Giant Market Maker Jumps on Crypto Bandwagon
High-frequency traders, known from the world of traditional finance as market makers, are reportedly getting into trading of regulated cryptocurrency derivatives such as exchange traded notes (ETNs).
ETNs are tradable assets normally issued by large financial institutions that tracks the price of an underlying asset, without the holder of the ETN actually owning that asset.
According to Bloomberg, the largest ETN trader in Europe, Amsterdam-based Flow Traders NV, is now making the first move into this market as it aims to profit from high-frequency trading of ETNs based on bitcoin and ethereum.
High-frequency traders create liquidity in markets by employing advanced computer algorithms that buy and sell securities at lightning speeds. While they generally hold an asset for only a very short period of time, these players make large profits from the spread between the buy and sell prices of the asset.
The entry of the new type of player into this market is significant because it brings with it a large increase in both trading volume and liquidity. That could, in turn, open the door for more institutional traders who have been hesitant to get involved so far.
Co-CEO of Flow Traders NV, Dennis Dijkstra, was quoted by Bloomberg as saying:
“People underestimate crypto […] It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested - we know they are because we get requests.”