Introduction to Crypto-currency

From shopping to entertainment, the internet has brought about a revolution in many industries. Now, it is setting its sight on taking the payment system digital. This has given rise to Bitcoins and other crypto currencies.

Crypto currency, as the name suggests, uses cryptographic techniques and methods to secure transactions. A mutually trustworthy party manages the integrity of a crypto currency. The rates are set and known to everyone. Crypto-currency puts a cap on production of the currency to maintain a balance in the market. Some of the best examples of crypto currencies are Namecoin, Litecoin, Peercoin, Ripple and Masterxcoin.

Bitcoins is one of the most popular crypto-currency so far.

Bitcoins is a form of a digital currency that is stored on a computer system and traded online. Bitcoins was developed by Satoshi Nakamoto in 2009. It does not have a central regulatory body to monitor and is based on a peer to peer model. It is the first crypto currency and many other crypto currencies have followed its model. One major issue with Bitcoins is highly fluctuating price and distrust on its authenticity and security.

Processing and storing bitcoins in computer system is called mining which is a reward for individual or a business because they charge a fee for that. You can buy bitcoins from exchange by paying real world money. Sending and receiving bitcoins is also not an issue anymore but you will have to pay a transaction fee for that. The fees are lower as compared to credit card fee which has attracted the interest of merchants towards Bitcoins.

CoinDesk

The need for a unified system still remains to be fulfilled to manage Bitcoins and other forms of digital currencies. CoinDesk tried to take care of this need and offered a platform for newcomers and experts in the field to know about the latest news related to crypto currencies and digital money. The site started operating in May 2013 and took it to the next level when Jon Matonis joined the team of CoinDesk as an editor in September 2013. Jon Matonis was a former executive director of the Bitcoin Foundation and has the right skills and experience in the industry.

CoinDesk is one of the best websites if you are new to the field of digital currency or want to know about the latest happenings in the Bitcoin industry. With the increase in popularity of mobile devices, CoinDesk also took an initiative and released its iOS app in April 2014. The app gives you access to all the top stories and news related to digital currencies. It also has a Bitcoin Price Index so that you can access all the important information about crypto currencies on the go.

CoinDesk Price Index

There are many exchanges for Bitcoins and the rates may differ slightly. To standardize things, a Bitcoin price index has been developed by CoinDesk. The CoinDesk Bitcoin price index is the average of Bitcoin prices of Bitcoin exchanges. Set up in September 2013, many new exchanges have been added while some removed since then due to a number of factors. For instance, Mt.Gox was added to the price index later due to decreasing risk premium and to add new deposit and withdrawal methods. Unfortunately, it was removed because it failed to meet the standards of inclusion in the index in February 2014.

A new exchange called Bitfinex was added to the index to take the number of exchanges to three due to its good performance in Bitcoins trading. Some of the popular publications, such as New York Times, BBC, and Reuters, also publish Bitcoins Price Index in their publications. There are a few conditions exchanges have to fulfill before they can be considered for inclusion in the CoinDesk Price Index.

For example, the minimum trade size should be worth at least $1500, the daily trading level must touch the level set by CoinDesk, the exchange should be operating internationally, and must be large enough to be counted as at least 2% of the total market. Otherwise, the exchange will not be considered for listing on the Coindesk index. This applies to any and all exchanges for Bitcoins and other crypto currencies.

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Top Bitcoin Start-Ups

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Market Place

MKTPlace is a leading digital and social media platform for traders and investors. MKTPlace offers premiere resources for trading and investing education, digital resources for personal finance, news about IoT, AI, Blockchain, Business, market analysis and education resources and guides.

High-frequency trading (HFT), as the name suggests, refers to the quick transacting and processing of a large number of orders. It is a trading platform traders can use to place and execute orders. In HFT, traders make use of complex algorithms to analyze the financial market they are trading in and then execute the trades accordingly. In other words, HFT is a form of algorithmic trading with the use of the necessary tools that allow traders to make trades quickly.

Obviously, they do take into account the market conditions before going ahead with the trade. Traders who can think on their feet and make quick decisions are the ones who benefit the most from HFT.

History and Growth

Up until a few years back, HFT orders were responsible for more than half the orders placed in the market. However, HFT hasn’t been around for as long as some other trading methods and techniques. It only came to the fore at the turn of the millennium. The turning point was the authorization of electronic exchanges by the SEC, which took place in 1998. Back then, it took at least a few seconds for a trader to execute his/her trade. A decade later, decisions can be made and traders placed in a matter of milliseconds. Trading has never been this quick and it is only going to get faster in the future.

Despite all-round acceptance of the concept, it took a while for HFT to become a household term, at least as far as the financial markets are concerned. It took a 2009 article published in the New York Times to turn things around and make traders and analysts sit up and take notice that HFT is indeed a practice to be reckoned with, not just a passing fad. Things have changed since then, with Italy being the first country to impose a tax on HFT. Initially, traders were required to pay 0.002% tax on any equity transaction they made which didn’t last more than 0.5 seconds.

Rise in Popularity

What’s there to be gained from making trades in milliseconds, you might ask? After all, there are 8 hours when you can make trades on the floor and after that, you can continue planning your trades for the next day online. That being said, HFT really only gained popularity after the traders were rewarded for adding more liquidity to the market. The NYSE has in place a group known as the supplemental liquidly providers (SLPs). There purpose is to increase the competition in the market as well as make existing trades and quotes more liquid. To incentivize this practice, the NYSE pays a rebate to these providers.

Firms which engage in HFT are not known to have in their coffers a large sum of capital, as is the case with the largest trading firms and hedge funds in the market. Moreover, HFT firms are also unlikely to sustain their current positions in the market for too long, usually doing away with them before the end of the trading period. As a result, the Sharpe Ratio for HFT is considerably higher as compared to the usual buy and hold strategies traders use. This is the reason HFT traders compete with others of their ilk rather than against any long-term trader in the market.

How it Works

So, you might be curious to learn how HFT actually works. There are generally three main pointers which can be used to explain the HFT process:

1. HFT firms choose the exchange they want to place the order on. Since they have direct access, they are not required to employ the services of a broker. They make the decisions pertaining to the trade on their own. Cutting out the middleman is what enables them to save time.
2. HFT firms then execute their trades themselves or have a computer with a set of instructions programmed into it to do it for them. Of course, in case there are any variances, a trader has to manually execute the trade. That being said, it still enables them to make traders faster than is manually possible.
3. Having intricate knowledge of how the market works and how trades are executed is important. You need to know how orders are placed and processed as you cannot get any additional help or assistance. Therefore, it is a given that HFT firms have the requisite knowledge to benefit from HFT.

So, this is all you need to know about HFT and how it works. As you can see, it can prove to be a winning strategy, particularly if you can find a way to automate the process.

Market Place

MKTPlace is a leading digital and social media platform for traders and investors. MKTPlace offers premiere resources for trading and investing education, digital resources for personal finance, news about IoT, AI, Blockchain, Business, market analysis and education resources and guides.