It could pay investors and traders to shop around, as big exchanges vary more than many may think.
News and analysis: Synthetic tokens linked to bitcoin are proving popular for investors in search of yield, and AMD is backing a mysterious crypto cloud operation.
MARKET MOVES
In the cryptocurrency markets, no two exchanges are alike. Even in major crypto exchanges, trading U.S. dollars for bitcoin can have fairly different order sizes and spreads, according to data compiled by aggregator CryptoCompare.
Average order sizes over the past week were quite varied, CryptoCompare found. Orders on Bitstamp averaged $3,424.11, the highest of major dollar to bitcoin (USD/BTC) pair exchanges. ItBit was second to Bitstamp at $2,874.17, with Kraken at $2787.68. Gemini’s average was in the middle of the pack at $1,438.31, followed by Coinbase at $1,113.15. Bitfinex was lowest, with an average order totaling $342.09. The average order of the six exchanges was $1,996.58.
Average spreads between the highest bid offer and the lowest ask offer on an exchange order book also varied significantly. Data from CryptoCompare shows a few exchanges have a much larger daily price spread than others.
“This is derived from L2 order book data, without fee calculations, on top of this,” said Constantine Tsav, head of research for CryptoCompare. Level 2, or L2, order book data is a term for market information that includes the scope of bid and ask prices for a given asset, in this case USD/BTC.
Luxembourg-based Bitstamp, at $5.21 and New York-domiciled Gemini, at $2.38, have the largest average spreads in intraday trading, in this case CryptoCompare used a two-hour interval. Market spread is the gap between the highest bid and the lowest offer on the order book. Thus the gap is the difference between the price traders are willing to sell an asset and others are willing to buy an asset, and vice versa.
Average spreads on six large USD/BTC exchanges (Source: CryptoCompare)
Chris Thomas, head of institutional trading for Swissquote Bank, doesn’t believe the spread discrepancy between some exchanges is bad – it just depends on the type of trader on the exchange. Traders looking to fill larger bitcoin orders on spot exchanges might choose Bitstamp, based on this data, since it has bigger average orders and wider spreads. Traditionally, traders look for tighter spreads.
(Source: CryptoCompare)
"Whereas Bitstamp and Gemini have a relatively wide spread, the four other ones will use this to boast that they have the most liquidity and are ‘the best’ exchanges,” he said. “But they may only be prepared to support these very tight prices in very small sizes – for example, 0.25 or 1 bitcoin on both bid and offers.”
“One bitcoin on each side of the bid/ask is okay for retail, but it’s not ideal for institutional.”
Of course, traders aren’t just motivated to go to an exchange based solely on average order sizes and spreads.
A very fragmented marketplace exists for crypto exchanges in 2020, said Denis Vinokourov, head of research for cryptocurrency broker Bequant. “The tech stack across exchanges is not uniform,” Vinokourov told CoinDesk.“Some exchanges offer high frequency trading connectivity while others don't, some are more retail focused than others; with segmented geographical focus, numerous legal jurisdictions and various approaches to fiat on-ramps.”
Maxime Boonen, CEO of liquidity provider B2C2, says a trader at that size really just needs to decide which exchange has the best fee structure. “Frankly all exchanges are more or less equal, the liquidity of the major cash exchanges is broadly the same for most intents and purposes.”
“The fees do vary, that's important, depending on how much you intend to trade,” he added.
The increased use of derivatives in the crypto market is also seeing more professional traders move away from spot trading, Boonen said. “Derivative exchanges are more liquid than cash exchanges,” he said.
One of the reasons why order averages might seem so low is that many traders on these exchanges are just buying from time to time to hold (or “HODL”) bitcoin, Boonen told CoinDesk. “You can't get physical bitcoin from derivatives exchanges, it’s not appropriate for HODLing.”
- Daniel Cawrey, Senior Markets Reporter
SPONSORED BY BITSTAMP
Enjoy zero trading fees on all XLM, PAX and GBP pairs through September 1st! Now is the time to join over four million traders and financial institutions that trust Bitstamp’s powerful platform, intuitive mobile app and industry-leading APIs to execute their strategy. Download the Bitstamp app or visit Bitstamp.net/Pro to get started today!
How to place a value on bitcoin? Its data are unfamiliar territory for many investors. Nearly half of investors in a recent survey said a lack of fundamentals keeps them from participating.
In a 30-minute webinar July 7, CoinDesk Research will explore one of the first and oldest unique data points to be developed by crypto asset analysts: Bitcoin Days Destroyed.
Trend: Bitcoin is flashing red at press time and may be heading for bigger losses in the short term.
At press time, the cryptocurrency is trading around $9,200, representing a 0.5% decline on the day, according to CoinDesk's Bitcoin Price Index.
On the daily chart, the cryptocurrency looks to have found acceptance under the 50-candle moving average (MA), a bearish development. Meanwhile, on the three-day chart, the 5- and 10-candle moving averages (MAs) have produced a bearish crossover, while the relative strength index has dived out of a 60-day-long descending channel, signaling a bullish-to-bearish trend change.
Some indicators, like the daily chart's golden crossover and a bull cross of the 50- and 100-candle MAs on the three-day chart, do indicate the path of least resistance is to the higher side. These indicators, however, are based on backward-looking averages and often trap traders on the wrong side of the market.
Besides, technical traders have refused to step in over the past four weeks despite confirmation of the golden crossover. Such reticence is reflective of a weakening of bullish sentiment.
All-in-all, the odds appear stacked in favor of a decline to support levels located at $8,630 (May 25 low) and possibly $8,300 (200-candle MA). On the higher side, $10,000 remains the level to beat for the bulls.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
