Dub 27

Crypto Arbitrage Trading – The Pursuit of Happiness

· April 27, 2018 · 5:00 pm

Arbitrage exists as a result of market inefficiencies and would therefore not exist if all markets were perfectly efficient. How does one capitalize on this market phenomenon?


A trader who, in 1970, pioneered a computerized trading system once said:

The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.

This is, of course, Ed Seykota, a former commodities trader. A lot has changed since he first introduced this system, with the onset of blackbox and algorithmic and high-frequency trading, it is harder than ever for point and click traders to make money.

The market has evolved and the inefficiencies that it suffered from in the 70s are unlikely to return. However, while the capital and debt markets are now highly efficient and, for the most part, very liquid, the same cannot be said for cryptocurrency markets. For one, the dissemination of information to the trading community is highly inefficient. The systems that aggregate volume and other data from various exchanges are still in their infancy and most importantly, the size of the trading community is growing every day.

Trading

Nobody Knows If a Stock Is Going to Go Up, Down, Sideways or in Circles

Those that have seen the film “Wolf Of Wall Street” will remember the scene with Matthew McConaughey and Leonardo DiCaprio, where Matthew McConaughey goes on to say “Nobody knows if a stock is going to go up, down, sideways or in circles.”

Is trading an art, a science, or is it no different than gambling and simply requires a degree of luck? Whatever camp you side on, crypto markets provide a unique opportunity to make very good returns on your investment. You don’t always have to be a trend follower or a contrarian, the smart way to approach crypto trading is by applying arbitrage models. The problem, of course, is standardizing the API data from the exchanges. While it is not an impossible task, it can be very laborious and requires a great amount of checking to ensure consistency between the different data feeds.

Despite the fact that the cryptocurrency markets are trading with extremely high-volume levels, they are not nearly as liquid as we might think. This market is still highly fragmented in a web of exchanges under very different jurisdictions. The liquidity is spread through various more or less trustworthy exchanges all over the world. The emergence of more trustworthy regulated exchanges has boosted the overall liquidity but has not yet delivered the desired effect of lowering spreads and slippage costs. Furthermore, increasing liquidity would definitely encourage significant institutional investments and promote mainstream adoption.

Arbitrage

Trading Edge

Volatility is something that has discouraged this much sought after mainstream adoption. This measure is related to uncertainty with regard to the extent of price changes. High volatility is evidenced in sharp and unpredictable price swings, while assets with low volatility will see little or minimal fluctuation in prices over a short-term horizon.

There are various strategies one can follow to capitalize on the potential arbitrage opportunities that currently exist across crypto markets. No one can tell for sure how long these opportunities will remain available, as the broader adoption of these assets by the general public will invariably reduce bid/ask spreads and increase trading volumes. However, for now, one can simply make comparisons between different exchanges to understand the magnitude of potential returns on capital.

The following numbers should be taken as an indication, these are not fixed levels and are subject to change. The price of Bitcoin on HitBTC is 2.55% higher than the price of the same asset on Exmo. Nowhere in capital markets can such discrepancy occur with what is said to be a leading asset in the digital economy and the spread on altcoins can sometimes be even greater.

There are different ways to trade the same markets, directional, technical, contrarian, fundamental – or you can utilize a combination of the above and create a strategy that works for you.

What do you think of market structure and is regulatory uncertainty to blame for such fragmented markets? Let us know in the comments below.


Images courtesy of Pxhere and Shutterstock.

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Led 22

Bitcoin’s Wall Street Combo Of Greed and Volatility

· January 22, 2018 · 7:30 am

The lack of volatility in global markets is leading investors to seek riskier investments with increased rewards. Cryptocurrencies, such as Bitcoin, are being used to feed this increased investor appetite. 


Financial Markets Bitcoin

Analysts at Deutsche Bank have asserted that there is a correlation between the price of Bitcoin and the volatility index (VIX). The analysts backed up their  argument saying that the first three weeks of 2018 so far show “correlation between Bitcoin and VIX has increased dramatically.”

The analysts go on to say:

The current ‘triple-low environment’ of low interest rates, low spreads, and low volatility has given birth to new asset classes like implied volatility (ETFs selling volatility), and cryptocurrencies.

Retail Investors Informing Institutional Investor’s Ideas Of Asset Sustainability

It appears to be a sign that investors’ risk appetites are growing as they veer away from the safer stocks and look to the large gains that are made in more volatile markets, such as those like Bitcoin and other more established cryptocurrencies.

CME Group to Launch Bitcoin Futures Trading

Masao Muraki,  Hiroshi Torii, and Tao Xu, Deutsche Bank global financial strategists, write:

Cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets. Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices.

