Visualising High Frequency Trading in Bitcoin (2014)


150 points | by nosuchthing 342 days ago


  • jnordwick 342 days ago

    This is really old, from around the end of 2014 it appears.

    Also there is no HFT in cryptos: there is no colocation and not a single exchange can support either the market data dissemination or order processing capabilities right now. Every crypto exchange is horribly slow and appears to be terribly written.

    • gnaritas 342 days ago

      That doesn't mean there's no HFT; automated trading as fast as the exchanges allow is HFT.

      • jnordwick 341 days ago

        Not by any definition I've seen. There's always the notion that hft techniques have always existed and there is some validity to that but usually when referred to in a modern context it relies on qualities that make speed of light (hence colocation) a limiting factor.

        • gnaritas 341 days ago

          On a modern exchange it does mean that because that's what it takes to trades as fast as possible, on a low tech bitcoin exchange where such speeds are not possible, it takes much less; it's HFT none the less. It's still computer programs trading the same algorithms offering up liquidity to flip a quick profit as fast as the tech allows.

          • jnordwick 341 days ago

            I work in HFT and i probably couldn't run most of my stats on these exchanges. There are some that can be but their performance limits what can be run.

            The ones that could be run are often the same that were run on the exchange floor but you wouldn't call those 20 years ago HFT.

            • gnaritas 341 days ago

              Bitcoin exchanges are full of manual TA chart traders, to them everyone running algo's is a HFT; context matters, you can't compare the nascent tech in Bitcoin to a modern Wall Street exchange. If you're algo trading as fast as technically possible on the exchange, you're HFT'ing. Words have meaning, you can't get any higher frequency than as fast as the exchange allows.

              HFT'ers collocate because it gives them an edge, they were HFT'ers before they discovered that edge, collocating isn't what makes it HFT. Trying to trade faster than your competitor, competing on speed, that's what makes something HFT.

      • feelix 341 days ago

        I have heard that in BitShares all the transactions occur on-chain and it can be HFT'd.

      • bmilleare 342 days ago

        I submitted this post back in 2015 and it's no less impressive now - I'd love to see some updated analysis now that automated trading is even more prevalent in btc.

        • brooklyntribe 342 days ago

          Plan B?

          Just buy what you can afford each week. And don't think about it. Come back in a year.

          Retire to Goa. AKA A beach. :-)

          • gnaritas 342 days ago

            Terrible plan, even if it double or tripled in a year you're not going to retire from that and given its history it's entirely possible it'll be half the current value next year.

            • bradleyjg 342 days ago

              This asset class is different. Prices only ever go up.

              • qntty 342 days ago

                It's hard to tell what's satire and what's serious when people are talking about bitcoin

                • 342 days ago
              • paulpauper 342 days ago

                paradoxially, if you buy a little each week , you want the price to oscillate rather than go strait up

                • jstanley 342 days ago

                  Don't you want it to stay low for ages and then shoot up all at once?

                  How does oscillation help?

                  • fragsworth 342 days ago

                    You are right, and they probably mean the reverse causation. If it is volatile, you want to "dollar cost average", so you aren't significantly impacted by the price of a single purchase.

                    • brndnmtthws 342 days ago

                      'oscillation' isn't the word I'd use, but I assume the parent is referring to dollar cost averaging:

                • GordonS 342 days ago

                  Wow, this is the most in-depth analysis of dodgy Bitcoin trading I've ever seen.

                  Is this kind of thing still possible, or do exchanges prevent it these days?

                  • runeks 342 days ago

                    > Is this kind of thing still possible, or do exchanges prevent it these days?

                    Why would exchanges want to prevent this?

                    As far as I can see, it’s speculators battling against speculators. Why not just let the best speculator win? It’s not like it affects my ability to sell or buy bitcoins on Bitstamp — and I hope we can agree that there is no “right” price of a bitcoin — so what’s the incentive to stop it, other than to assist particular speculators (with particular strategies) in making profits?

                    • nerdponx 342 days ago

                      Because it makes Bitcoin unusable for actual economic transactions.

                      • blunte 342 days ago

                        Not really. On most exchanges, the transactions never hit the blockchain - it's all internal accounting within the exchange.

                        All this speculatory activity creates liquidity, at least on the exchanges where the speculation is taking place. That's generally good for outsiders who need to exchange bitcoin for something else (on said exchange).

                        Except for a few flash-crash scenarios (or failures of the exchange), this shouldn't have much impact on price volatility on day/week scales that average people care about.

