Cryptocurrency’s recent turmoil has not reduced the appetite of institutional players to increase their exposure to this asset class. Despite the sharp decrease in total value of coins and tokens, from a peak of nearly $3 Trillion to under $1.5 Trillion, the infrastructure of Crypto trading is now being built and new funds are being committed. Markets are evolving from being primarily retail-driven to now, institutionally focused. Trading technologies must adapt to this new world of diverse trading strategies, such as; long, market-making, arbitrage, delta-one (with the emergence of ETFs).
Crypto trading is the closest to FX Trading, but it also has distinct differences. The main reason is the fact that Crypto, as well as FX is about a relative price between the crypto (or the currency) and USD. This is an asset class, with a low (to near non-existent) level of regulatory framework, a plethora of players and participants, and an incredible level of innovation. The below table review the similarities and differences of each market and supporting technologies.
The Crypto and digital asset market is very analogous to the heyday of the FX trading world, but with any new market the technology, regulatory and participant challenges are unique.
For any TradFi vendor it is critical to approach these new markets with an open mind to innovation and not simply try and solve new problems with old designs. On the other hand, the new providers launching in the Crypto space cannot ignore the valuable technology lessons that have been learned through investment and suffering over the last decade in TradFi. Arrogance is the biggest impediment to technology growth and by learning and adapting the best multi- cross- asset trading solutions will evolve.