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> I assumed that Wall Street would stay away. > I assumed that Bitcoin’s extreme volatility would be a turnoff. Anyone who thinks these things is not paying a
by philipodonnell 9y ago
> I assumed that Wall Street would stay away.
> I assumed that Bitcoin’s extreme volatility would be a turnoff.
Anyone who thinks these things is not paying attention to the historically low realized and implied volatility of the major market indexes and its negative effects its having on the largest market participants by volume (MM+HFT firms) who's profits are correlated to overall volatility and who's technology easily translates.
One thing I think is underappreciated with crypto is just how easy it is to setup a high-frequency trading bot on these new exchanges vs the equity exchanges. GDAX has totally free real-time non-rate limited Level 3 quote access via websocket, sub-millisecond fill rates, literally no commission for market making activities, and co-location is just a matter of picking the right AWS region and a bit of luck. That's a couple million bucks, an enormous expense in servers to handle the data volume, and a few dozen partnership agreements to get something similar for the equity or option markets.
If you have spent your career dealing with all that, even if you've been closely following the crypto industry, it may not even occur to you how different the market structure is until you spend a few days coding up a bot that can detect a signal and roundtrip a trade in < 100ms from my consumer laptop at home.
- tCfD 9y agoIsn't the very definition of a bubble is that the speed at which the market gets wise is always outrun by the speed at which it gets greedy?
- mlevental 9y agowhat's the definition of market making activity here? my understanding of "market making" is simply "high volume" trade (creating order depth)
- philipodonnell 9y agoAll market makers are HFTs. Most (but not all) HFTs are market makers. MM/HFT is just really saying "all high volume firms" while acknowledging that what most people are talking about when they say "high volume" is market making. Market making software is mostly independent on the market it trades, so its trivial for a market-maker in one product to switch to a similar product.
- mcv 9y ago> Anyone who thinks these things is not paying attention to [...] I'm not really sure what you're saying, but I totally see why people would expect volatility to be a turn-off. It was presented as a payment method, a currency. And for currencies, extremely volatility is absolutely a turn-off. Even for gold, it's a turn-off. Gold is prized for its stability. One of the selling points of Bitcoin was that it would be immune to inflation and currency manipulations. Now it turns out that none of those promises are true, and to everybody's surprise, that turns out to be a good thing. I can totally see how people are surprised.
- philipodonnell 9y agoThat may have been flippant, but the reduced volatility leading to lower HFT/MM trading profits has been widely reported. Its not a leap to think those people would look for a product with higher volatility if it could be done with similar tools.
- AnimalMuppet 9y agoIt's not the same people. Different people care about different "features".
- ataturk 9y agoNY Times helping to sweep in as many rubes as possible? I never assumed Wall Street would stay away--the unethical jerks who inhabit big banks have been attracted to BTC like flies on a cowpie because it is unregulated, allowing them to pull all manner of cons and schemes. Pump & dump? Just watch and see. Go back and read about how they manipulate pink sheets.