The Holy Grail In Crypto Trading
Hello! Friends,
Today, I woke with another new discovery in the history of crypto trading. There something that I keep saying when it comes to information, you just have to dig deep and get the full understanding of what a writer is saying. For the past days, I have been searching through different journal to add to my knowledge in this world of new ideas, innovations and technology. Have you heard about, the holy trinity in crypto trading? Oh, you are familiar with this term? Let me do short explanation and leave you with study, research and comment on what I shared.
The Holy Trinity In Crypto Trading.
The information was gathered from coinmarketcap when considering two exchanges during trading and all this brought us to what I called risk. What are the holy trinity in crypto trading?
The holy trinity are:
Cost of Execution
Risk of Volatility
Ease of Execution
As these three are listed above, each of them are enemy to one another, meaning you can only have one at a time when considering two exchanges. Many of us are looking for best way to trade but if you understand this trading trinity it can help you.
Like I mentioned, this three are conflict with one another because you can never attain large degree with the three at the same time. If you take coinbase and bitstamp for example, the cost of executing trade on both exchange is a determinant of commissions, software cost, and server costs which can never be the same.
The second trinity on both exchange which is risk of volatility is a determinant of synthetic price risks, liquidation risks and predictability which not be the same on both exchanges.
The third trinity, Ease of Execution focus on level of competition, execution risks, and number of legs.
When you consider all these, when the risk of volatility is low, it is difficult for the price to greatly diverge just because many traders are always exploiting the price discrepancy and with this, spreading will be very tight and the commission paid to execute such trade may be more than profits from trading the spread. With this their is a high risk of volatilty but low ease of execution and cost of execution.
The holy trinity is best way to understand crypto trading, but note that it is very difficult to see a spread trade meeting this holy trinity and if you find one it is actually an holy grail in crypto trading.
What do you think about this?