[ANN] KRAKEN.COM - Exchange with USD EUR GBP JPY CAD BTC LTC XRP NMC XDG STR ETH

[Dargo]

I don't understand how a market maker would operate?

The necessity for a market maker seems to be build on a false premise that there are not always users willing to buy or sell. This is never true, there are always users that want to buy from or sell to you, just not for the price that you like.  

So you don't like the price...

How can a market maker change that?

How can a market maker buy or sell bitcoins for the price that you like (which is always a better price than the users are willing to offer)?

Let's say he always puts up the most competitive bids and asks. 

From what I see when the price goes up he would end up selling btc cheaper as he can buy them back, going broke. Correct?

Yes, there would always be buyers or sellers at unfavorable prices, and this means you might have trouble selling or buying without a lot of slippage from the present market price for larger orders. The role of the market maker is to provide liquidity or volume closer to current market prices than would otherwise be possible, so you can sell or buy with more volume and less slippage in price.

This is just a basic sketch, but market makers make their money in the spread. For example, a market maker (MM) might be buying bitcoins for $100 and selling them for $102. The MM is making $2 for every coin, and with heavy volume this can add up quickly. This doesn't mean that the MM is always making money. If suddenly the MM can't find any buyers for the coins bought at $100, the MM might have to sell them at a lower price. In that situation, the MM would take the loss on those coins, but set up shop with a spread around a lower price (say buying at $96 and selling at $98). With skill and proper risk management, the MM can avoid heavy losses and turn a profit in the long run. And the MM is providing a helpful service for other market participants by providing liquidity. 

Here's the Investopedia entry for market making, which has a little video that runs through the basics.

http://www.investopedia.com/terms/m/marketmaker.asp

[Dargo]

How will Kraken protect themselves from default when offering margin?

See "Understanding Leverage and Margin" in our Trading Guide - https://www.kraken.com/help/trading-guide#understanding-leverage-and-margin

The basic idea is that we will liquidate positions well before a user reaches the point that they owe us any money. (Edit: That is, well before the user's losses got to the point that the value of their positions (and account balance) was less than the amount they owed us and their positions couldn't be liquidated to fully pay their debt to us.) This is the purpose of the "Margin Call Level" and the "Margin Liquidation Level". Before anyone starts trading on margin, they should carefully read this section of the Trading Guide and make sure they understand the risks of margin trading.  

While we are at it, what's the current financial strength of Kraken before going broke? I'm asking as to estimate how safe funds are with you.

We can't use customer funds for our own operations, so if we couldn't continue to fund our operations, we would wind down trading and return funds to customers.

From https://www.kraken.com/security/practices (under "Financial Security"):

• Customer funds reside in a bank account separate from our operations account, and fees are transferred on a daily basis.
• Customer funds cannot be borrowed to fund operations, nor can they be lent, even for margin trading on our own platform.

Thanks for the questions RationalSpeculator.

[Herp]

One of the things that are missing on all Bitcoin exchanges, including MtGox is a market maker. No Bitcoin exchange has that and it's one of the factors that contributes direly to the volatility. A market maker would ensure there will always be someone there to buy or sell to you, even if users themselves are not.

If you could partner with a business to provide such service or do it yourselves, you'd soon become the exchange of choice for everyone.

Informative video on the topic: http://www.youtube.com/watch?v=IbSOHwCOnG0

I agree.  We're looking for a partner to help us out with market making. If you know anyone, send em my way!

I don't understand how a market maker would operate?

The necessity for a market maker seems to be build on a false premise that there are not always users willing to buy or sell. This is never true, there are always users that want to buy from or sell to you, just not for the price that you like.  

So you don't like the price...

How can a market maker change that?

How can a market maker buy or sell bitcoins for the price that you like (which is always a better price than the users are willing to offer)?

Let's say he always puts up the most competitive bids and asks. 

From what I see when the price goes up he would end up selling btc cheaper as he can buy them back, going broke. Correct?

Check this out. Pretty much answers your question
http://www.youtube.com/watch?v=IbSOHwCOnG0&feature=youtu.be&t=1m8s

For an exchange to be taken seriously, it would require a substantial amount of liquidity. That in itself will bring more players to that exchange generating even more liquidity. A market maker would pretty much solve the liquidity issue and people would no longer be concerned about trading volume.

Say for example one would want to unload 1000 bitcoins unto the market or buy 1000 bitcoins. A bitcoin investor would like to be able to do that easily. If he can't do that on X exchange he'll just migrate to Y exchange which can make that happen. Such big investor also jacks up the price of Bitcoin, making that exchange more attractive to customers, thus generating even more liquidity and higher spread when compared to other exchanges. High volume and high liquidity also means high profits for the exchange that partners with a market maker.

I agree.  We're looking for a partner to help us out with market making. If you know anyone, send em my way!

Max Keiser probably had Exante in mind when he said was looking to partner with an exchange to implement market making services. They offer the Bitcoin Fund https://exante.eu/products/BTC/ This is similar to the Winklevoss ETF idea just that it's privately traded. This fund holds 90k Bitcoins and could theoretically act as a market maker for you.

