No doubt there are many, many people around the world who wish they have bought bitcoin back when it took several tokens to buy a pizza and are wondering if they should buy now that prices have, if not crashed, at least tumbled considerably. David Weisberger, CEO of CoinRoutes, an algorithmic trading platform for digital assets, has a clear eyed view of crypto trading.
We recently asked him about trading in crypto, where retail investors fit in, and what the pros know that everyone else should hear about.
Grit Daily: Would you say that trading in the crypto market is any riskier than trading in traditional markets?
David Weisberger: Potentially, but not necessarily. Crypto offers more leverage than traditional markets,
particularly in perpetual swaps and futures, but traders do not have to take advantage of that
leverage. From a counterparty risk perspective, there is no central counterparty, so that implies
more risk. That being said, the real time risk engines of crypto exchanges mean that there is
lower systematic risk, while 24 hour trading means there is more time to reduce risk when
necessary.
Grit Daily: Do you know of any strategies traders may use to reduce this risk with crypto?
David Weisberger: There is no need to use leverage to trade in crypto and even if one does want to use it, they can use the appropriate amount adjusted for the volatility of the asset. To be clear, if trading an
asset that is 3 times more volatile than the traditional assets one normally trades, then use 1/3
the leverage. Other risks in crypto include custodial risk, but that can be mitigated by using
counterparties who insure deposits and the appropriate multi-signature software for transfering
assets.
Grit Daily: Have you noticed any hesitation from institutional traders when it comes to crypto trading? Are there any ways to reduce this hesitancy?
David Weisberger: It depends on how one defines “institution.” Traditional institutional buy and sell side firms
hesitation is quite real and emanates from their compliance departments due to a lack of
regulatory clarity in the U.S. This would be mitigated if a bill such as recently put forward by
Senators Lummis and Gillibrand became law. Hedge Funds, however, are moving to trade
crypto assets at an accelerating pace.
Grit Daily: How does the platform Coinroutes provides help traders looking to get into crypto?
David Weisberger: CoinRoutes helps in multiple ways, but primarily by allowing traders to be confident in how to minimize transaction costs. Our system achieves prices superior to optimal smart routing and
provide institutional quality Transaction Cost Analysis on all the trades executed.
Grit Daily: What benefits do professional or institutional investors get from using the Coinroutes
platform? Are there any benefits for traders already experimenting with crypto?
David Weisberger: In addition to trading at lower cost per trade, the CoinRoutes system is dramatically more cost effective for firms. Instead of hiring programmers and paying datacenter and infrastructure
costs, CoinRoutes typically will offer its trading software for less money in the aggregate.
Considering that our software is the result of 15 years of developer effort and routinely
outperforms smart routing, the result is substantial net savings.
Grit Daily: Do you think now is a good time to get into crypto trading? Why or why not?
David Weisberger: As Warren Buffet says, “buy when others are fearful and sell when they are greedy.” At this point, there is substantial fear in the crypto market, but there is also a certainty among
participants that the market is here to stay. As a result, while DeFi trading via distributed
exchanges is viewed as extremely risky, there are still good opportunities for traders to
profitably implement strategies on trustworthy centralized exchanges or with well capitalized
market makers that are rapidly maturing.
Grit Daily: Do you still see a lot of potential for growth in crypto, or has it already hit its peak?
David Weisberger: Crypto is probably comparable to Internet technology in the 1990s, with the investable assets more comparable to those which existed in 2001. I say this because the actual technology to create an internet of value is in its infancy, but investment in protocols and use cases ran ahead of the technology twice already (in 2017 and 2021-22). The potential, however, is enormous in
three distinct areas:
1) Bitcoin as the base layer to transfer value seamlessly on a global basis. While individual
transactions will likely use networks (such as Lightning) built on top of Bitcoin, the base
layer is likely to be THE store of value for the digital world. Despite prices sinking, the
adoption metrics have been improving.
2) DeFi as disruptive technology to introduce competition and efficiency to financing
businesses globally. Much of today’s DeFi is based on regulatory or tax arbitrage and
the protocols & businesses are immature, but there is substantial promise for the
technology.
3) Web3 including NFTs and individuals retaining control and value of their own data and
application usage. This is a very broad topic, but I will use one example to illustrate.
Consider the immense value created by open source software. Most of that was done
without compensation to developers, so imagine what could be created with financial
incentives built into the process. Similarly, consider the potential if all creators had the
means to earn value directly without paying intermediaries…