The correlation that the analysts highlight is that when volatility, as judged by the VIX, drops, then they are seeing the price of Bitcoin rise as investors seek potentially more lucrative investments.

The analysts conclude:

The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors).

Greed Is Good

Bitcoin Price markets

Steve Chiavarone of Federated Investors told CNBC’s Trading Nation that:

It’s the first sign of greed since the Great Recession, It’s indicative of rising risk appetites which will drive equity markets higher almost regardless of what happens with bitcoin.

These risk appetites are currently not being exercised in the world of traditional stocks but rather in the world of cryptocurrencies. However, Chiavarone is confident that whatever happens to Bitcoin and crypto in 2018,  investor appetites have nonetheless grown from their exposure to cryptocurrencies. As 2018 unfolds, we will see if money moves back to traditional stocks or remains with Bitcoin and other virtual currencies.

Is the correlation a sign of causation? Are retail investors’ risk profiles increasing and what will this mean for traditional markets? Let us know what you think in the comments below.


Images Courtesy of Bitcoinist archives and Pxhere.

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Úno 09

Bitcoin Welcomes Investors Affected By Japanese Stock Market Volatility

Source: bitcoin

Bitcoinist_Bitcoin

Being part of the stock market is not as fun right now as it was a few years ago.  Every day, a new financial disaster seems to be waiting just around the corner. After the trouble started brewing in China a few months ago, the Japanese stock market is the next one to plunge. The reason for this is simple: government bonds are going negative for the first time. At the same time, Bitcoin is looking more and more appealing as a way to diversify portfolios.

Also read: Valve is Bringing Bitcoin to Over 125 Million Steam Users Worldwide

Japanese Stock Market Takes A Big Hit

In this day and age, being involved in the financial sector with one’s money doesn’t make for a great experience. Every type of investment that seemed reasonably safe – for as far as that is ever possible is losing value faster than one can say “abracadabra”. No stock market appears to be safe from major plunges, and the Japanese market is no exception.

Earlier today, the Nikkei dropped a whopping 5.4%, which is just a sign of what is to come on the Japanese stock market by the look of things. To make matters even worse, Japanese government bonds went negative for the first time, as investors started pulling out their reserves and putting them into other assets.

As a result of this move, anyone who bought Japanese government bonds will be taking a financial loss by simply holding this asset right now. Until the yield of those bonds is back in the positive – or, at least, break-even – the Japanese stock market will remain very volatile. However, this is a trend taking place all over the world, and the ripple effect seems to be in full effect.

Truth be told, this loss on the Japanese stock market does not come as a big surprise. Both the US and European markets had taken several hits yesterday as well, and it only makes sense to see other markets follow that trend. The biggest “losers” in the market were Mitsubishi UFJ Financial Group and Nomura Holdings, both of whom lost close to 9%.

Mitsubishi UFJ Financial Group Announced Digital Currency Plans

It is especially interesting to see the Mitsubishi UFJ Financial Group on that list, as this Japanese bank recently announced how they are looking into developing their digital currency. Whether or not this announcement has anything to do with the sharp drop remains unknown at this point, though.

Bitcoin remains one of the only safe bets remaining for investors. Granted, this popular digital currency can be quite volatile at times as well. But at the same time, Bitcoin is nearly the only asset with a potential for a value increase, whereas more traditional solutions are not even able to offer a return of investment these days.

What are your thought son the Japanese stock market right now? Let us know in the comments below!

Source: CNN Money

Images courtesy of Shutterstock, Mitsubishi UFJ Finance Group

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Bitcoin Welcomes Investors Affected By Japanese Stock Market Volatility

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Úno 05

Cash is An Interesting Investor Portfolio Diversification Tool Next to Bitcoin

Source: bitcoin

Bitcoinist_Cash

With the stock markets being subject to high volatility these days, investors around the world are looking at different options to diversify their portfolio. While some of them have taken a keen interest in Bitcoin, most of the investors are looking at cash as their preferred solution. This may seem odd to some people, but it makes a ton of sense at the same time as well.

Also read: Simplex Offers Bitcoin Exchanges Risk-Free Credit Card Purchase Solution

What Makes Cash So Appealing To Investors?

Based on statistics provided by Bank of America Merrill Lynch, roughly US$208 billion of inflows can be attributed to cash and money market funds. In this day and age of financial insecurity in the stock markets, cash seems to be the only remaining traditional financial vehicle worth gambling on. But at the same time, various banks around the world are pushing for the abolishment of cash altogether.

Most people would assume investors are flocking to bonds and stocks, as they have been one of the most popular investment vehicles for quite some time now. Nothing could be further from the truth, however, as close to US$50 billion has been pulled out of bonds as well. Only stocks have seen a poor growth in attention, although the numbers are nothing to sneeze at.