The fund currently manages a portfolio of 90,000 bitcoins

If they won't help you with the market making, they can at least point you in the right direction.

[RationalSpeculator]

I think it's more beautiful if you put € sign before the number, like $ world does it.

Also amount of decimals used for € is more than 2, which is unnecessary, and amount of decimals for btc is only 2 which is too few. (top page)

I'm really excited with your exchange. Hope it succeeds

Since mtgox is basically down and btc-e seems untrustworthy there really is an alternative needed to bitstamp.

[Dargo]

Hey guys, minor typo on the kraken.com landing page title:

Code:

<title>Kraken Digial Asset Trading Platform</title>

Digial ---> Digital

I couldn't find this error. It may have been fixed already or perhaps I'm not understanding the location you mean.

[Dargo]

I think it's more beautiful if you put € sign before the number, like $ world does it.

Also amount of decimals used for € is more than 2, which is unnecessary, and amount of decimals for btc is only 2 which is too few. (top page)

I'm really excited with your exchange. Hope it succeeds

Since mtgox is basically down and btc-e seems untrustworthy there really is an alternative needed to bitstamp.

Thanks for the support and thanks for your suggestion. I'm not sure if we'll do it, but I like the idea of putting '€' before the number. As for 2 decimals being too few, do you mean for 24 hour volume at the top of the page?

[nitrous]

I think it's more beautiful if you put € sign before the number, like $ world does it.

Also amount of decimals used for € is more than 2, which is unnecessary, and amount of decimals for btc is only 2 which is too few. (top page)

I'm really excited with your exchange. Hope it succeeds

Since mtgox is basically down and btc-e seems untrustworthy there really is an alternative needed to bitstamp.

Thanks for the support and thanks for your suggestion. I'm not sure if we'll do it, but I like the idea of putting '€' before the number. As for 2 decimals being too few, do you mean for 24 hour volume at the top of the page?

I would think the reason for putting the € symbol after the number is because it's common in many countries which use the Euro? Even still, other countries in the Eurozone put the symbol before, so you could argue either way; I suppose this is more of a subjective issue. With regards to the decimals, my personal opinion is that it makes sense to put in all the places available as these can be very important in trading, especially where margin trading is prevalent. This practice is common in forex and so I would like that to remain the case with Kraken. I do agree though that only 2 d.p. for the volume seems too few.

[Hawkix]

I think it's more beautiful if you put € sign before the number, like $ world does it.

Also amount of decimals used for € is more than 2, which is unnecessary, and amount of decimals for btc is only 2 which is too few. (top page)

I'm really excited with your exchange. Hope it succeeds

Since mtgox is basically down and btc-e seems untrustworthy there really is an alternative needed to bitstamp.

Thanks for the support and thanks for your suggestion. I'm not sure if we'll do it, but I like the idea of putting '€' before the number. As for 2 decimals being too few, do you mean for 24 hour volume at the top of the page?

What the hell with putting '€' before the number? I own TWO EUROS, not EURO TWO. No need to mimick all US idiosyncrasies. I guess Foot-Ball is enough at all.

[Rampion]

Very low volume on BTC/EUR. I guess its worthwhile to place a bid for a few thousands BTC at sub-EUR (0.3€ or something like that), a distracted trader could sell a few hundred BTC with a market order and BOOOM

[bitbbs]

Reserved

[Dargo]

Very low volume on BTC/EUR. I guess its worthwhile to place a bid for a few thousands BTC at sub-EUR (0.3€ or something like that), a distracted trader could sell a few hundred BTC with a market order and BOOOM

Yeah, the volume is low so you want to avoid market orders. Limit orders + patience is the game right now. It's slowly improving and the pace should pick up in the coming weeks.

[Sioux]

why is the daily volume so low

0.05
24 Hour Volume total are you kiddin me?

[RationalSpeculator]

The problem I see is:

Buyer: "why should I pay more than on bitstamp?"

Seller: "why should I get less than on bitstamp?"

Result: open orders being added but no trades/deals done


If the price moves on other exchanges that should get it rolling.

[xchrix]

a market maker is what is needed.... kraken should do this with some coins for the first weeks to get things started.

[Dargo]

a market maker is what is needed.... kraken should do this with some coins for the first weeks to get things started.

Yep, market making is on the way.

[Sioux]

Why did kraken.com close down already?

I thought it would be pretty decent except all the validation requirments...

[btcx]

Why did kraken.com close down already?

I thought it would be pretty decent except all the validation requirments...

who says it's closed?  validation requirements are a legal requirement, unfortunately.  I support your effort to have the law changed.

[btcx]

USD Pairs are now available for trading:  XBT/USD, LTC/USD.

[Dargo]

USD Pairs are now available for trading:  XBT/USD, LTC/USD.

To clarify, this means USD deposits and withdrawals are also available.

[jimbobway]

No California?