Professional traders using high-speed, automated trading are now responsible for 80% of bitcoin trading, according to Bloomberg. Bitcoin offers arbitrage opportunities across different exchanges, zero transaction costs on the Chinese venues hosting most of the activity, round-the-clock trading, and co-location services allowing participants to align their servers with exchange servers.
As trade volumes reached record levels this month, according to Bitcoinity.org, opportunities exist for automatic traders to reap record profits.
Profiting From an ‘Imperfect’ Market
Zhou Shuoji, a former IBM consultant now operating Fintech Blockchain Group, a bitcoin hedge fund and venture capital fund, said that through automated, 24-hour-a-day trading, his firm is able to profit from tiny discrepancies in the myriad venues through which bitcoin changes ownership. He said the bitcoin market presents a “golden age” because it is imperfect.
The majority of traders are not required to disclose their profits. The government prohibited Chinese banks from trading bitcoin in 2013. Foreign firms that may be more likely to disclose earnings have a small presence on Chinese exchanges due to government capital controls.
Chen Zhenguo, a trader who founded the country’s largest platform for facilitating automated bitcoin strategies, said he has realized 50 percent gains for his own account. He did not provide information to verify his claims.
Chen, whose company, BotVS, allows clients to run live trials of bitcoin algorithms on 23 exchanges, said bitcoin has a natural advantage in automated trading. Bitcoin gained 6.9% to $890.77 at 10:18 a.m. in London.
Bitcoin’s price volatility has deterred some high-speed firms.
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