Volatility is putting the fear into hearts of investors these days. Local markets are somewhat safer compared to overseas investments, but it is impossible to predict how either will evolve in the coming months. This is part of the reason bonds are far less attractive, as they require investors to “lock” their funds for an extended period.

Furthermore, interest rates remain far too low to make any traditional investment even remotely appealing right now. While cash may not offer any interest rate at all, it is more accessible and usable all over the world. Plus, with cash, it is rather easy to move funds around the world, which is of high importance to investors.

However, cash is losing a small portion of its value at every time, simply because there is a lot of inflation. Central banks keep printing money to provide a financial stimulation when the economy is struggling. At the same time, this decreases the value of all other cash bills and coins in circulation by a small margin.

While cash may not hold all of the answers investors are looking for, it’s one medium of value that will be affected less if a new financial crisis were to hit right now. While the money will lose some value due to increased inflation, at last, there will be no funds missing from savings and retirement accounts, like what happened in 2008.

So What About Bitcoin Then?

Bitcoin holds more answers than cash right now, although the modern digital currency is still struggling with adoption by both merchants and retailers around the world. Even though Bitcoin has the potential to become the new global currency in a few years, banks and governments are thoroughly opposing the idea of letting digital currency take off without regulation.

At the same time, cash is being opposed by these same institutions, and investors seem to flock to that medium of value exchange. Bitcoin could become the next major asset in every investor’s portfolio in the future although there is no guarantee this will ever take place. But the digital currency sure looks appealing right now, as it operates outside of the realm of traditional finance altogether.

What are your thoughts on investors gambling on cash as an investment vehicle? Let us know in the comments below!

Source: CNN Money

Images courtesy of Shutterstock, Bank of America

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Led 19

Local Apple App Store Pricing Changes Show Why Bitcoin is The Only Global Currency

Source: bitcoin

Bitcoinist_Bitcoin Global Currency

There are multiple signals that our current global financial structure is not working optimally, and the recent price restructuring by Apple is yet another indication of why things need to change soon.  App store prices will go up in seven countries around the world, as tech giant Apple needs to account for volatile exchange rate changes in the affected regions. Bitcoin remains the only global currency in existence today where the playing field is even for anyone in the world.

Also read: Cryptsy Announces 1000 BTC Reward for Stolen Coins

App Store Price Increase Due To Volatile Financial Markets

Similar to nearly every type of business in the world, an online application store – such as the one run by Apple – needs to adjust its pricing now and then. In most cases, the prices for applications are set by the developers themselves, and Apple will just take a cut from every transaction made on their platform.

However, this App Store price change is quite different from the rest, as the volatile financial markets are to blame for more expensive apps and games. Apple has established a global presence with their App Store, although a lot of the foreign currency transactions will need to be converted to other instruments, such as the US Dollar.

Due to high volatility in certain markets, Apple is forced to up the pricing, as the country does not want to risk losing any of its profits during the process. It is not the first Apple makes such a drastic change, though, as the company has upped prices in 10 different countries over the past few months.

Among the affected countries are Canada, Russia, Israel, and Mexico. Apple users living in those countries – or in Singapore, South Africa, and New Zealand – have slightly under 72 hours left to make any App Store purchases at the normal price. Once that period has elapsed, prices will be inflated artificially to cover change in the value of these traditional currencies.

Furthermore, customers who have an ongoing subscription for any of the games, apps, or services offered by the Apple App store, will see prices increasing as well. Before that happens, they will be notified by Apple via an email, however. The world of traditional finance is far less stable than most people would like to believe, and Bitcoin presents a welcome alternative for the [near] future.

Why Apple Needs To Start Working With Bitcoin Payments

While it is true Bitcoin has seen its fair share of volatility, there is still a good reason for Apple to use the popular digital currency as a payment method for their App Store. Bitcoin is a global payment method and a change in the Bitcoin price would affect all customers in the world in the same manner. A change in local fiat currency affects a specific part of the population, which is not fair by any means.

Furthermore, by using Bitcoin, Apple would be able to let the prices adjust automatically, as third-party payment processors will provide the exchange rate at any given moment. No further manual intervention would be needed in the App Store, allowing more people to work on future innovation for the tech giant. In the end, everybody will win when using Bitcoin.

What are your thoughts on these local price changes in the App Store? Will Bitcoin provide a more stable alternative in this regard? Let us know in the comments below!

Source: Tech Radar

Images courtesy of Shutterstock, Apple

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Local Apple App Store Pricing Changes Show Why Bitcoin is The Only Global Currency

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