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You seem to be missing the point. If you want to trade crypto in a 10 microsecond window then the exchange, or a trusted broker, needs to be a custodian of your
by nly 4y ago
You seem to be missing the point. If you want to trade crypto in a 10 microsecond window then the exchange, or a trusted broker, needs to be a custodian of your crypto.
What you're suggesting just doesn't fly.
This is why the regulated markets brokers have to stump up collateral and we have clearing houses. You can buy Facebook shares in a microsecond but it takes days to settle and become yours. During that time, you're at risk. Likewise with crypto, even if you settled every few hours on the Blockchain (hideously expensive), there is still a risk window.
- jrm4 4y agoYes. Treating crypto like a high velocity stock exchange gets you exactly the same thing that you get from a high velocity stock exchange; aka a system that just generally screws little guys.
- PaulHoule 4y agoIt's actually a system that screws (some of) the big guys. The "little guy" enjoys very low commissions and market orders with bid/ask spreads less than they ever were. Market makers are happy to give cheap liquidity to "uninformed" traders whose trades don't move markets. (People on Robinhood get very good access if they want to trade sensibly; I wouldn't blame the market makers primarily that many of them use stock trading as a substitute for sports betting.) If you like trading limit orders on the theory that odds are very good you can set a limit 1% below the current price and get a fill thanks to Brownian motion, they are going to outtrade you because they've got answers to the risk that a limit order sometimes fills not because of Brownian motion but because the market is moving sharply in one direction and you don't. Market makers do not want to trade with large traders who know something that not everybody knows and whose trades may be a harbinger of market moves that will go against the market makers. Market makers want to make those traders pay through the nose for liquidity and that is why large trainers are always complaining that "the prices I see aren't for real."
- jrm4 4y agoAbsolutely, I was mentioning the whole thing in a summary kind of way. I'm definitely aware that power can shift greatly -- but it does seem to, on balance, extract money from little guys to big guys, even if the identity of the big guys sometimes changes.
- throwaway22032 4y agoYes, you cannot, in the general case, securely trade cryptocurrencies with 10 microsecond timing without accepting huge counterparty risk. If you want to park your car on the side of a free flowing motorway you are at risk. You can do it, but it's dangerous. People get hit all of the time. It might be more convenient to check your map. It might be faster. But you really probably should get off at the next exit or find a rest area and take that theoretical efficiency hit, cause it works most of the time until it doesn't. This is a demonstration of that risk. It's not the first, likely it isn't even the 100th.
- bcrosby95 4y agoYou're missing the point. You can't trade anything with 10 microsecond timing without accepting counterparty risk. Crypto is not special here, except that it's full of fraudsters or people that think they're smarter than they are.
- kasey_junk 4y agoThe person you are commenting against understands you’re point. They want crypto to be special. In their mind crypto should be the antidote to counterparty risk and they are willing to give up liquidity to achieve that.
- throwaway22032 4y agoThe counterparty risk is significantly higher because cryptocurrency transactions are irreversible in the general case.
- quickthrowman 4y agoAnd the exchange is also clearing transactions instead of a third party clearinghouse which ups the counterparty risk substantially.
- tnel77 4y agoHideously expensive? I sent a decent chunk earlier for (allegedly) only $0.75. I agree with your timeframe argument, but the price of these transactions aren’t always that bad.