High Frequency Traders and Firms Will Loss Money Trading at BitMex, BitFinex, and Okex, New Study Reveals


Order Speed Analysis

A new study by Deribit, a crypto derivative exchange similar to BitMex, reveals that on average it will take 1.11 seconds for an order to be executed on BitMex. The exchange’s study went on to show that out of all their tests, 13.4 percent of orders were executed within 10 milliseconds and a further 20.8 percent of all orders placed took more than 1 second to execute. This is in stark contrast to Deribit order placement where on average order delays never exceed 6 milliseconds. At the same time, 89.6 percent of all trade orders are executed within 10 milliseconds and none took more than 1 second to fill. It’s even worse at BitFinex and Okex exchanges where delays exceed 120 milliseconds.

The test was simple and data was extracted from the top six exchanges. Here Dalbit recorded the time it took for a limit or market order to be filled. All testing machines were placed near all exchanges in questions to reduce unnecessary latency:

“We measured the time from the initial request until the confirmation that the order had been placed. To compensate for network delays outside the control of the exchange, we recorded the latency for a trivial API request. The duration for these trivial requests was subtracted from the duration of the order requests and the remaining time is assumed to be the true execution
time for a request.”

Regardless of the underlying objective, market participants are in the space to make money and it doesn’t matter the tradable asset/instrument in question. After registering 1000+ percent gains in last year’s super rally, cryptocurrencies are quickly becoming a melting pot of professional traders, retail investors and enthusiasts amazed by how quickly the sector has grown. Remember, yesterday marks ten years since Satoshi Nakamoto the elusive creator of Bitcoin laid out the crypto’s white paper.

Though cryptocurrency exchanges are vital as they act as the necessary bridge linking fiat to crypto or filling crypto-to-crypto orders, the quality of their services lies mostly on the exchange’s liquidity and secondly, on order execution speed. It’s not rocket science. Of course, you wouldn’t like to trade in an exchange where a simple BTC buy or sell cause prices to fluctuate costing you money neither will you like to trade in a super slow exchange where algos take eons to fill an order.

Depending on trading strategy, order execution should be lightning fast and almost instantaneous. This is so because high latency translates to lost opportunity. This is why this study is important for traders or brokers relying on algorithms that execute trades by the second. The faster the exchange’s speed, the higher the probability of making money and it appears that Deribit-who are by the way open for third-party verification of their data is perfect for high-frequency trading.