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Comment by na85 | Hacker News Reader

Hooray for high-freq algorithmic trading, I guess.

The fun thing about Bitcoin is the immense latency in moving money (USD) between exchanges, which has at minimum 4 days of transit. This makes just about anything involving multiple exchanges or high frequency (especially arbitrage trading) absolutely impossible to do without a service such as bitinstant, which is currently MIA

Assuming that you're willing to maintain inventory at multiple exchanges, you could still absolutely do arbitrage inter-exchange.

Unfortunately there's no way to hedge your BTC inventory so you have to take on a lot of currency risk.

Just so that it's said, buying at Coinbase right now gets you the right now price (or at least their spot price at the moment).

You're perfectly right that you won't receive the coin for 4 or more days, which leaves a lot of opportunity on the table for turning it around quickly, and perhaps increases the risk non-negligibly, but buying is done at spot price, not receipt.

Where does this 4 days of transit come from?

once your funds are in, you can instantly exchange between crypto-currencies

Nothing stops you from doing HFT on one exchange, or on multiple ones independently. Most of them have APIs.

High frequency? MtGox, which is still the second largest exchange, has something like a 5 second execution lag.

Their new Midas engine is about to get released - will handle over 500,000 transactions/second and will support other cryptocurrencies (although I don't think they will open it to the public just yet). It may not be great as it is, but it's definitely better than the rivals at the moment.

You think 5 seconds is slow? If you were to do it manually it'd take much longer.

For the thought-of connotation of high frequency trading, yes, 5 seconds is slow.

Doesn't this almost guarantee profit, as long as the average price doesn't come down too much? As in, buy when it's [low enough] and sell once it's [high enough]? Of course, if the market is filled with these algorithms it will get harder, but low-risk investments and trading over long periods of time should turn to notable profit, no?

Weird stuff, machine pushing the man out of business.

determining "low enough" and "high enough" is what professional market-makers do all day. it's not easy.

It would be pretty easy for man to beat such a simple algo.

How? Assume it's binary buy up to x bit-coin's at 835 and sell all of them at 875 does not leave a lot of room for manipulation.

Because past trends do not predict future. You buy bitcoins at $835 and instead of going up to $875 they drop to $100.

Why bother with bitcoin? You can do the same with GOOG stock too.

Stocks aren't quite so volatile.

Borrow money for more leverage. Or buy derivatives.

Even if your assumptions of 'correct' price range would be 100% correct, there's an old saying "the markets can remain irrational for longer than you can remain solvent". If you buy bitcoins at 835, and the rational longterm price is above 835, then there is still a serious risk that the market price will remain much below 835 for an arbitrary amount of time.

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