Caspian, a leading crypto asset trading and risk management platform for institutional investors, has launched its pairs trading functionality.
Since its founding 19 months ago, Caspian has seen its trading volume steadily increase, with it exceeding $1 billion for the first time in June 2019. Caspian’s trading volumes were 207% higher in Q2 than what they were at the end of Q1, showing real institutional participation is growing in the crypto market.
Caspian’s institutional clients will now be able to use relative value-based strategies and statistical arbitrage thanks to the new pairs trading capabilities. Arbitrage trading is a popular and effective strategy as the nascent crypto market still has many inefficiencies.
Caspian’s price-ratio and price-spread pairs algorithms enable its clients to trade pairs using coins or derivatives from 35 exchanges. Caspian states that several trading firms are already using its new crypto pairs functionality.
How Might This Affect the Crypto Market?
Chris Jenkins, the Managing Director at Caspian, explained that he is seeing more and more trading firms adopting arbitrage strategies. As cryptocurrencies trade at different prices on multiple exchanges, this enables those with the right technology to profit from these inefficiencies. Jenkins explained that the situation now is very similar to when electronic trading of stocks first began.
With platforms like Caspian now providing professional traders the tech needed to utilize these strategies, we could see the crypto market become more efficient. That will mean more even prices across different crypto exchanges, as any discrepancies would be quickly arbitraged away. It is also another major step towards a more mature and well-established crypto market in-line with traditional financial markets such as stocks and commodities.
Caspian’s Pairs Trading Features
Caspian’s new crypto pairs trading functionality will enable futures, spot, and perpetual swaps to be traded on either leg of a pair with the ability to mix them. For example, the BTC spot price at Coinbase could be one leg of a pair while the XBT futures price at BitMEX could be the other.
Users will be able to control aggression levels by adjusting the algorithm parameters, accounting for the different levels of liquidity across exchanges. Clients will have the ability to amend active pairs orders and “monitor order progression slice-by-slice.” They can also “control hedge risk in a granular way” by setting rules that execute automatically.
Institutional Participation on the Rise
Caspian saw its trading volume jump from $578 million to $1.069 billion in a two month period ending June 2019, an increase of 85%. As all of Caspian’s clients are institutional investors, the trading volume data provides great insight into the appetite for crypto among these large players.
Commenting on this shift into crypto by institutions, Gabriel Wang, an analyst at AITE Group, stated that this is a long-anticipated trend that “we expect to continue.” Aite Group is an independent advisory, and research firm focused on the impact that technology, business, and regulatory issues have on the financial services industry.
Caspian will continue to release its trade volume information on a monthly basis, hoping to provide a factual view of the crypto market. Caspian’s CEO Robert Dykes commented that it was important to be able to measure real institutional participation, especially with so many reports recently detailing fake volumes in the crypto trading industry.