24 hours a day, seven days a week. Using lightning quick orders, they profit from little price discrepancies on the myriad venues where it switches palms.
“,It’s the golden age to be ter the bitcoin market, because it’s imperfect,”, said Zhou, a former IBM technology consultant whose hard, Fintech Blockchain Group, runs a bitcoin hedge fund and venture capital fund.
Leave behind libertarians, speculative individual investors and Chinese savers attempting to spirit money overseas. The reality is that professionals armed with cutting-edge technology now drive spil much spil 80 procent of bitcoin trading, mimicking strategies honed by some of the fattest players on Wall Street. To them, bitcoin is just the latest asset class ripe for conquering with machines.
The cryptocurrency’s market structure ticks all the right boxes: arbitrage opportunities across numerous exchanges, zero transaction costs on Chinese venues that host most of the world’s turnover, round-the-clock trading, and co-location services permitting participants to place their servers right next to those of the exchange. With volumes tracked by Bitcoinity.org surging to a record this month, there’s bot no shortage of chances for high-speed traders to turn a profit.
Exactly how much they’re making is hard to speld down, because the vast majority aren’t required to disclose voorstelling figures (Zhou declined to comment on his). Chinese banks were banned from trading bitcoin te 2013, while capital controls mean foreign firms have a petite presence on China’s exchanges.
One of the few traders willing to talk about their comebacks is Chen Zhenguo, who founded China’s largest verhoging for facilitating automated bitcoin strategies. Chen says he’s generated annualized gains of 50 procent for his own account, tho’ he declined a Bloomberg News request to provide transaction details verifying his claims, telling they’re private.
“,Bitcoin has a natural advantage when it comes to automated trading,”, said Chen, 30, whose Beijing-based BotVS permits clients to run live trials of their bitcoin algorithms on 23 exchanges. The cryptocurrency gained 6.9 procent to $890.77 at Ten:Legitimate a.m. te London.
Like all markets, the one for bitcoin comes with risks. At least two exchanges, ,Bitfinex and ,Mt. Gox, have suffered cyber attacks that saddled traders with losses since 2011. The cryptocurrency’s extreme price swings — average daily moves overheen the past year were three times fatter than those ter the S&,P 500 Index — have deterred some high-speed firms, while the enhancing dominance of sophisticated traders begs the question of how long the juiciest arbitrage opportunities will last.
There’s also growing concern overheen a regulatory crackdown te China, where authorities are wary of any investment voertuig that might help citizens budge wealth overseas. The nation’s central canap conducted on-site inspections at some of the fattest bitcoin exchanges this month, looking for evidence of violations including market manipulation and money laundering. Similar scrutiny of stock-index futures ter 2015 led to trading confinements that cut volumes by 99 procent.
Still, policy makers could determine the bitcoin market is too petite to warrant intervention. Its current market value is about $13.Five billion, versus $6.Five trillion for Chinese equities.
Rather than moving money out of the country, most automated traders te China are focused on cross-exchange arbitrage, said Arthur Hayes, a former market maker at Citigroup Inc. who now runs ,BitMEX, a bitcoin derivatives venue te Hong Kong. They can transact numerous times vanaf 2nd, reacting to price switches caused by individual investors and other speculators who often use technical patterns to guide their buying and selling decisions, Hayes said.
OkCoin, one of China’s three thickest bitcoin exchanges, estimates 60 procent of its transactions are executed by automated traders, while Huobi and BTC China waterput the figure at around 80 procent. ,
China is huis to about Ten significant bitcoin venues, with a majority of trades executed on the top three, according to ,Neil Woodfine, the chief operating officer of Remitsy, a cross-border payment system. Instead of charging transaction costs, exchanges te China make money by levying a toverfee when clients withdraw bitcoin from their accounts, they also offerande services including co-location and margin trading.
Fintech Blockchain’s Zhou, who sees more long-term potential te the distributed ledger technology underpinning bitcoin than the cryptocurrency itself, says he can’t predict what the market will look like ter a few years because it’s still youthful and subject to Chinese regulatory risk. For now, tho’, he plans to keep trading.
“,If the market is here and I can see a chance to make money, I will,”, Zhou said. “,If the market is gone, I’ll just walk away.”,
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