Matthew Tweed is worlds apart from Wall Street traders. The 20-year-old finished high school just two years ago, never went to college and works out of his bedroom at the family home in Surrey, England.<\/p>\n
Yet thanks to the fragmented new world of crypto, Tweed is making markets in Bitcoin derivatives with his one-man operation, which is connected to two of the largest exchanges — alongside the hedge fund pros.<\/p>\n
After learning how to build algorithms from a stranger on Reddit, he\u2019s trying to get rich in digital currencies before more institutional players enter the industry in droves.<\/p>\n
\u201cI\u2019ve very much enjoyed doing it independently — not having to work for half a decade as a young analyst at a bank in 100-hour weeks,\u201d he says over lunch in a cafe near his home, before the start of his work day. \u201cI can do that for myself but somewhat on my own terms.\u201d<\/p>\n
His ambitions would be nigh impossible in highly regulated and liquid markets like stocks where the deep-pocketed pros with their high-frequency tech ramp up the barriers for entry for the little guys.<\/p>\n
Tweed, who incorporated his one-man band as Pine Financial, seeks to make money from the spread between the bid and ask quotes for Bitcoin perpetual futures — a uniquely crypto derivative for speculative wagers — whenever it looks profitable.<\/p>\n
Thanks to a reliable slew of trading opportunities that help returns grow over time, Tweed says 100% annualized gains can be reasonably expected, declining to disclose precise figures. An executive of an exchange where Tweed is active confirmed he\u2019s a competitive low-latency market maker.<\/p>\n
He\u2019s a small-time player in the industry, which overall now sees hundreds of billions of dollars changing hands every day. Chicago trading firms like Jump Trading and Tower Research dove in a few years ago, and transplants from the likes of Goldman Sachs, Susquehanna International Group and Jane Street are increasingly a common presence.<\/p>\n
But crypto trading remains slow and decentralized — Coinmarketcap.com lists more than 300 exchanges — while data and access are free, putting it within reach of Reddit-fueled amateurs. Rather than relying on advanced math or engineering wizardry involving fiber-optic cables or towers next to data centers, trading the crypto micro-structure is a different beast from stocks.<\/p>\n
\u201cEverything about the space is just set up differently,\u201d said David Fauchier, who allocates capital to quant managers for Nickel Digital\u2019s Factors Fund. \u201cIt\u2019s a completely different skill set.\u201d<\/p>\n
Modeling and coding skills are important, but much of it comes down to a good grasp of the crypto market\u2019s many quirks. For instance, in traditional markets, high-frequency firms put their servers near the exchange\u2019s to maximize speed, a move known as co-location.<\/p>\n
In crypto, most platforms are run on the cloud, so Tweed executed a series of trades to figure out the location of a given exchange\u2019s servers, a common strategy pursued by low-latency traders.<\/p>\n
With the high volumes across a multitude of coins, derivatives and exchanges, market making has been a profitable crypto strategy in the bull market. It\u2019s also one way quant long-short funds have been using to generate income, according to a report by PricewaterhouseCoopers and Elwood Asset Management.<\/p>\n
Other than the bid-ask spread, some exchanges also pay high rebates to liquidity providers, while some token issuers pay dealers to trade their assets.<\/p>\n
That\u2019s not even to mention decentralized finance, where practically anyone can be a market maker by staking their coins in a liquidity pool that then automates the buying and selling with a mathematical formula. So-called yield farmers locked in nearly $23 billion worth of tokens at exchanges on Wednesday, from just $5 billion at the end of 2020, DeFi Pulse data show. The industry has also drawn more sophisticated market makers such as Wintermute, whose co-founders hail from Dutch algo trading firm Optiver.<\/p>\n
Sipping his can of soda in a crimson hoodie, Tweed says now is just the time for early converts to go all-in, given the abundant opportunities.<\/p>\n
\u201cYou don\u2019t know necessarily if cryptocurrency is going to be the same in a decade,\u201d said Tweed. \u201cSo you might as well use it while you got an advantage.\u201d<\/p>\n
Reddit crypto traders rush for riches before Wall Street invades.<\/p>\n","protected":false},"author":341034,"featured_media":197907,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[44696],"tags":[67759,8045],"class_list":["post-408674","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-crypto","tag-reddit"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/408674"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341034"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=408674"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/408674\/revisions"}],"predecessor-version":[{"id":408676,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/408674\/revisions\/408676"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/197907"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=408674"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=408674"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=408674"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}