A survey by Market Intelligence specialists, Acuiti, commissioned by Avelacom and Deribit, offers insights on how proprietary trading firms are approaching the cryptocurrency markets, both spot and derivatives. The survey also explores how this differs between those firms created specifically to trade these assets vs firms entering these markets alongside their existing business trading “traditional” assets.

A survey by Market Intelligence specialists, Acuiti, commissioned by Avelacom and Deribit, offers insights on how proprietary trading firms are approaching the cryptocurrency markets, both spot and derivatives. The survey also explores how this differs between those firms created specifically to trade these assets vs firms entering these markets alongside their existing business trading “traditional” assets.

Key conclusions include:

• Proprietary trading firms have been early adopters of crypto derivatives:
• 81% of those already trading crypto derivatives do so alongside the spot market.
• 40% began trading spot before moving onto derivatives, 32% started with derivatives and 28% began trading in both simultaneously.

Options are currently less popular than futures: 46% are trading futures only (although just over half trade futures and options). However, 90% of those not trading options are interested in doing so.

The number of markets being traded varied according to the type of proprietary firm and the trading strategies being employed:

• Traditional firms tend to trade on a higher number of exchanges than specialist firms (6 for futures and 2.6 for options for traditional vs 4.9 and 1.9 respectively for specialist firms)
• Firms using arbitrage strategies trade on more markets on average (6.9 for futures, with many trading across more than 10 venues).

The survey found a strong appetite for expansion among respondents with 97% of firms planning to connect to more exchanges to trade crypto derivatives. All specialist trading firms were planning to increase the number of exchanges they traded on suggesting that they will soon narrow the gap between the number of exchanges they trade vs their traditional peers that was identified in the survey. The key drivers of connecting to new markets were to realise greater arbitrage opportunities, to interact with different market participants and to improve price discovery.

Latency is a key issue, particularly when trading crypto derivatives vs spot for more than 60% of market participants.

• Specialist crypto markets are lagging traditional markets for latency (but far outperform traditional markets in respect of market data costs).

The full report can be downloaded here.

Avelacom will use this data to build more points of presence (PoPs), increase its connection capacities with AWS, Alibaba and Cloudflare public clouds and collaborate with exchanges to improve their infrastructure resilience and prevent current infrastructure failings aimed at increasing opportunities for traders arbitraging between venues.