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Cryptocurrency Analytic Company: Arbitrage


Cryptocurrency Analytic Company: Arbitrage


1. History of Development?

We started early stage testing on our system around November of 2013. During the period of November to January our company took on about five clients for our Alpha period. After a successful alpha period, we incorporated in early January as a Delaware C corporation. We then began our beta period, where we have been open to clients for services.Since then we have added 10 more clients, and continue taking on about one client every week or two weeks. We began with one market pair(bitstamp vs btc-e using BTC) and have since expanded our selection of markets to four, with each pair able to connect to each of the other exchanges ( ie bitstamp vs bitfinex, bitstamp vs kraken, ect…).

2. Arbitrage, a touchy subject usually correlated with Ponzi schemes and the like. How are you different?

Allow me to answer number 3, which will take care of the Ponzi scheme question. Suffice to say we are MUCH different than any other trading pool or fund that directly takes BTC from their clients.

3. How does it work?

 Our system was designed by myself to get around a few problems that exist in the field of Bitcoin proprietary trading:
  •  Trust of the trader in charge of your funds
  • Be profitable
  • Automatic response as fast as possible to a market change in two markets
  • Little to no involvement by the account owner, and 24/7 operation
  •  Have as low risk profile as possible
Here is how we address all of those concerns:

Trust the Trader

Our trading system is build to foster trust between the trader and the owner by never allowing the trader to have direct access to withdraw client funds. This is done by the client creating an account on the exchange such as Bitstamp, and then creating a special API key that is given to the trader. This API key has the ability to buy or sell BTC inside the owner’s account, but does not have the ability to withdraw or deposit funds. The result is that the trader can make changes in market position for the owner, and the owner does not have to worry about his funds being used in a Ponzi type scheme, used for some other purpose, or withdrawn and stolen from them. The funds stay only in the account holder’s possession and are 100% watchable during the trade.The only way that the trader can make a profit, is when he can show the account owner that he has made a profitable trade in the account, and the account owner pays him directly the % that we take (currently 20% of the profit made from the trade).

Be profitable

Our system is built to be the fastest around at its function, and it relies on this speed to make a profit. The basic strategy is to examine two markets that trade in Bitcoin (we added litecoin as well last month), and compare the history ofprice difference between them over a long period such as a month. For instance, if on average last month Bitstamp is 2% higher than BTC-e, then we would use 2% as a basepoint for our trade. Our system would be given this threshold of 2% and when Bitstamp was higher than 2% the system would sell coins that it controls on Bitstamp, while buying them back on BTC-e. When the system noticed that the difference was below 2% it would do the opposite trade,buying coins back on Bitstamp, and selling them off on BTC-e. This allows us to net the percentage above and below the 2%, and profit off of volatility when it presents itself.

Little to no involvement by the account owner, and 24/7 operation

Our system once set up, requires very little maintenance by the account owner. Since we don’t move Bitcoin around between exchanges there is very little maintenance, mostly it is just re-distributing the profit and paying the 20% profit fee to CCA, which takes very little time. A comparable trader would be spending hours watching the market while an account owner on our system may only check once a week or so.

Low risk as possible

The risk profile of our trade is very low. By the nature of the trade, we do not make a trade when it is not instantaneously profitable. Therefore, our risk is mainly due to holding Bitcoin on the exchange itself. In our system funds are held in a 50/50 split between USD and BTC. This is always constant and provides a natural hedge against Bitcoin volatility. As a result, half the portfolio is subject to the change in value of BTC, and we have no control over that value, the other half is held in USD and those funds are where the profit from volatility trading occurs. We believe that a 50/50 strategy for holding is really beneficial as it provides some downside protection from sudden drops.

Fast response as possible

Since we have begun our target is to be as fast as possible with the reaction to this signal that I described above. We have been able to get down to from 5 to 30 milliseconds in latency with the major exchanges, as well as being able to react to a trade signal within .5 to 1 second. This has been an improving statistic as exchange APIs improve.

4.  Risk factor?

The risk factors are holding your BTC or LTC on an exchnage, which should be profiled before trusting them. The second risk factor is holding BTC as 50% of your portfolio, which may change in price to the downside, but may also change in price to the upside. Our trading itself introduces no risk as when it buys 1 BTC it also sells 1 BTC. For a market neutral position. If our models are very off during trading we may lose money to exchange fees, but our system is designed so that this has never happened, and foreseeable will never happen.

5. How are you able to execute this consistently?

We are able to consistently execute this strategy because once an account is set up we are 100% automatic. Our system is well tested and has an excellent tech team backing it for great up-time.

6. Current Status?

Currently we are operational, are taking new clients, and have four market open for trade including Bitstamp, Bitfinex, Btce, and the newly introduced Kraken. In our older markets pairs in BTC we have been showing between 2-4 % a month from the USD deposited. Our newest addition has been the same trade in LTC and it has blown by expectations returning over 8% in its first month of operations.

7. Future Development plans?

Our future development plans include an event that should be happening very soon. We hope to introduce a full client log-in, with personalized returns displayed with live data. This already under heavy development and should be released at the end of July.
For people interested, you many want to know a minimum of $5000 is required per account. Also, they charge a fee of 20% monthly which is payable via USD or Bitcoin. Do note during their trial  period its only 15%.

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