Since the entire crypto-transformation market entered the bear market in 2018, the quantitative trading has become one of the few markets in the bear market that can stabilize profits. The cryptographic vouchers have become active.
According to TokenInsight's “Global Encryption Quantification Fund Industry Research Report” released in May this year, 2018 became the most rapid development of quantitative funds. The newly added quantitative team occupied 36.66% of the total number of establishments over the years.
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(Source: Global Encryption Quantification Fund Industry Research Report )
Behind the spurt development of the cryptographic metrics fund industry, it is also accompanied by chaos. There are some inexperienced individuals and teams who use the quantitative banner to raise funds, which has seriously affected the reputation of the industry, so many investors talk about “quantitative” discoloration. On the other hand, due to the lack of transparency in the market, excellent quantitative funds were buried.
At the end of 2019, after two years of rapid development, what stage is the quantitative market? What is the biggest bottleneck affecting the development of quantitative markets? What are the directions for the future development of the quantitative fund?
In the face of the above problems, how will the 2020 quantification be held by TokenInsight on October 12? "Online live, Bybit CEO Ben, BHEX founder and CEO Ju Jianhua, BitUniverse founder and CEO Chen Yong, Kronos COO Ran and others shared their views.
Quantifying the market is still in its early stages
Ran believes that the quantitative market for digital currencies is still at an early stage. The first is a mature digital currency exchange . Traditional secondary market investment has clear custody, settlement and supervision, and every link of the transaction is relatively mature. In addition, the overall market does not have sufficient liquidity, and it is difficult for institutional investors to enter this market. In addition, digital currency transactions are mainly spot-based, lacking more financial derivatives, and many financial products have not been approved by regulation, hindering the entry of institutional funds.
In such a market, how is the way to quantify transactions?
Chen Yong introduced that there are currently two main types.
The first category is to provide a programmatic programming interface through a quantitative trading platform. This method requires the user to write a program, which is too high for ordinary users.
The second category is the purchase of fund services . Since the digital asset investment is still in its early stage, the excellent quantitative fund team has not been tapped by the market. Nowadays, many people in the market are making a high rate of return, using the mentality of users to make quick money, to do the funding. It is very difficult for ordinary users to avoid encountering these scammers, because the entire fund operation mechanism determines that its trading strategy model is a black box. Even if the user is informed, due to the high complexity of the strategy, it is difficult for ordinary users to understand and has to pass the fund yield. A single dimension to quantify it, causing bad money to drive out good money.
Lack of liquidity and infrastructure become the biggest bottleneck
Ben believes that from the perspective of the exchange, the biggest bottleneck affecting the development of quantitative teams is liquidity and imperfect infrastructure .
Infrastructure Most of the marketplace's websocket and rest APIs are required to go through the public network. This leads to delays in order placement and delays in order feedback that can seriously affect the quantification strategy, and even many traditional strategies are simply not able to run in the currency circle. This piece needs to be gradually improved throughout the industry, and even later may produce a professional bridging industry service to quantify the team to minimize delays.
Another bottleneck is the order placement and request for frequency limiting. Most exchanges have a very strict control guarantee for this piece. The reason is that all the orders and the retail users are connected, and all the orders are combined. Later, as the industry matures, after the brokerages increase, they may free some of the retail sales from the exchange. Then the exchange will also relax the api's frequency limit. Ju Jianhua believes that principal security, transaction depth, compliance and technical issues are the biggest bottlenecks in the current industry.
First, the participants in the quantitative market, the first concern is their principal security. If the principal of the investment itself is lost and the risk of running, they will not dare to do such business. Second, the market depth. Whether it can accommodate the corresponding scale of funds, especially some quantitative teams that do hedge arbitrage, basically after the number of participants is large, the return is very low. Third, it is the source of funds. Many of the large funds of the quantitative team come from the traditional market. If the compliance is not well solved, there will be obstacles to their funding sources. The last point is the technical stability and the professionalism of the trading system.
In Chen Yong’s view, there are currently two major bottlenecks in the quantitative market development:
First, for the professional quantitative team who wants to participate in digital currency trading, the transaction scale of the entire cryptocurrency trading market is too small, the variety is not rich enough, the transaction depth is not enough, and the trading rules, capital security, and compliance are compared with the traditional financial market. There are still gaps.
Second, for individuals who invest in the quantification team, the cost of identification is high. Due to the opacity of the quantitative market strategy and the insufficient supervision of the industry, it is difficult for ordinary users to identify excellent quantitative teams, which will take a long time to cultivate. Ran believes that from a trading perspective, the bottleneck in development lies in volume . The overall growth rate of the current market is slowing down, and it does not attract new external traffic. In the industry, the scale expansion of individual employees is limited because the exchanges, wallets, and quantitative teams are independent of each other and the liquidity is dispersed. At the individual level, it is not able to form a considerable scale, and it is less attractive to external funds and flows.
In the next 5 years, global mainstream investors will deploy digital currency quantitative funds
There are many problems in the quantification market that need to be improved, but this also indicates that the industry is in a dividend period.
Ran is very optimistic about the quantitative industry. He believes that there are many trends in the future of quantitative funds, and within three to five years, the mainstream institutional investors around the world will come up with some combination configuration into the digital currency.
“The biggest investors in global hedge funds are American pensions, American charitable funds, sovereign funds, etc., all of which will allocate stocks, commodities, and bonds. They may buy their own digital currency directly through a broker, or they may allocate assets. A hedge fund for digital currency."
Therefore, Ran believes that as transaction costs decline and transaction depth increases, both retail investors and institutional investors will have a better trading experience. Ran also said that the trading boundaries between traditional secondary market transactions and the secondary market for digital currencies will become increasingly blurred . Because with more institutional investors entering the allocation of digital currency or digital money funds, the correlation between digital currency and stocks, commodities, and foreign exchange will become higher and higher, and the dominant position of digital currency trading will also be from the current currency. The hands are transferred to the hands of professional institutional investors around the world .