Crypto HFT: Know-how of Dark Pools

Capital Markets CIO Outlook | Wednesday, February 20, 2019

For a majority of trade on the stock market, High-Frequency Trading (HFT) has been responsible for a number of years, and it is important to shed some light on its role in the cryptocurrency market. Although HFT remains relatively new on the cryptocurrency market, many HFT companies that already expand their operations into the crypto-currency market have increased their growth and interest. Several giants in the crypto-monetary market, including DRW, DV Trading, Jump Trading, and Hehmeyer have already established themselves in the market. Traditionally, these companies operate in stock and are now focusing more on the cryptocurrency market by using their technology to generate profit through large orders in altcoin transactions. Financial Times reports that these leading high-frequency trading companies have swung into high-frequency crypto trading. The same report claims that several new hedge funds are also used to create positive ROIs for investors in crypto markets by using algorithmic trade strategies.

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Now, more investors in cryptocurrency trading in retail and institutional cryptocurrencies are engaged. The internet has grown especially popular with high-frequency trading. It was made easier for high-frequency trading not only institutions and hedge funds but also ordinary retail investors. For higher frequency crypto traders, crypto could be the next large area for growth.

Special trading tools used by High-frequency traders are dark pools and dark pools of Liquidity. A dark pool is a liquidity pool that the general public cannot access. High-frequency traders can do substantial business using dark pools without alerting the rest of the market. Dark pools enable traders to receive liquidity without transparency from a major exchange. Other investors are making trades out of sight.

Meanwhile, traders who do large businesses can perform without being tackled by the market. In traditional markets, dark pools play an essential role in high-frequency trading. But in crypto markets, they're not yet as prominent.

Dark pools–especially large, regulated dark pools–will benefit crypto markets as they facilitate participation in the industry for institutional investors and high net worth individuals. Today, the crypto markets still include these participants, but they use OTC trade desks and other similar platforms with caution. Dark pools would give these groups another option, encouraging more cryptographic adoption.

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