Saturday, June 24, 2017

Money Stuff talks ETH crash

Matt Levine: 
On Wednesday, the price of ether -- the cryptocurrency of the Ethereum blockchain -- on the GDAX exchange briefly crashed from $328 to $0.10. The story seems to be that there was a big market sell order that blew through a lot of the buy orders on the book, pushing the price down.
What was missing?

All traders must submit a risk profile, the red/green span they are willing to tolerate.  The trading bot that executes the orders can translate risk profile into stop limits on the trade.  Round robin access to the tradebook then prevents the trading bot from jumping across a concavity, as happened.

It is mathematics that requires risk profiles and auto trading need to go together.  In the Redneck model, each trade bot starts with the user's token, which contains the necessary risk profile. The trading bot format makes analysis easier because bot the pit boss and trading bots are treated semi-equally on the stack.  But there are limited types of bots that can trade,and they can be tested simply to avoid the concavity problem.

No comments: