Crypto Trading

Andreas Park

Three Fallacies for Crypto Markets

crypto assets = traditional equities

crypto trading = traditional trading

crypto entities = traditional firms

Curious case of a utility token: KIN

  • comments: from Raquel Jackson on Medium
    • "Everything KIK wants to do can be accomplished with fiat currency or a simple payment integration with their app."

Do people understand utility tokens?

Crypto

Exchange

Traditional

Internalizer

Wholeseller

Darkpool

Investor

Venue

Broker

Settlement

Investor

Venue

Settlement

On chain

Concerns

arbitrage requires capital commitment => expensive

exchanges = brokers? => single point of failure

decentralized: totally anonymous => easy price manipulation (e.g. wash trades)

Spirit of Blockchain: Fully decentralized

... 300 lines of code ...

standard trading rules practically impossible to enforce

Crypto exchanges are a security risk

August 2016

A taxonomy of coins vs tokens

Coin

Token

  • native to a blockchain for payment

  • examples: Bitcoin, Bitcoin Cash, Ether, Lumens, Cardano

  • build on top of or linked to an existing blockchain
  • various uses, not just payments

Payment

Utility

Security

Stable coins

Some trading data

based on Khapko, Malinova, Park, and Zoican (2018)

Where does trading take place?

Distribution of changes in beneficiary ownership

most tokens stay at exchanges and don't get settled on the blockchain

some usage tokens are "in use"

Compare Market Value vs Trading Crypto to TSX

Transactions costs

Source: Interactive Brokers

Broker
Level

crypto exchange fees for $1,000,000 market order

account

wire/in-out

  • 25 bps = 2,500 trading fee

  • in/out fee 0.1% - 3%

  • mining fee ($0.25)

Transactions costs

Bid-ask spreads

Transactions costs TOKENs

Summary: Crypto Trading

exchanges = brokers

exchanges = security risk

high exchange fees

tokens: large spreads

very active market

trading rules? => info(price)

decentralized trading possible and happening

Trading of Crypto Assets - Short Version

By Andreas Park

Trading of Crypto Assets - Short Version

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