The core idea of cryptocurrencies is to provide a form of exchange that is decentralised and independent of government. The value of this is captured via the coins that run on a specific network. Cryptocurrency market caps have exponentially increased since the advent of Bitcoin in 2009 and many people are looking to them as a speculative asset class.
The state of the cryptocurrency market is very different from the state of the stock market – whilst stocks trade on a few major exchanges, there are many more cryptocurrency exchanges to buy and sell coins. As a result of this, price discovery is fragmented and arbitrage opportunities exists between various exchanges that allow the instantaneous buying and selling of coins.
Transaction fees and times can be quite high on large volume coins such as Bitcoin – it can typically take hours for Bitcoin’s to transfer and by then the price may have moved – DataSpartan have gotten around this by having currencies on both exchanges for arbitrage so that the exchange fees are lessened – the platform would then buy a coin on one exchange and sell it on another so that a profit can be instantaneously booked.
Binance – the largest cryptocurrency exchange as of time of this writing, at one point it added 240,000 users in just one day. It exchanges roughly $1.6 billion each day.
Bittrex – a medium sized exchanged – it exchanges roughly $372 million each day.
Cryptopia – a small New Zealand based exchange that offers a wide variety of low volume coins for trading – these types of coins typically have fewer buyers and sellers but much more volatility. It exchanges only $19 million each day.
Policies and strict governance can prevent rogue trading but another more direct way is stricter controls on the technologies used for booking these trades. Inefficiencies and inconsistencies in databases used within banks may allow traders to hide these trades from the central risk book. DataSpartan worked on a Blockchain proof of concept platform that addressed these database inconsistencies.
A Blockchain type solution allows different departments within the bank to have a consistent view of orders – this is because it is impossible to delete or change any of the executed trade orders without other departments agreeing. This provides transparency about trade execution and minimises the chance of rogue trading.
The custom built trading platform has a historical backtesting functionality as well as live trading functionality. Currently, cross exchange arbitrage is being run and live but other strategies using technical indicators are also being developed. The bulk of the number crunching is handled in Python whereas the execution libraries are in C ++.