This would be a US-based bitcoin market maker, adds liquidity to the order books of both the currency and futures and options market.
Needs a lot of capital for such a venture, any interest in this? This is something I mainly want to organize and begin discussions on, because there is a need for this.
This is a bad idea for a couple of reasons. What you are essentially saying is, you want a lot of money to force what you think the spread should be. Real market markers learned the hard way this doesn't usually workand nowadays people stick to HFT, naked short selling, and jumping in front of people's trades. If you want to follow down that road you will either ruin yourself and your money or you will become dirty like them. Even the quants themselves don't like being quants. They even made a movie about it. It's called
Quants.Bitcoin trading volume is at a low as of time of writing. Larger market participants are unable to consider bitcoin with its low trading volume, thin order books, lack of liquidity and lack of hedging capabilities.
For a direct comparison, CBOE - Chicago Board of Options Exchange would be the model this company would be like.
Ideally this would be a market maker for existing exchanges, but the company would seek a maker-taker liquidity rebate model, that does not exist on any current bitcoin exchange.
This company could do its part in solving some of the growing pains of bitcoin by adding liquidity.
Anyway, I hope to open a discussion on it at the very least, to refine a potential offering.
There is a solution to all this, but people around here won't like it very much. It's also being worked on. By several groups. And it's considered a highly secret thing. The group that comes out with the solution will become millionaires overnight, future billionaires, and will control the bitcoin economy. I guess we will see where they take us, although I do wonder if anyone is interested in a community solution I do not think the community is really ready to work together on an idea like that.
Well this market making system is based on an algorithm that can do HFT. Basically the fact that it can determine orders to create and route to/from exchanges in nanoseconds. Obviously it will be milliseconds due to the locations bitcoin exchanges, but there is nothing technical limiting it. TL;DR this is an HFT. The difference between this, and the fund I wanted to set up using HFT is that this is not looking to make a profit from aggressive order placement, and hunting out people's orders. This instead is looking to receive liquidity rebates, all day, every day.
I would like to point out to skeptics that HFT was novel in 2005 and this is 2013, 8 years later. Despite what sensational Forbes articles might say, there is really nothing special about dark pools and the "secrecy" behind HFT. Program trading contributed to the flash crash on Black Monday in 1987. And now, there are bitcoins exchanges which all use modern API's, broadcast for free. (Nasdaq data feeds are $6000/month, for example, trickled down to Direct Market Access participants for about $80/month... and the FIX protocol is antiquated shit)
In a direct example, 65nm die processes were novel in 2006 and now every factory in Shenzhen can do it and make ASICs for the price of 1btc. Anyway this algo's core code has been co-located on systems in datacenters alongside exchanges in New York. It judges networks latency as well as a factor in decisions.
What is the solution you are talking about, being worked on by several groups. I thought you were going to say what that was in that paragraph.
