Long Live Volatility

Long Live Volatility

For the majority of participants in the cryptocurrency markets, this year will likely go down as crypto’s annus horribilis. 

But for a certain breed of trader, 2018 has simply been business as usual. CountingHouseFund, an actively traded crypto hedge fund which came to market just over five months ago, has so far doubled its fund value. Its secret? No-one knows precisely as its algorithms are a closely guarded secret. But, according to the funds’ own managers, the key is volatility. “Generally speaking, the more volatility in the markets, the stronger the fund’s growth,” a rep stated on the project’s Telegram channel.

And it is the relatively high volatility of crypto markets – compared to traditional markets – that has been attracting an increasing number of margin traders from traditional finance into the crypto space.

Whereas the crypto community generally squirms at events such as the $500m heist of Japanese crypto-currency exchange earlier this year, margin traders welcome these kinds of developments – good or bad – because they introduce further volatility into the markets, their staple diet.

Trader Shadowing

But the number of traders who can make long-term profits from margin trading – and specifically margin trading targeting market volatility – is a relatively small one. It is an elite club within the crypto community.

So it is in this context that NordFX, a crypto-currency trading platform, has now created a new service which it hopes will democratise the ability for traders more generally to take advantage of crypto’s inherent volatility.

Known as Meta Trader 5, the principle behind the platform is to allow its users to gain access to trading insights from experts, and to do so with leveraged positions – for every $100 committed to the trade, a user can leverage positions up to 1 BTC within the market.

From there, traders can then enter into head-to-head trading positions with other users. Markets are defined by traders themselves – they either create their own markets, or enter into opposite positions of markets created by others.

Similar platforms exist within traditional finance, but the concept is new to crypto – and, given crypto’s greater market volatility, the phenomenon is likely to draw more traders away from traditional platforms.

“The most important aspect, from our point of view, is that we are providing a service that allows traders to engage with crypto in a more meaningful way – by giving access to resources that develops improved understanding of market behaviour, and the means to create their own markets,” states NordFX Senior analyst John Gordon.

Whilst there had been indications in recent weeks that the crypto markets may have been settling down, Bitcoin’s overnight crash of 15% has shown that commentators proclaiming a new found stability within crypto were jumping ahead of themselves.