The one question algo-traders have been asking themselves lately: is it worth trying to trade on cryptomarkets or is it still too much of a Wild West out there?
Cambridge alumni Dr. Timur Zainiev worked for some of the largest British and Russian investment banks (The Royal Bank of Scotland in London and Sberbank in Moscow), but right now he has chosen to be a partner and an in-house algo-trader at Arbidex.uk.com – a platform for cross exchange arbitrage and single-window trading. We asked Timur why he made this choice, what is the future of algorithmic trading on cryptomarkets, and what are his plans for this project.
BN: You worked for some of the largest investment banks in London and Moscow. Why did you decide to switch to crypto-trading?
TZ: Although work in a large bank has its merits, it can get a bit predictable and mundane. Initially I left Sberbank CIB (former Troika Dialog) for a small algo-trading hedge fund, which traded primarily on the Moscow stock exchange. After a few years at the fund I realized that the nascent field of algorithmic crypto-trading offers great opportunities (and rewards) for professionals, brave enough to take the leap. I took it last year and never looked back.
BN: Do the same trading algorithms work identically on classic stock exchanges and cryptomarkets?
TZ: Not really. Primarily, since the level of competition on cryptomarkets is much lower than on the established exchanges. For example, to make money using arbitrage strategies, a very, very fast robot is required on classic exchanges. The latency of the robot has to be within 1 microsecond (one millionth of a second). On crypto exchanges, at least for now, robots that are thousands of times slower, can still compete and earn money. And having a relatively fast (and clever) algorithm translates into profits of up to 10% per month.
BN: So if arbitrage is that super-profitable, why can’t traders do it themselves? Just buy at one exchange and sell at another. Why use a platform like Arbidex?
TZ: As the number of participants increases, the profits inevitably start to shrink. It has already become pretty much impossible to arbitrage by hand, and even the robots that used to turn profit a year ago are too slow and dumb by today’s standards. This trend will continue, and only the fastest, smartest, and most robust robots will survive. We believe that our platform will be one of the winners in this race.
BN: And how fast are your robots?
TZ: We have a very fast and robust connector, adapted from the connector to classic exchanges. On top of it we have a trading algorithm, that can be made much faster than it is right now, yet even as is it’s one of the fastest on the Bitmex exchange, for example. Once the competition catches up we will upgrade our algorithm and make it, by my estimates, 20 to 30 times faster.
BN: How is your platform better than actual crypto exchanges?
TZ: Arbidex SWT platform insulates trader from actual exchanges with all of their bugs, idiosyncrasies and quirks. Additionally, by aggregating trades we can offer our customers lower commissions than exchanges for the same traded volumes.
BN: And why do exchanges want to work with you? With how many exchanges are you integrated at the moment?
TZ: We provide liquidity for exchanges, bringing more customers to them through our platform. Right now, Arbidex SWT system is integrated with Bitfinex, OKEx, Bitmex and Binance. Our architecture allows us to quickly add new exchanges if need arises.
BN: What are your plans for the future?
TZ: Soon we will open to the public our Single Window Trading platform – the best tool for small crypto investors. It will bring the ability to trade on 4 exchanges through one application, pass KYC only once and have lower commission than on exchanges themselves. After SWT we will launch the “best exchange rate” option for our customers. Comparing the current prices on different exchanges in real time, we will offer the best bid and offer. After the best rate exchanger, we will give Arbidex users the ability to trade between themselves, basically, creating our own crypto exchange.
Essentially, we plan to reverse the standard exchange-opening procedure. Instead of first creating the platform and then trying to attract customers to it (not an easy task by any measure!), we will start with a platform for trading on other exchanges, attract a large customer base and then gradually introduce our own exchange features to existing customers.