Bitshares as a trading platform
From the outside, you can see Bitshares as another blockchain, with their coin attempting to survive in a soup of other cryptocurrencies. But unlike many of the others, there are some differences that make the Bitshares blockchain attractive, especially for traders.
Trading, whether as a hobby or a business, requires specialized knowledge. You must know the assets you are exchanging. Most strategies also require that you have an idea of the future value of those assets.
There are also the technical hurdles of trading. Most assets can be traded at multiple venues. You must know those venues, and also how to enter, execute, and manage your trades there.
You could think of the Bitshares ecosystem as another venue for trading assets. It may or may not be the best venue for trading a particular asset, but it is an option for consideration. When selecting a venue for execution, you must consider the following factors (this is not an exhaustive list):
- Trading costs: How much does it cost to make a trade? What are the costs for moving assets to another venue?
- Trade quality: Will you be able to make the trade when you desire, at the price you planned?
- Trade liquidity: Can your order be filled without distorting prices? Would you be able to reverse the transaction (or transfer to another venue) without a large loss?
- Order management: Are the required order types available on the venue's platform? Do they have the interfaces available to match your expertise and style of trading?
Now I would like to evaluate the Bitshares platform, with these four points in mind. Please read the following as an OPINION. This is based on my knowledge and experience. As with all opinions, yours may differ. Please feel free to discuss any point in the comments below.
Trading Costs: Bitshares has a big advantage here. Imagine trading Bitcoin on a distributed or decentralized platform, paying network fees for each transaction. Unless you were trading a very large sum for strong gains, your profits would be minimized by the network costs. While traders would love zero fees, the Bitshares platform is about as close as you can get to 0.
Trade Quality: The Bitshares platform is always being managed. There are no "trading hours" per se. There are of course hours with more or less liquidity. That of course is true with almost all venues. Also, the bids and asks posted are real. If you want to take the offer, you can, as long as someone doesn't get there first. This is unlike some venues or "specialists" who can "front-run" orders to their advantage.
Trade Liquidity: With the variety of assets available on the Bitshares platform, liquidity can be an issue. If you stick to the major assets and your trade size is reasonable, you're probably happy with the liquidity. But if you are trading thinly traded items, the spread and depth can be a big hurdle.
Order Management: There are a variety of front-ends available for Bitshares. Wallets for your mobile device, websites, and desktop software. There is also a well defined API for the programmer types. With the open source nature of Bitshares, there's also source code, and even ways to propose changes to the protocols!
While I would give high marks for websites like OpenLedger, and good marks for the Bitshares desktop application, these do not fit with my style of trading. But with the API available, the possibilities exist to build (or buy) a trade and order management system to my liking. So if you're unhappy with the front end, look around. And if you have the expertise, build what you want.
Once again, the above is my opinion. What is below delves deeper into imagination.
If you were to build the ultimate trading platform, what would it look like? Would it look like TradeStation? Or perhaps you like MetaTrader. Or maybe just a "black box" with a cash dispenser on the front is more to your liking (my favorite idea).
What the front end looks like also depends on your style of trading. If you are a visual trader, you want to see charts and studies and easy order entry. If you're more of a quant, you want to see rows, columns, calculations and imbalances. The answer is that there is no "one size fits all".
Personally, I'm in the middle. I like seeing the charts, but spend much of my time coding strategies for automated or semi-automated execution. As a long time software engineer, I have to say I enjoy the coding more than the trading. As semi-retired, I have to say my time and resources have their limits.
A desire I have is to help the Bitshares community (and the trading community) with #4, and hopefully do it in a way that helps with #3. If the Bitshares platform can gain more traders, there will certainly be lower spreads and more liquidity.
And now the bigger question. What is the best way to accomplish this goal, given the resource constraints? I have some ideas. Perhaps you do too. Feel free to comment below.
My thought is that retail traders are those who would help the most with these items. Institutional traders have the resources to connect if they wish, and would probably not be interested (yet) with executing major transactions without the retail traders there to take the other side of the trade.
A) Should a "connector" be built that wires in Bitshares to existing retail platforms?
B) Should the existing Bitshares desktop software be improved to make trading easier?
C) Should there be software specifically for the Bitshares trader?
D) Are the software and websites okay, and it is simply a matter of documentation, or usability, or marketing?
Future posts will take a deeper dive into these questions.
Thank you for hearing me out. I look forward to your comments.