Hot search keywords

Hot search keywords

3 exits for Chinese Bitcoin HFT traders with millions of funds

In the past few days, the transaction volume of big three took a nose dive. For instance, OKCoin had 3.7 million coins exchanged on 5th January and 4,329 on 19th Feb as per sosobtc . The “big three” are losing their most precious assets as an exchange: traders. According to a report on WSJ China , high frequency traders (HFT) are running away from Chinese market with millions of funds out of panic or the need to liquidate their funds. They found 3 outlets for their money.
Before the PBOC site inspection, it’s believed that the 80% of the exchanges transaction were initiated by HFT traders. It’s estimated 60% of the transaction in OKCoin was conducted by trading robots and 80% in BTCC and Huobi. As there was no need for HFT to consider the cost of transaction fee in the past, HFT may run their bots 24-7 to capture the smallest price difference between exchanges. After the adoption of 0.03-0.2% trading fees, traders tried to adjust strategy but the effort was futile. One HFT trader explained:

“A positive profit could only be realized with 0.2% fluctuation. Trading bots may initiate 30 transactions within 10 seconds. With the burden of transaction fee, it’s almost impossible to capture a profitable fluctuation within such a short timeframe.”

Under the regulatory pressure, HFT teams are leaving the exchanges with millions of funds. One HFT investor said:

We want to maintain a 4% income but it isn’t easy with 0.3% withdrawal fee and 0.2% transaction fee. The revenue graph looks ugly.

Where do they go?

There are several options: premium-taker, foreign futures exchange and OTC.
Price gap between various exchanges are still profitable. Some traders set up accounts across various exchanges, hedging around to realize positive gains. However,

“Such operation requires substantial amount of bitcoin and fiats.”

Pan Guoli, founder of biqushi, said. Pan offers market analysis and also in charge of hedging fund.
Also, these traders may opt to trade in foreign futures exchanges. Currently there are genuine overseas futures exchanges, or some less genuine exchanges that are actually registered abroad but operated domestically. 0 fee and are free from Chinese regulations are the major attractions.
Haipo Yang, founder of Viabtc, even developed a futures premium index based on OKCoin price:
okcoin premium

The third exit is OTC trading.
However OTC  is criticized for its simple or non-existent KYC procedure, which may allow money laundry or capital flight. OTC traders are looking for each other through mobile apps, social media tools, forum, website or offline meetup. Some major OTC dealers are hiring people to spam online. Wechat chatbot are being developed for OTC purpose. With the absence of exchange-like monitoring, OTC trading will be even harder to track.

COMMENTS(9)

  • hl5460
    5 months ago hl5460

    In the past few days, the transaction volume of big three took a nose dive. For instance, OKCoin had 3.7 million coins exchanged on 5th January and 4,329 on 19th Feb as per sosobtc . The “big three” are losing their most precious assets as an exchange: traders. According to a report on WSJ China , high frequency traders (HFT) are running away from Chinese market with millions of funds out of panic or the need to liquidate their funds. They found 3 outlets for their money.http://news.8btc.com/3-exits-for-chinese-bitcoin-hft-traders-with-millions-of-funds

  • Idaho
    5 months ago Idaho

    It’s far from clear whether HFTs benefit anyone other than themselves.

  • INRI666
    5 months ago INRI666

    The future doesn’t rosy for Bitcoin traders in China. But who cares. They’re all for making cash money from Bitcoin’s price fluctuations anyway. What I like about it is some traders have started doing OTC trading. That is how BTC should be traded. Simple and direct. Maybe we should expect the currency exchange forum to be more active after a month.

  • cr1776
    5 months ago cr1776

    Quote from: DooMAD on February 20, 2017, 02:25:42 PM
    …Also, I love how the article calls for more KYC and even going as far as to cite OTC as a problem in some mythical la-la land.  I can’t tell what the author is smoking and I definitely don’t want any.  If anything, we should be encouraging more peer-to-peer trading and less centralised exchange, not less P2P trading and more centralised exchange, like the article suggests.  It’s completely ass-backwards.

    Have to agree here.  The issue isn’t decentralization, the issue is centralization.  Most notably centralized control by the government.

  • 1Referee
    5 months ago 1Referee

    Quote from: DooMAD on February 20, 2017, 02:25:42 PM

    I can’t tell what the author is smoking and I definitely don’t want any.  If anything, we should be encouraging more peer-to-peer trading and less centralised exchange, not less P2P trading and more centralised exchange, like the article suggests.  It’s completely ass-backwards.

    It’s bias and financial compensation, to write articles the way people behind the scenes want them to be. It’s something that nowadays seem to be a hot thing to pump low quality obviously sponsored articles into the net. I fully agree that we should stimulate to cut ties with centralized incentives when it comes to exchanging Bitcoin. But then again, the far majority of the people are nothing more than sheeps following the rest, and thus will continue to value current incompetent and centralized exchanges.

  • BitcoinAllBot
    5 months ago BitcoinAllBot

    Here is the link to the original comment thread. Or you can comment here to start a discussion. Author: 8btccom

  • hl5460
    5 months ago hl5460

    Quote from: DooMAD on February 20, 2017, 02:25:42 PM
    High Frequency Trading is a legacy finance parasite, not welcome in Bitcoin in my view.  Any attempt to stamp it out in the fiat world is greeted with the usual “too big to fail” mindset.  Artificial volume only leads to speculative bubbles.  One only has to mention ‘Willy Bot’ to conjure images of all the things wrong with automated trading in cryptoland.  Also, I love how the article calls for more KYC and even going as far as to cite OTC as a problem in some mythical la-la land.  I can’t tell what the author is smoking and I definitely don’t want any.  If anything, we should be encouraging more peer-to-peer trading and less centralised exchange, not less P2P trading and more centralised exchange, like the article suggests.  It’s completely ass-backwards.

    Thanks for reminder. The article is about what is happening in China. Maybe central bank doesn’t realize they just help decentralize bitcoin trading.

  • DooMAD
    5 months ago DooMAD

    High Frequency Trading is a legacy finance parasite, not welcome in Bitcoin in my view.  Any attempt to stamp it out in the fiat world is greeted with the usual “too big to fail” mindset.  Artificial volume only leads to speculative bubbles.  One only has to mention ‘Willy Bot’ to conjure images of all the things wrong with automated trading in cryptoland.  Also, I love how the article calls for more KYC and even going as far as to cite OTC as a problem in some mythical la-la land.  I can’t tell what the author is smoking and I definitely don’t want any.  If anything, we should be encouraging more peer-to-peer trading and less centralised exchange, not less P2P trading and more centralised exchange, like the article suggests.  It’s completely ass-backwards.

  • e-coinomist
    5 months ago e-coinomist

    Quote from: Idaho on February 20, 2017, 09:53:50 AM
    It’s far from clear whether HFTs benefit anyone other than themselves.

    That, and piggybacking on our backs. The other (all of them) tradesites funding their services by taking smallish fees (0.2%) create a spread on their orderbooks, caused by that fee. It doesn’t make any sense to trade on a high frequency and paying a fee … on a high frequency. Just paying 100x 0.2% a minute are like … do the math (my brain hurts!) should look like radioactive decay line on trade portfolio. Exponential growthshrinkage.Effectively blocking out any HFT approaches.But… if one exchange plays defect and offers Zerofees, all other tradesites are creating an opportunity for HFTs on that site.Guess who pays that bill.We have to decide for what we want.

Please sign in first