Market & Analysis

A 20-year-old crypto market-maker who skipped college breaks down his Reddit-inspired approach to trading – and outlines why he sees ether displacing bitcoin as the ‘king cryptocurrency’


Matthew Tweed
Matthew Tweed is a 20-year-old crypto market maker.

  • Matthew Tweed runs his crypto firm from his parents’ house in the suburbs outside London.
  • 20-year old Tweed told Insider “around 90%” of the conversations he has about crypto take place on Reddit.
  • He backed ether to eventually displace bitcoin due to its technological advantages.
  • See more stories on Insider’s business page.

Matthew Tweed learnt his first valuable lesson about cryptocurrency six years ago, when he was just 14 years old.

“I got into investing in crypto because I found an interesting token that was meant to be for online marketplaces, and I moved from that to bitcoin,” Tweed told Insider. “I can’t remember what the project was called – it didn’t go anywhere, but that showed me that there’s a lot of cool projects, but a lot of projects won’t end up working out.”

Tweed now runs his low-latency trading firm, Pine Financial, from his family home in Woking, a medium-sized commuter town, 25 minutes from London. He believes 100% annualized gains are possible in that area of cryptocurrency trading.

Low-latency, or market-making, trading refers to the use of algorithmic trading to increase profitability. Tweed’s bots execute trades on crypto exchanges like Deribit.

“I managed to get into the market-making space without eight figures behind me, but it’s not very accessible,” Tweed said. “You have to put in a lot of time to become competitive.”

Tweed has spent a significant amount of that time on Reddit. He said his first break in market-making trading came from an interaction with another user on the social networking site.

“At the very end of 2018, I got into low-latency trading,” he said. “That came from someone I met on Reddit – to be honest, 90% of what I’ve done and the people that I’ve met has come from the various sub-reddits on algo-trading.”

“I frequent r/algotrading for a lot of my work,” Tweed added, referring to a Reddit forum with 1.2 million users that focuses on quantitative trading and automated strategies. “The specific subreddits are good, but places like r/cryptocurrency don’t have much good content, so I barely look at it.”

Tweed embarked on a career in algorithmic trading just as his classmates were beginning to apply to college. For him, a formal education had limited appeal, given his success with cryptocurrency trading.

In terms of which cryptos he likes the most, Tweed said he believes the ethereum network’s superior technological capabilities will enable its ether token to surpass bitcoin.

“Ethereum will be far more scalable – that should lead the way for being able to make much better applications, so you can have a proper smart contract based decentralized system,” he said. “You’d never be able to build smart exchanges on top of bitcoin – there’s not a platform for it.”

“Long-term, I think there’s a good chance ethereum will become the king cryptocurrency,” Tweed added.

Ether has been volatile this year, surging from $730 to a peak of almost $4,000, before collapsing to under $2,000 weeks later. The token has risen by around 10% to $3,140 since last week’s implementation of the so-called “London hard fork” upgrade, which initially burned around $8,900 worth of coins per minute.

“I think Ethereum 2.0 is going to be great for scalability in the crypto space,” Tweed said. “Many smart contract platforms claim better scaling than Ethereum, but they’re often extremely centralized, or make other fundamental trade-offs, which defeats the purpose of crypto.”

However, despite his own success as a relative outsider, Tweed said investors need to be careful before throwing themselves into the cryptocurrency space.

“Cryptocurrency is fairly small and specialist – I wouldn’t recommend people just throw money at it,” he said. “There’s a lot of ways that retail investors can lose money.”

“There’s a need for regulators to have knowledge of the industry, but in general, I’m in favor of exchange regulation, risk disclosures, and education to protect retail investors,” he added.

Tweed pointed to ‘sh*tcoins’, such as the highly volatile dogecoin, as an example of an area where retail investors could potentially lose money without tighter regulation.

“[Sh*tcoins] are amusing, and I enjoy watching them, but I wouldn’t invest in them or hold them,” he said. “The price may go up in the short-term, but there’s no reason it would in the long-term. In the short-term it’s just supply and demand – people jumping on the meme-coin.”


Source link

Market & Analysis

Bears lick their paws while Bitcoin price blasts through $46,000


Bitcoin (BTC) hiked 20% in seven days in an unexpected move that brought the price to its highest level since May 18. The price appreciation happened despite U.S. Treasury Secretary Janet Yellen reportedly supporting a broader definition of crypto companies in the HR 3684 infrastructure bill currently being considered in the U.S. Senate.

Even though Bitcoin price continues to surge higher, investors are worried that regulation could erase the recent gains, but derivatives indicators show no sign of confidence from the bears.

Bitcoin price at Coinbase, in USD. Source: TradingView

The proposal mandates that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service, including validators, miners, and protocol developers. However, Senator Cynthia Lummis and Senator Pat Toomey are lobbying to focus those requirements exclusively on brokers and the exchanges.

Holders keep ‘hodling’ and inflation benefits the crypto market

On-chain analysis firm Glassnode highlighted that coins held for 12 months and longer are not being moved despite the strong rally, indicating a “holding behavior.” Meanwhile, the Crypto Fear and Greed Index, a well-known indicator that tracks volatility, volume, social media, dominance and Google searches, moved from “moderate” to “greed.”

The 74 point indicator reached on August 8 was the highest level since April 18, indicating that investors firmly believe that the bottom of this cycle is behind us. The index ranges from 0 (extreme fear) to 100 for maximum greed.

It is worth noting that the United States Bureau of Labor Statistics will release July’s inflation report on Wednesday, with markets forecasting a 0.5% increase. Cryptocurrency markets also reacted positively after Federal Reserve chairman Jerome Powell failed to explain how the 5.4% year-over-year increase on the consumer price index (CPI) would recede.

Margin and futures markets show little activity from bears

Analyzing derivatives indicators can help confirm whether these positive expectations are reflected in professional traders’ data. The first one is the Bitfinex margin long ratio, which drastically changes when bearish bets are made.

Bitfinex BTC margin longs / total margin contracts. Source: Bybt

The above chart shows that after a brief period from July 9 to July 19, Bitfinex margin longs were back at 90% or higher. However, the ratio has not seen a downturn since then, displaying a lack of confidence from bears.

Bitfinex margin traders are known for creating positions of 20,000 or higher BTC contracts in a very short time, indicating the participation of whales and large arbitrage desks.

Next, analysts should evaluate the futures market by measuring the percentage of top clients either betting on the upside (longs) or downside (shorts). Keep in mind that the outstanding amount in longs and shorts contracts are balanced at all times in futures markets.

Bitcoin futures top traders aggregate long-to-short ratio. Source: Bybt

Bybt consolidates futures markets data from Binance, OKEx, and Huobi top traders. The current 1.14 indicator favors longs by 14% among those exchange’s largest users. Therefore, there has been a significant change over the last 12 hours because these traders were previously net short.

Both the Bitfinex margin and derivatives exchange futures markets point to a lack of confidence from bears right as Bitcoin breaks through the $45,000 resistance. This suggests that the recent 20% rally is well-founded and not simply a blip or the result of heavy liquidations.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.