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Dark Pools for Bitcoin Liquidity Are A Big Deal

Reading Time: 3 minutes by on August 11, 2016 Bitcoin, News
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In the world of Bitcoin, liquidity across the various exchanges can be a problem at times. Particularly when larger investors and traders involved as they do not want to crash or boost the price through their actions. Jered Kenna has teamed up with TradeZero to create a solution for this problem, in the form of a Bitcoin dark pool exchange.

Larger investors and traders are always looking for new opportunities that can provide more liquidity. This is why dark pools are so vital to the ecosystem, as these platforms facilitate very large orders without impacting the market directly. However, there was no such exchange platform available, up until now.

The new partnership between TradeZero and Bitcoin pioneer Jered Kenna will see the world’s first Bitcoin dark pool being established. In doing so, they hope to reduce volatile market movements around the world. Right now, the Bitcoin price is primarily dictated by Chinese exchanges. A dark pool for Bitcoin would see a lot of trading taking place outside of the exchange order books, thus having little to no impact on the current Bitcoin value. Kenna told IBTimes UK,

“If a significant holder were to decide they wanted to liquidate their Bitcoin completely and dump it on an exchange all at once then the price could drop quite a bit. Similarly, if another individual places a massive buy order the price would likely rise.”


Don’t be mistaken in thinking this concept would only apply to cryptocurrency traders, though. Anyone in the world can reap the benefits from this dark pool, as it can be used to hedge against fiat currency volatility. At the same time, mainstream investors would not make their actions public, leaving their “competitors” none the wiser and would not suffer from ‘slippage’. Slippage refers to when large orders move the market price significantly.

Contrary to what some people may believe, the Bitcoin liquidity market is a lot smaller compared to traditional investments. This also means it takes less volume to cause volatile price swings. TradeZero maintains a minimum deposit of US$10,000, which is well above what most people would spend on a more traditional Bitcoin exchange.

Security Is Critical For Any Trading Platform

Once this new Bitcoin dark pool launches, there will be a strong focus on whether or not the platform is secure. The recent Bitfinex hack showed the world once again how lackluster security is not an option in the financial world. One small mistake in the code can cause million of US Dollars in stolen funds down the line.

Thankfully, Jered Kenna is a strong advocate of security for Bitcoin trading platforms. He even went as far as saying how he “hasn’t lost a single Bitcoin to hacking or theft”. Unlike the traditional financial word, Bitcoin does not have the capacity for refunds or chargeback policies if funds were to be stolen or missing.

TradeZero offers built-in security features to put users’ minds at ease. Withdrawal limits will be imposed, and any attempt to go over this limit will require manual verification by the user. In most cases, this will happen through a phone call, which is far more secure compared to email communication. It is also positive to see the company not relying on two-factor authentication, as such security measures are not always enabled by the user due to the minor inconvenience.

Platforms such as exchanges and dark pools need to make sure users are transferring their funds on their own accord, rather than having someone trying to empty their accounts. Regardless of whether a user accesses the dark pool from their computer or mobile device, proper security measures need to be implemented across the board.

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