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AlphaPoint Provides Liquidity to Bitcoin Exchanges

People in most countries still don't have access to a local bitcoin exchange, but AlphaPoint has made it their mission to change that. The company provides liquidity, by sharing order books across a range of exchanges.

Starting up a successful new digital currency exchange can be challenging, as customers are less inclined to use an exchange with few orders. The number of orders on an exchange reflects the liquidity of the asset. The less liquid the asset, the harder it is to buy and sell. The amount of trading that occurs results in volume.

Many countries do not currently have local bitcoin exchanges, and bitcoin is not likely to become popular in those countries unless there are exchanges with liquidity and volume. AlphaPoint, a New York based bitcoin exchange service provider, offers services that allow entrepreneurs to jump start bitcoin exchange businesses.

"In every place there is a fiat currency, there should be at least one digital currency exchange. We will help make that happen."
— – Joe Ventura, Alphapoint Founder

One of the services provided by AlphaPoint is the Exchange Remarketer. When a user buys a bitcoin on a local exchange, if the sell order was placed by the remarketer it will immediately acquire the appropriate amount of bitcoin from a third party exchange. A similar, reverse process satisfies users selling on a local exchange. This service provides smaller exchanges with the liquidity from exchanges with larger order books.

"We can also connect to non-AlphaPoint exchanges, including ANX, Bitstamp, BTCChina, BTCE, and Cryptsy.  More connections with other large exchanges are in the works and rolling out soon."
— – AlphaPoint

The partnership with major exchanges results in a significant increase in the pool of collective bitcoin orders which is a huge boon to all of AlphaPoint’s other customers, including the major exchanges themselves, making it a win-win situation for all involved.

AlphaPoint also offers a white label Exchange Platform, although other companies have offered similar white-label services such as BTCTrader, Draglet, and the open source WLOX. A previous contender in the white labelled exchange market, Bex.io, is now-defunct. While AlphaPoint is not the first provider to offer finished exchange websites and backends to new bitcoin start-ups, their offering comes with the backing of liquidity.

AlphaPoint has confirmed partnerships with at least eight exchanges, including Bitfinex, mexBT, Cointrader, and bitt. Bitfinex alone is one of the world’s largest bitcoin exchanges by volume, with approximately 20% of the total bitcoin trading volume worldwide and 37% of bitcoin trading in US dollars, according to Bitcoincharts.com.

Each of these exchanges have access to some impressive hardware and high-performance software architecture. The Exchange Platform can facilitate as many as a Million trades per second, or one Billion trades each half hour. Based on the same architecture used by major trading systems at some of the world’s largest banks, the platform can even handle High-Frequency Trading (HFT) and offers advanced risk systems, fail-safe modes, system monitoring and alerts.

This AlphaPoint services are not limited to bitcoin: alt-coins are also invited to the party. This gives the finished product the ability to trade any national fiat currency with any cryptocurrency of their customer’s choosing.

“Full ability to customize pairs allows your institution to add new tradable products. Examples include fiat to fiat, commodities to fiat and virtual to virtual.”
— – AlphaPoint

No longer will a new exchange struggle to grow their order book since AlphaPoint claims that they can customize and launch a new bitcoin exchange within 20 days. These fully hosted platforms are styled to order, and can display any local currency. In time, AlphaPoint hopes that every country will have an exchange using this service.

“With state of the art technology, AlphaPoint enables businesses to integrate with the fabric of digital currencies including Bitcoin.”
— – AlphaPoint

As AlphaPoint’s collective book of orders grows, from each new exchange added, liquidity will increase and trading will become more lucrative and useful for exchanges in the AlphaPoint family. It is conceivable that this dense liquidity pool could grow so desirable that a network effect could take hold, resulting in an increasing numbers of customers only using AlphaPoint exchanges, which may result in smaller non-AlphaPoint exchanges going out of business. The smaller AlphaPoint driven exchanges will always be less competitive than the exchanges providing the liquidity, as they charge a premium for using the larger exchanges order book.

Whether these smaller exchanges going out of business could be considered a threat to bitcoin’s decentralization remains to be seen. In theory each exchange is standing on its own two feet, and keeps its own order book, they simply sell currency from other exchanges too.

Taking their services to the next level, AlphaPoint’s has an ambitious plan to connect the order book directly to Wall Street traders, including large institutional traders, hedge fund managers and proprietary traders. According to AlphaPoint founder Joe Ventura the service "will allow institutions to open one account and get access to 20 exchanges."

To further this goal a partnership was announced in an AlphaPoint press release last week, with a company whose identity has yet to be revealed. This company will act as a “bitcoin clearinghouse” and is meant to be a "single contact point for wall street traders, responsible for vetting exchange partners and assuming counter-party risk," according to the release.

"Instead of connecting to each individual exchange one at a time, they can connect to one" and still “trade bitcoin across a big percentage of the industry"
— – AlphaPoint

Given the recent news of GBTC trades opening, with institutional orders starting to flood in already, this summer is starting to look really hot for bitcoin’s prospects on Wall Street.


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