                        • paulpauper 342 days ago

                          I think it's possible for exchanges to exacerbate volatility. If all the trading were consolidated to a single exchange (like the NYSE or NASDAQ in America), it would mean that there would be more liquidity to the downside and price resistance to the upside, but instead everything is split up between 5 major exchanges. So if someone places a large order on one exchange, the others will mirror it, so effective liquidity is cut by 80%. This works to the upside too. A way to fix this would be to split the transactions evenly among all majors exchanges, executing all the orders at once instead of only at a single exchange, but most large traders probably don't do this.

                          • ryanmerket 342 days ago

                            Isn't that what Bitcoin Cash is for and why they split off? Bitcoin Core has super high transaction fees and will evolve not into a currency but a vehicle for wealth storage (much like gold).

                            • alphydan 342 days ago

                              I keep hearing about these high transaction fees but I've never seen them. When I send the equivalent of tens/hundreds of thousands of USD I pay a few cents of a dollar. It does take a few hours, sure. But what would it take in a fiat currency: walk to the bank, explain why you are sending so much money, set-up the order, wait a few days. No doubt with fees in the hundreds of dollars.

                              So as far as I can tell fees are still ridiculously small. Large transactions are usually not that urgent.

                              • JumpCrisscross 342 days ago

                                > But what would it take in a fiat currency: walk to the bank, explain why you are sending so much money, set-up the order, wait a few days. No doubt with fees in the hundreds of dollars.

                                When was the last time you sent a wire? For accounts with $15,000 minimums it's usually free, can be set up from your phone and, depending on your bank, either clears within minutes or by close of business.

                                • alphydan 341 days ago

                                  Good point. I assume you are talking about national transfers (within the same country) and during the week?

                                  What is your experience wiring $X0,000 abroad as a consumer?

                                  • JumpCrisscross 341 days ago

                                    My last international wire was for $60,000. It arrived same day in Switzerland. I set it up from Citi's iPhone app and paid nothing for it.

                                    • alphydan 339 days ago

                                      I assume using this?

                                      > Citibank, which offers free international wire transfers to other Citi accounts through the Citibank Global Transfers service.

                                      There is a major caveat. If you need to send money to someone who doesn’t have a Citibank account, the fee is a steep $35.

                                • lsseckman 342 days ago

                                  Are you actually sending that amount around?

                                • lsseckman 342 days ago

                                  Are you actually sending that amount around?

                                • popol12 342 days ago

                                  It's more complex than that. Both Bitcoin Core and Bitcoin cash teams want to scale things up, Bitcoin cash is doing it one way and Core another way (look for "Lightning Network"). Nobody in both camps want Bitcoin to remain a store of value, we all want it to replace fiat.

                                  • zwily 342 days ago

                                    No, even the Bitcoin Cash blockchain could not handle even a small percentage of HFT traffic. Like the poster above said, this activity is all internal exchange accounting.

                                • nebabyte 342 days ago

                                  Aand again, why would exchanges care? Unless they never cash out their fees to fiat (which I'm sure all do at least to some extent), they've got theirs.

                              • Zarath 342 days ago

                                Order book spoofing still happens all the time.

                                "Related to fleeting orders (inevitable order cancellations), laying involves adding volume at various price levels with the sole intention to influence other market participants into believing (observing) an order book imbalance or strong buying/selling pressure."

                                As a trader, this is something you should be learning to spot.

                                • Grangar 341 days ago
                                  • OscarCunningham 342 days ago

                                    Right, if people are expecting spoofing then it should lose money. People won't change their prices in response to it, but they will accept your overly generous offers.

                                    • Zarath 341 days ago

                                      Not everyone does and there can be multiple layers of reverse psychology even if there is. Is this wall fake? If so, are they trying to fake that there is sell support? Or do they know people will think that and there really is sell support?

                                      • goldenkey 342 days ago

                                        You dolt. The orders get canceled before anyone could have a chance to eat through the order book and match them.

                                      • gnaritas 342 days ago

                                        In the real world, that's illegal. In the bitcoin world, it will be eventually but until then, looking at the order book is a waste of time, it's all fake.

                                        • Zarath 341 days ago

                                          I kind of like it. Random walk price movements must be incredibly boring to trade against. The more manipulation, the more interesting IMO.

                                      • paulpauper 342 days ago

                                        it can be prevented by not showing the order book size

                                        • jnordwick 341 days ago

                                          Then people would just shred their orders and separate them by one satoshi to make the market appear deep.

                                      • jg2009 342 days ago