Trading Bitcoin

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Dave Chapman, COO of Bitcoin exchange ANX answers a range of questions on the cryptocurrency and its role in institutional trading.
Is it possible to achieve an institutional level of liquidity?
We developed our platform from the ground up to be institutional-ready. We’re seeing an increasing number of corporates and institutions engaging the bitcoin space. It’s also one of the reasons we’re actively developing our FIX API’s. In saying that, we’re today facilitating large institutional orders by means of block trades; some on exchange, some off exchange. The liquidity in bitcoin today is still too primitive to shift large orders without moving the market.
What remains clear however is how much illiquidity in bitcoin is owing to the lack of it not holding fiat currency status. Bitcoin’s market value and turnover are still trivial by currency standards. Bitcoins average daily trading volume across the major exchanges is somewhere between 20 and 50 million US dollars per day. Comparatively, the average trading volume of FX Futures on the Chicago Mercantile exchange is around 33 billion for Euros alone.
I’ll be the first to admit, there are few financial asset classes that share the tiny market cap in terms of size that bitcoin currently maintains and that equally exhibit bitcoin’s impressive volatility. Provided this small market cap however, bitcoin will definitely fall foul to market manipulation and will do so for some time. We often hear about this manipulation in the media and its negative impact on the crypto currency. However market manipulation is not new to bitcoin, nor is it a problem that only affects small, new and experimental markets (e.g. one only has to examine the numerous and still ever-present scandals that afford themselves to the likes of interest rates, precious metals etc.).
We’re now witnessing numerous bitcoin ETF’s requesting approval from the regulators, and we’re now also seeing derivatives and options products being made available.
Bitcoin may appear very much a consumer, retail market, however we’re seeing the corporate and institutional sides show far more interest and I anticipate that momentum continuing in to this year and beyond.
What are the algo trading possibilities?
Algo trading is definitely active on bitcoin exchanges. One can rely on the various API’s offered by the bitcoin exchanges to develop their own strategies. On the inverse however colo services are not really necessary right now for arbitrage between exchanges. We’re talking sub-second latency at best, not sub-millisecond, though I anticipate colo services will be offered as the opportunities to arbitrage prove more difficult to profit from.
Who regulates, controls the bitcoin ledger?
The bitcoin ledger, known as the block chain, is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of the block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history. There is no central body or regulator who overseas or controls the block chain; instead every user of Bitcoin oversees and validates it.
Why would one use it over a traditional currency?
Payment freedom – It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money.
Very low fees – Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants’ bank accounts daily. As these services are based on bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.
Security and control – Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.
Transparent and neutral – All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organisation can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.
Is ANX trustworthy?
Founded in June 2013, ANX has grown into one of the most used bitcoin exchange platforms. According to Bitcoincharts.com, ANX is the seventh largest bitcoin exchange in the world by volume.
It is ANX’s mission to promote a healthy eco-system by providing value-added bitcoin exchange services to the public. ANX is also lowering the barriers to bitcoins and other crypto currencies adoption by increasing ways for consumers to acquire and access crypto currencies. ANX introduced the world’s first physical Bitcoin Retail store, the world’s third Bitcoin ATM machine, a multi-currency online bitcoin exchange platform, as well as mobile Apps for crypto currencies. ANX have also just launched the world’s first bitcoin debit card allowing ANX customers to spend bitcoin at any traditional retail, POS, or online merchant along with the ability to withdraw cash from any one of the millions of standard ATMs available around the world.
ANX is committed to enhancing its development and innovation capabilities to strengthen its global branding. Finally, ANX is a licensed Money Services Operator with a rigorous stance towards KYC and AML compliance.

What security measurements does ANX have?
Security is of paramount importance to ANX. Every element of our operation has been methodically designed for optimum security. This includes all factors including physical intrusion, exhaustive vetting and background checking of staff members, the cold storage of coins and validation of withdrawal requests, and dedicated awareness to recurring security threats such as social engineering, phishing, and remote zero day exploits to name only a few.
Our staff are trained to detect suspicious transactions and requests and are procedurally qualified to comply with KYC and AML policies.
For those technically minded or curious, some of the security aspects we utilise are detailed below (some of our security elements will not be disclosed):
SSL Encryption: We use 128-bit encryption to encrypt all communication between our customers and our platforms. This is the highest encryption available and is used as the gold standard for all secure communication on the net.
State of the Art infrastructure: The ANX platform is hosted on dedicated servers in Tier 1 data centers. We do not use shared servers, nor do we employ services from Cloud providers.
Passwords: We do not use MD5 hashing to encrypt your password. To avoid common weaknesses, our proprietary procedures are designed to provide our customers with the peace of mind that comes from our security implementation.
DB Security: Our databases are encrypted and protected against SQL injection attacks. We also do hourly backups and send backups off site to multiple locations.
Business continuity planning: We have process and controls in place to deal with outages or attacks. Our site and funds are totally segregated. All customer crypto funds are maintained in cold storage, thus invulnerable to hacking attempts.
DDOS protection: We leverage one of the world’s strongest forms of protection against Distributed Denial of Service attacks. We do not pretend to do this by ourselves and partner with multiple third parties who have proven to mitigate some of the largest DDOS attacks in internet history.
Regular Stress and Soak Testing: Our technology is immediately scalable. Our regular stress testing has proven it achieves low latency processing and we’ve soak tested to over 10 million transactions within a 24 hour period. Translation: our engine and underlying infrastructure can handle load, and lots of it.
We employ a proprietary design to ensure that in the very unlikely event of a site breach, this does not result in access to online wallets or cryptos. We will not provide details to avoid providing potential attackers any insights; however the terms “air gap” and “complete segregation” may offer some hints. Additional information on the ANX exchange and their FIX offerings can be located at ANXPRO.com