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Several of the largest trading companies on Wall Street have announced plans to enter the cryptocurrency market, opening up a new front for them to win lucrative businesses from institutional investors.
Jump Trading, GTS, and Jane Street are among the largest participants in the U.S. stock market, and after years of secrecy during their early involvement in these markets, they are strengthening their trading in digital assets.
They are some of the most competitive trading companies, fighting for every transaction in the global stock, currency and futures markets. Now they are planning to grab turf and serve as a bridge between the world of cryptocurrencies and asset management companies that are keen to trade in fast-growing markets.
Mina Nguyen, head of institutional strategy at Jane Street, said in an interview with the Financial Times: “We started trading cryptocurrencies at the end of 2017 by expanding our experience developed from other asset classes. We are trading digital assets around the world 24/7. times.
“We have seen a significant increase in institutional interest, and we are actively sharing our expertise to support a more effective crypto market.”
Over the past two decades, high-frequency traders have been at the vanguard of the wave of change that has swept the world’s largest stock market. They use ultra-fast technological and regulatory changes, squeeze the profit margins and commissions of stocks, and use the price difference of the same asset in different locations to improve market efficiency. This focus has earned them billions of dollars in revenue.
As institutional investors are attracted by the high returns provided, many people now hope to bring this expertise into the crypto market. Rapidly volatile prices and extreme volatility are in sharp contrast to bond, currency, and stock markets, where long-term ultra-low interest rates suppress volatility.
Large high-frequency trading companies first flooded the crypto market in 2017, when the price of Bitcoin soared. Until recently, most of these companies still focused on cryptocurrencies and quietly established their market share.
JPMorgan Chase analysts estimate that by the end of last year, high-frequency traders were responsible for nearly 80% of the price of bitcoin sent to exchanges, similar to their share of US government debt. Many of these computer-driven traders are targeting crypto “basic” transactions-the difference between spot prices and derivatives prices.
But many people are now also keen to attract over-the-counter transactions on behalf of institutional investors as a channel for transactions on a decentralized network, where transactions are not matched in a single place.
This puts them in competition with specialized crypto trading companies such as Genesis, B2C2, and Bequant, and possibly other exchanges. On Wednesday, Coinbase, a US-listed cryptocurrency exchange, said it has applied to become a futures commission merchant, which will enable it to process customer futures orders.
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GTS is setting up Radkl, a new business that will begin proprietary trading of digital assets later this year, from Bitcoin to the fast-growing decentralized financial market. Billionaire hedge fund manager Steven Cohen is also investing in Radkl.
GTS CEO Ari Rubenstein stated that he believes that “large and mature players who can navigate the regulatory environment are needed”. He said these participants will make the market “more efficient” and “more attractive to investors.”
Jump Trading is setting up an independent department composed of more than 80 people, focusing on the growth and development of blockchain networks and digital currencies. Kanav Kariya, president of the new division, said Jump has spent decades building high-performance infrastructure. “We are bringing this power to cryptocurrency,” he added.