Report Suggests Wall Street’s Influence has Drastically Improved Price Variations Between Cryptocurrency Exchanges
Recent data analysis by cryptocurrency trading technology firm SFOX shows a significant drop-off in price variations on digital asset exchanges in 2018. According to SFOX, the trend can be attributed to large Wall Streets firms entering into the market, Business Insider UK reports.
“Before institutional firms were actively trading crypto or heavily involved (before 2018) bitcoin price differences between exchanges varied as high as 4.5%,” said Danny Kim, head of growth at SFOX. Kim told Business Insider that price differences between exchanges are now no more than one tenth of one percent.
If the trend continues, uniformed price assessments could mean an important step forward in legitimizing the cryptocurrency marketplace.
Business Insider reports that a number of large Wall Streets firms including Goldman Sachs and the parent company of the New York Stock Exchange, ICE, have announced their intentions in the last year to enter into the digital assets market. Additional reports of large money managers, hedge funds, and endowments entering the market are becoming increasingly common.
Danny Kim believes that developments in trading technology are beginning to allow high-frequency trading firms (HFTs) to take crypto trading seriously.
“Some HFT firms have been trading since crypto 2014, but have limited themselves because the infrastructure wasn’t there,” said Kim. “Most if not all HFT firms require a FIX connection (an advanced type of connection to an exchange) at an exchange in order to trade efficiently. Crypto exchanges haven’t offered FIX connectivity until recently.”
Another important technological advance being made by crypto exchanges is the adoption of colocation services. Large equity exchanges like the New York Stock Exchange and Nasdaq allow traders to house their trading computers in the same building as their matching engines. In 2017, we began to see cryptocurrency exchanges offering colocation, beginning with Gemini and more recently Coinbase. This too could play an important role in bringing more price stability across markets for digital assets.
Suggested Reading : Learn how Gemini compares to Coinbase in our comprehensive exchange comparison.
“As this trend continues, the stabilizing effects of institutional investment will extend beyond price spreads, and on to price fluctuations,” Kim said. “Eventually, it could even come to the point where Bitcoin could come to resemble the stable coins people are looking to for payments and is used for Satoshi Nakamoto’s original vision: a ‘Peer-to-Peer Electronic Cash System.'”
Rumors have been circulating recently that Gemini cryptocurrency exchange is on the verge of launching a joint venture with Nasdaq to list top cryptocurrencies for global trading. The rumors were confirmed by a source within Nasdaq that a “Nasdaq coin exchange” is set to launch as early as Q2 of 2019. The Nasdaq source reported to the ICO Journal,
“The conversation around listing coins has centered on how they will be classified from a regulatory standpoint. As you can imagine, our leadership is closely connected to the rumbling at the SEC and CFTC around cryptos and what is expected over the next 3-6 months. Even with the longest of time frames assumed, some guidance will be provided and I expect we will act quickly. The framework (two different sets of framework based on two different regulatory outcomes) has already been laid to create a separate silo for coin listings and a robust trading apparatus. Doing the math here, look for regulatory bodies to provide guidance in Q1 of 2019, and an announcement and a ‘coin exchange’ to either be announced or launched in Q2 of 2019.”
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