Note from the Publisher: We know, we know – we write a LOT about digital currencies, and their underlying technology-blockchain, but SOMEDAY in the not too distant future when these are much more widely adopted, we are just sure you will thank us for giving you all the tools to learn about these technologies at their infancy in an easy way through FintekNews (or so we hope!). In the meantime, we’re just going to keep at it, and so today, we have news about how traders are using algos to trade bitcoin. In the near term, the digital currency trading markets are not even a fraction of a fraction as deep as stocks, derivatives and forex, so algos buy you less of an edge, but still, gotta stay on top of the trends, whether you’re a hedgie just starting to dip your toe into digital currency trading, or a wealth manager with clients interested in participating in this new Wild West.
“Investors have benefited from algorithmic (‘algo’) trading programs under many different circumstances, but these ‘trading bots’ can prove particularly valuable to those interested in cryptocurrencies.
Bot trading has reduced user error, enabled more rapid processing of information and given traders more time and flexibility. However, it may hold even greater potential in the crypto markets due to their immature nature.
Trading bots have been around for decades, seeing growing use in stock markets as digitization has taken hold. However, the digital currency markets are less than a decade old and with far less tenure than more mature markets, have had significantly less time to integrate algo trading.
Tim Enneking, chairman of cryptocurrency investment manager EAM, highlighted the differences between high-frequency trading (HFT) in traditional markets and those for cryptocurrencies. He told CoinDesk: ‘When it comes to use HFT for stocks, milli – and even micro – seconds matter. However, for cryptocurrencies, these very small increments of time are not nearly as important.'”