Where have all the Traders gone?

No, this isn’t a treatise about the crab market we’re in currently. We know the narrative these days is all about how traders are staying away because of market conditions. But the real question is- were there ever any professional traders in the crypto industry to begin with?

Overstatement? Well, we beg to differ.

Cryptocurrencies are a relatively new class of tradable assets. Trading on an online exchange in Bitcoin began in 2010. Compare that to the stock market (year 1531) or the forex market (roughly 500 years ago) crypto trading is taking its first wobbly steps.

Ergo- this nascent industry has extreme price volatility. In a situation of high volatility, the ability to hit the desired price for the asset being traded is of vital importance to a professional trader. Enter technology that falls below the mark. Two key technical aspects of an exchange- latency and order matching speed- leave a lot to be desired in this volatile industry.

A unique characteristic of the crypto industry is the strong dominance of Bitcoin (~40% purely on market cap). The dominance of Bitcoin extends beyond the simple market cap. Various studies have shown a strong price correlation of every cryptocurrency (including Ether) to the price of Bitcoin (with their individual betas overlying the correlation). In this market, price discovery of even an illiquid coin should be straightforward given the known market price of another coin, but it is not. It is common to see significant price manipulation on illiquid coins.

Let’s add to the pain of a trader not able to hit the desired price point. Let’s throw in some exorbitant fees. But, 0.1% trading fee (average industry fee for monthly volumes up to 1M USD) isn’t much you say? Trading fees in the crypto industry are on an average much higher than that of the Forex market. For a professional who trades well over a million dollars every month, that adds up pretty quickly.

Hold on, how about we compromise on security too? Did you know that all major crypto exchanges function completely on cloud infrastructure? Did you know that Cloud servers are susceptible to various technological vulnerabilities, especially in shared environments? Data loss/theft/ leakage, vulnerability to account or service hijacking, vulnerability to Denial of Service attacks, insecure interfaces or API are some of these weaknesses. As a business, you have limited to no control over the cloud infrastructure. The levels of data protection are also significantly lower than those on a physical server infrastructure.

Ok, but at least these new techie-driven exchanges have user-friendly interfaces, right? That actually depends on what you mean by user-friendly. Yes they’re easy to use with catchy graphics and layouts.

But can you watch FULL MARKET DEPTH for multiple pairs while trading multiple instruments?

Can you have multiple order-books showing details of every order? And live portfolio balance for every trade and active order?

Can you have multiple views of the entire market?

Can you have multiple desktop layouts available at the click of the mouse?

We could go on, and we haven’t even started on some of the advanced analytical tools that are so essential to every trader’s kit.

Should we then be surprised that professional traders have not ventured into the crypto industry?

After that spiel, you must be expecting an explanation on what we at Aquarius are doing about this , read our next blog on this topic.