High-Speed Traders Dominate Bitcoin Zhou Shuoji is not a bitcoin believer.He says the cryptocurrency will never replace its traditional forebears, and he calls most of its proponents fanatics.But for Zhou, a 35-year-old high-speed trader in Beijing, bitcoin is also too good to resist.His computers trade it 24 hours a day, seven days a week.Using lightning quick orders, they profit from tiny price discrepancies on the myriad venues where it changes hands.“It’s the golden age to be in the bitcoin market, because it’s imperfect,” said Zhou, a former IBM technology consultant whose firm, Fintech Blockchain Group, runs a bitcoin hedge fund and venture capital fund.Forget libertarians, speculative individual investors and Chinese savers trying to spirit money overseas.The reality is that professionals armed with cutting-edge technology now drive as much as 80 percent of bitcoin trading, mimicking strategies honed by some of the biggest players on Wall Street.To them, bitcoin is just the latest asset class ripe for conquering with machines.The cryptocurrency’s market structure ticks all the right boxes: arbitrage opportunities across multiple exchanges, zero transaction costs on Chinese venues that host most of the world’s turnover, round-the-clock trading, and co-location services allowing participants to place their servers right next to those of the exchange.

surging to a record this month, there’s been no shortage of chances for high-speed traders to turn a profit.Exactly how much they’re making is hard to pin down, because the vast majority aren’t required to disclose performance figures (Zhou declined to comment on his).Chinese banks were banned from trading bitcoin in 2013, while capital controls mean foreign firms have a small presence on China’s exchanges.One of the few traders willing to talk about their returns is Chen Zhenguo, who founded China’s largest platform for facilitating automated bitcoin strategies.Chen says he’s generated annualized gains of 50 percent for his own account, though he declined a Bloomberg News request to provide transaction details verifying his claims, saying they’re private.“Bitcoin has a natural advantage when it comes to automated trading,” said Chen, 30, whose Beijing-based BotVS allows clients to run live trials of their bitcoin algorithms on 23 exchanges.The cryptocurrency gained 6.9 percent to $890.77 at 10:18 a.m.

Like all markets, the one for bitcoin comes with risks.At least two exchanges, Bitfinex and Mt.bitcoin farming wikiGox, have suffered cyber attacks that saddled traders with losses since 2011.bitcoin haendlerThe cryptocurrency’s extreme price swings -- average daily moves over the past year were three times bigger than those in the S&P 500 Index -- have deterred some high-speed firms, while the increasing dominance of sophisticated traders begs the question of how long the juiciest arbitrage opportunities will last.Read more: A QuickTake on bitcoin and the blockchainThere’s also growing concern over a regulatory crackdown in China, where authorities are wary of any investment vehicle that might help citizens move wealth overseas.bitcoin qr code iphone

The nation’s central bank conducted on-site inspections at some of the biggest bitcoin exchanges this month, looking for evidence of violations including market manipulation and money laundering.bitcoin legal di indonesiaSimilar scrutiny of stock-index futures in 2015 led to trading restrictions that cut volumes by 99 percent.Still, policy makers could decide the bitcoin market is too small to warrant intervention.bitcoin successorIts current market value is about $13.5 billion, versus $6.5 trillion for Chinese equities.ethereum declineRather than moving money out of the country, most automated traders in China are focused on cross-exchange arbitrage, said Arthur Hayes, a former market maker at Citigroup Inc.who now runs BitMEX, a bitcoin derivatives venue in Hong Kong.

They can transact multiple times per second, reacting to price changes caused by individual investors and other speculators who often use technical patterns to guide their buying and selling decisions, Hayes said.OkCoin, one of China’s three biggest bitcoin exchanges, estimates 60 percent of its transactions are executed by automated traders, while Huobi and BTC China put the figure at around 80 percent.China is home to about 10 significant bitcoin venues, with a majority of trades executed on the top three, according to Neil Woodfine, the chief operating officer of Remitsy, a cross-border payment system.Instead of charging transaction costs, exchanges in China make money by levying a fee when clients withdraw bitcoin from their accounts; they also offer services including co-location and margin trading.Fintech Blockchain’s Zhou, who sees more long-term potential in the distributed ledger technology underpinning bitcoin than the cryptocurrency itself, says he can’t predict what the market will look like in a few years because it’s still young and subject to Chinese regulatory risk.

For now, though, he plans to keep trading.“If the market is here and I can see a chance to make money, I will,” Zhou said.“If the market is gone, I’ll just walk away.”— With assistance by Tian Chen, Benjamin Robertson, Gary Gao, and Lulu Chenby Tyler Durden The Bitcoin Investment Trust is an open-ended grantor trust based in the U.S., sponsored by Grayscale Investments.Trading under the ticker GBTC, it is invested exclusively in bitcoin and derives its value solely from the price of bitcoin.According to its prospectus, the Trust's objective is for the NAV per share to track bitcoin's market price... However, as the chart below shows, while NAV is not far off the price of Bitcoin (multiply the Trust's NAV by 10), the actual traded price of the trust has exploded... to a premium of over 100% in recent days - a record... GBTC now has a market cap of almost $750 million and offers (for those who can find a borrow) perhaps the greatest bitcoin arbitrage of all time with GBTC trading at a stunning $2000 premium to the underlying Bitcoin it is supposed to track...

As Chris at Capital Exploits previously noted, in any other market on this planet, were we to have an asset priced at one level in one place and an entirely different price some other place, the price discrepancy wouldn’t last very long.Traders would buy the asset where it is cheaper while simultaneously selling the asset where it is more expensive and pocketing the difference.Something also known as an arbitrage.Arbitrage opportunities exist in public markets all the time but the discrepancies are typically extremely small and even more so with higher liquidity.It’s also pretty rare for them to last for any real length of time.Years ago I worked with traders whose sole focus was on arbitrage trading but today algorithmic trading trading has almost eliminated these opportunities and jobs.Bitcoin’s market cap is now over $37 billion so it can no longer be considered “illiquid”.We herefore humbly ask any of the Joe Sixpacks out there who’ve invested in this Bitcoin Trust to provide me a borrow as shorting it is not currently available.