By Tom Higgins CEO, Gold-i
By Tom Higgins CEO, Gold-i

The future of margin crypto trading

It really is the Wild West at the moment with seemingly hundreds of “crypto exchanges” popping up everywhere, all with the “Nirvana” of offerings, but the difference between these exchanges and traditional exchanges (also known as RIEs, or Recognised Investment Exchanges) is vast.

First Published: e-Forex Magazine 77 / Viewpoint / September, 2017

Crypto exchanges are more like retail crypto platforms, with payment, CRM, and affiliate marketing all bolted together in one cohesive lump. Traditional exchanges have some knowledge of crypto trading but little about retail trading, and certainly none of the bolt-on goodies.

There’s further confusion when it comes to the distinction between margin trading and physical trading. In the retail FX world, never the twain shall meet but in the crypto world there is no distinction (yet) and this causes no end of issues. Just imagine the difference between exchanging GBP for USD to go on holiday to punting in the GBPUSD market with a leverage of 1:100, and trying to use the physical market to punt on! This is what is happening in the crypto world. There are still a lot of unanswered questions when it comes to trading this new form of currency – such as what happens if validation fails, and how does the trade unwind?” It is not legal to “short” a crypto currency (just like a stock), and as there is no repo market for borrowing and lending, this is a problem. No one seems to know for sure how to solve these challenges but despite the confusion and unanswered questions, I believe cryptos are here for good.

Where is it heading?

In my view, we need to develop a real margin crypto market with some leverage (probably very small due to the high volatility) with an aggregated executable price feed across multiple crypto exchanges to give the best option for price discovery and trading. This all cries out for the introduction of a derivatives market for cryptos, such as the CFDs we have as a proxy for equities in the Stock Exchanges, which can be shorted. Whilst most of the focus is on Bitcoin, there are many other crypto currencies, with Ethereum, Ripple and Litecoin being next in line to the throne. Ultimately all crypto currency trading will take place on exchanges but will this be traditional exchanges adapting to the New World or the current crypto exchanges maturing to meet the stringent demands regulators will inevitably place on them? This is an iPhone vs Blackberry battle and it will be fascinating to see who wins.

Gold-i’s crypto offering

Gold-i currently has a crypto rate feeder for MetaTrader, taking pricing from either Poloniex, Kraken or BTC-e, with seven others currently in development. We are launching a vertically integrated version of our innovative liquidity management platform, Matrix, for cryptocurrencies. Gold-i’s Crypto Switch encompasses aggregation, risk management and advanced analytics across a number of different cryptocurrency exchanges, enabling brokers to see prices and also execute in an exchange.

For further information about Gold-i, please visit www.gold-i.com