Despite the current massive growth in crypto markets, there were times when exchanges and other market intermediaries were illiquid, fragmented, insecure for custody, and costly.
Between 2014 and 2019, I was heavily involved in running a bitcoin arbitrage fund in Switzerland. I created strategies when it was still legal to trade bitcoin in China, before Bitfinex was hacked, and when the US-based exchanges (Kraken, Coinbase, itBit, CEX) and Bitstamp had price discrepancies ranging from 0.5% to 5%. As a fund, we took advantage of every opportunity, including the “kimchi premium,” by building the proper infrastructure from the ground up.
Here is the outline of the most innovative solutions we built while trying to deploy millions of dollars into illiquid markets.
We built a decentralized automated trade execution system (nicknamed DATE) that used artificial intelligence to implement our trades across the exchanges in different parts of the world. The DATE served as a protection layer from counter-party risk and significantly reduced the costs associated with trading. Kudos to many partners on different exchanges that helped us implement the necessary API connections.
Using machine learning, we used DATE’s internal marching engine to break large orders into small pieces and execute trades at given time and price gaps at specific exchanges.
We also taught our AI to analyze current liquidity and trading conditions and calculate what would be the ideal distribution of funds across exchanges.
The experience we have with crypto exchanges is deep and hands-on. We brought a lot of innovation to the market. Now, it’s time for the next step.
Through one of the companies we invested in, we are building the fastest decentralized p2p crypto exchange in the market on top of a new blockchain network utilizing many innovations related to NFTs. This is one of the few projects I am incredibly excited about, and I will share more details as we progress. Stay tuned.