Block trading appears to be the latest focus of big players in the crypto market. With institutional investors looking to make substantial trades in the market, providing crypto block trading services can be a profitable proposition. In March 2018, Independence Reserve, an Australian crypto exchange platform launched an over-the-counter (OTC) crypto trading desk that is targeted at offering block trading services to big-time crypto traders. Now, it appears that Gemini, the crypto exchange platform owned by the Winklevoss twins is about to do the same.
The service will enable big trades to occur outside of the platform’s order books.
The Gemini Block Trading Service
A block trade, also known as a block order, is an order or trade submitted for the sale or purchase of a large number of securities. A block trade involves a significantly large number of equities or bonds being traded at an arranged price between two parties, sometimes outside of the open markets, to lessen the impact on the security price. (Definition from Investopedia)
Gemini is looking to compete with platforms that cater to institutional investors by launching a service that can allow traders purchase a significant amount of cryptos. Already, many of such platforms have begun to spring up in markets like Australia and Hong Kong. Crypto block trading is suddenly becoming the new hot spot in the crypto market due to the increasing demand for cryptos from hedge funds and other institutional investors. Already, it has been noted that the participation of institutional investors in the Asian crypto market was one of the reasons for the meteoric rise of bitcoin in late 2017. Experts believe their American counterparts might be joining in soon as shown by the crypto purchases being made by some notable firms in the mainstream American finance landscape.
The Gemini crypto block trading service will come online by 9:30 a.m. local time in New York on Friday, April 12, 2018. According to a blog post released on the company’s website on Monday, April 9, 2018, the service will make electronic broadcasts informing potential investors simultaneously. The post also revealed that information regarding any trades would be published on the Gemini market feed 10 minutes after execution.
Importance of Block Trading in the Crypto Market
Most cryptocurrency exchange platforms list trading contracts on a central limit order book. Traders use this order limit book to monitor useful signals that indicate where the market is heading. However, this only works within certain limits. When orders are placed that are beyond those limits, the market may move in a direction that is tangential to the interest of the trader or incites a market-wide panic. To avoid this type of situation, block trades are used for significantly high-value trades. All the negotiations concerning the trade are done in private before being announced to the market. The sudden nature of the announcement of the deal plus the time delay helps to prevent any unwanted price effect on the market.
Before the entry of crypto exchange and trading platforms, crypto block trading to limited to informal OTC transactions. As a crypto exchange platform that makes use of a limit order book, Gemini is combining equity and futures by offering a block trading service.