It is no surprise that high-frequency trading has already found a conducive home in the cryptocurrency trade market. Cryptocurrency trading has also surged to extremely high levels. Innovation in this market has been the order of the day from early on. The most recent entrant tool into this space is definitely the high-frequency trading, better known as HFT. This tool enables traders to rake in huge amounts of intra-day profits, and who can doubt that this is the reason as to why it has been warmly received by almost all cryptos and their users? Absolutely no one.

high frequency trading hft

So What Does HFT Mean?
High frequency trading is a phrase that means using high class software and algorithms that enable cryptocurrency traders to perform thousands of high-speed transactions automatically within a particular trading day. Traders might buy millions of dollars worth of crypto in the morning, for instance, hoping that their value will increase by a large margin by afternoon. The trade has since become particularly popular among ordinary stay-at-home investors, proprietary trade firms, hedge funds and institutions as well. Moreover, investors can now build their trading strategies in an automatic fashion and with varying sophistication based on set parameters. All this can be attributed to the rise of cryptocurrency trading bots which enable traders to build their strategies and then execute them on their behalf.

It has thus become a crucial part of crypto assets trading alongside regulated exchanges, asset-backed tokens, OTC brokers, security tokens, crypto funds, and multi-billion market capitalization. Trade has been made even easier by the volatility in bitcoin prices, which offers investors (both ordinary retailers and institutions) high frequency trading an opportunity galore.

Investors in this trade now have it easy, unlike in the past, when crypto currency trading was making its way onto the internet, which was characterized by high levels of insecure exchanges and illegal entry by rogue strangers. Fast forward to today, making peer-to-peer transactions when trading is a very easy feat like it has never been.

Impact of HFT on Cryptos
Pundits and regulators continue to demonize high frequency trading, arguing that it gives HFT investors an unfair advantage over other market participants. There is also another factor that has been constantly ruining its reputation by day - its perceived involvement in the 2010 flash crash. However, its proponents maintain that this trade adds more liquidity to the market, which in turn increases efficiency.

Many people argue that HFT might add more volatility to the crypto market but there is no reliable data to support the claims. But what we can all agree on is that HFT might not have a strong impact on the long term price development just because HFT traders have an advantage over other slower market investors.

hft high frequency trading

The Future of HFT
While regulators find High Frequency Trading a nightmare, it is more likely that this cryptocurrency tool will have more benefits than harm to its participants. Since we are enjoying immense support from crypto, we cannot deny that this trade has hit a point of no return. With wild price swings in less than minutes, we can only guess that this trade will continue attracting more customers. It is only a matter of time.