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Bitcoin Market Maturing as OTC Firms Move to Digital, Finds Report

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Bitcoin Market Maturing as OTC Firms Move to Digital, Finds Report

In a sign of a maturing market, Chicago-based Jump Trading now allows its customers to trade bitcoin through an electronic Over-the-counter (OTC) platform.

Digital Trading Push

As per a report on Business Insider, the company’s graphical user interface has been well-received  by clients, allowing them to trade with others in a wholly electronic system that also leaves convenient audit trails.

The report observed that while cryptocurrencies are a groundbreaking financial innovation and extremely forward-thinking in their concept, the way the asset trades is akin to historic trading methods.

For example, institutional traders place million dollar digital currency trades via phone calls or video conferences, instead of using more advanced techniques. Reportedly, companies such as Cumberland, DRW’s cryptocurrency arm, even conduct bitcoin trading via Skype.

Large Trades not a Novelty

In stark contrast, Jump Trading’s electronic platform allows users to execute and place large cryptocurrency trades directly with counterparties. Additionally, the desktop interface ensures that external trading exchanges have no intervention in the trade.

The investment house is famous for its High Frequency Trading (HFT), which utilizes advanced quant algorithms to perform thousands of trades per second in the traditional markets. In addition, the company claims to be developing a “lower frequency trading strategy,” but has not released any public information on the latter.

Industry observers believe that Jump is serious about its cryptocurrency ventures, besides propagating the fact that voice-based platforms are not the best bet for place trades. Such techniques can easily be tapped and lead to the compromise of sensitive information.

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Jump office

(Source: Glassdoor)

Cryptocurrency Market Much like FX

John Spallanzani, a former FX trader at Sumitomo Mitsui, believes that the cryptocurrency market is maturing similarly to the multi-trillion dollar foreign-exchange market. In the latter’s salad days, the market conducted trades exclusively over the phone, adding that  his company “used to call 20 banks at once for spot FX prices in the 1990s.”

The cryptocurrency industry has experienced the rise of many OTC desks in recent times. Popular cryptocurrency exchange Kraken set up an OTC desk in 2017 in New York, while Coinbase launched block trading in May 2018.

More to this point, several cryptocurrency-focused investment funds are also opening up at breakneck speed. As per research, over 61 such funds have launched in 2018 alone, with the global total at 366. However, the crypto-specific hedge funds only handle $5 billion: a drop in the financial ocean for traditional hedge funds with trillions of dollars under management.

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