You can still run an arbitration strategy even with one exchange, and the risk within that single exchange can be different between different coins. For example, if an exchange's Bitcoin balance is stolen but not their Litecoin, there might be a period during which you can withdraw in Litecoin but not Bitcoin. If the rumor mill works, that would be preceded by a change in the relative prices during which this algorithm would suggest buying Bitcoin.
Re:Algo trading digital assets
by nosuchthing on Monday October 30, 2017 @03:28PM
(#15588113)
You forgot the most infuential (and unscrupulous) crypto exchange in the cyptocoin ecosystem: Bitfinex. https://medium.com/@bitfinexed/latest
Yes, very familiar with finex and the bitfinexed guy's warnings / rants / whatever you want to call them.
If counterparty risk is a top concern (and it probably should be) then don't trade on unlicensed exchanges... That rule is great to follow and I haven't even gotten into any usdt tether issues...
couldn't you trade on decentralised exchanges where counterparty risk isn't a thing? at least if you're only trading between crypto pairs
Yes, decentralized exchanges (dex) are coming and I'm very hopeful.
However, the ones I have looked at / tested so far just aren't ready for primetime. Slow transaction times, lackluster user experience, no liquidity.
But those are all problems that are to be expected for what are basically beta-status projects (at best) and I am excited to see where things go from here.
Counterparty risk definitely still exists, but it is getting better very quickly with the growth of regulated US-based exchanges like gdax, gemini, and ledger x. In the altcoin world, Bittrex is in the process of fulfilling state-by-state requirements for regulatory approval. The crypto world is very different today from when MtGox dominated and getting even better.