Cryptocurrency Trading: Analysis of Exchanges and Strategies Report

This report provides a detailed analysis of cryptocurrency trading. It begins by defining arbitrage trading and its role in market efficiency. The report then compares the pros and cons of various cryptocurrency exchanges, including Binance, Coinbase, Huobi Global, Okex, Bibox, Kucoin, Bitfinex, and Bitmex, focusing on interface, product offerings, liquidity, and fees. The report also explores the practical applications of price ladders and price ranges in trading, explaining how they can be used to maximize profits and efficiency. A comparison between fundamental and technical analysis is provided, discussing their strengths and weaknesses in identifying profit opportunities. Furthermore, the report outlines several effective trading strategies for cryptocurrencies, such as support/resistance levels, hammer patterns, and trend lines. Finally, the report concludes with an explanation of derivatives markets and leveraged trading, including their benefits and risks.

Running Head: CRPTOCURRENCY TRADING
CRPTOCURRENCY TRADING
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to Question 1.................................................................................................................2
Arbitrage Trading...................................................................................................................2
Answer to Question 2.................................................................................................................2
Pros and Cons of Exchanges..................................................................................................2
Answer to Question 3.................................................................................................................7
Uses of Price Ladder and Price Ranges in Trading................................................................7
Answer to Question 4.................................................................................................................8
Fundamental versus Technical Analysis................................................................................8
Answer to Question 5.................................................................................................................9
Strategies Used in Trading Cryptocurrencies........................................................................9
Answer to Question 6...............................................................................................................10
Derivatives Markets and Leveraged Trading.......................................................................10
Reference..................................................................................................................................11

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Answer to Question 1
Arbitrage Trading
Arbitrage is technique that is use for taking benefit of the price differences in the
substantially similar assets all across different markets or different types of the instrument.
This process is consists of simultaneous selling and buying of asset for getting profit from the
discrepancy in price in the two different exchanges and markets. The existence of the
arbitrage opportunities helps in keeping the financial markets liquid and efficient and it
ensures that larger deviations of price does not exist for the extended periods. Arbitrage is
consists of simultaneous selling and buying of the stock in future or spot for gaining
difference for gaining differences in price (Bakar and Rosbi 2017).
It is the strategy to take advantages of the price differences in various markets for
same asset. For this to take place, there needs to be situation of having at least two equivalent
assets with the differing prices. It is the situation, where trader can get profit from asset’s
price imbalances in the different markets. One of the simplest form of arbitrage is to purchase
asset in market, where price is lower and simultaneously selling assets in market, where price
of assets are higher. Arbitrage is widely used strategy of trading and probably it is the oldest
strategies of trading to exist. Arbitrageurs are the traders, who are engaged in strategy. This
concept is related closely with market efficiency theory. This theory states that for the
markets to be efficient perfectly, there should not be opportunities of arbitrage that is all the
equivalent assets are required for converging to the same price. Market efficiency is
measured by convergence of prices in the different markets (Bauriya et al. 2019).
Answer to Question 2
Pros and Cons of Exchanges
Binance

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Binance is brand new website of new currency exchange trading that is continuously
increasing its level of popularity and many have shifted into this website of cryptocurrency. It
strives to become biggest players on market by the help of providing decent technology of
trading and huge array of the pairs of cryptocurrency to trade (Bulut 2018).
Pros:
 Lower fees.
 Stable mobile apps.
 Eighty or more than eighty altcoins are acceptable and tradeable.
 Anonymous accounts with the generous limit.
Cons:
 Slow support of customer.
 Buggy platform.
 No support for the fiat.
Coinbase
Coinbase is the largest Bitcoin broker of world and is available to the users in more
than 55 countries.
Pros
 Higher buying and liquidity limits.
 Easy way for the new users for buying bitcoin.
 Instant purchase available with the credit card as the backup.
Cons
 Limited methods of payments.

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 Tracking can be done on the way users spend bitcoin.
Huobi Global
Huobi Global is global exchange of crypto that is offering inviting platform for
trading cryptocurrency with the wider support for various altcoins and larger variety of the
stable coins, with its own invention of HUSD that is USD backed stable coin.
Pros:
 Competitive fees.
 Pre-trade programs of education for the new users.
 Access to wide ranges of the digital tokens and coins.
 Available on the Mac operating systems and Windows as well as through Android
and iOS trading apps.
Cons:
 It has been previously accused of falsifying the volumes of trading.
Okex
The exchange of Okex is leading exchange of the virtual currency that allows for
buying and selling different currencies. It was founded in 2014 and it was backed by the
millions of dollars in the investment from funds of venture capital such as Giant Network
Group.
Pros:
 Easy registration.
 Good Interface.
 Wide variety of the coins.

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Cons:
 The volume is suspicious and there are much fake volume on the Okex.
 There is gateways of only third party fiat.
Bibox
Bibox is new exchange of cryptocurrency that is hit the market. It was developed by
teams, which has created the exchange powerhouses of Chinese Bitcoin that are OKCoin and
HuoBi.
Pros:
 The exchange of Bibox is available to the users around world.
 It is flexible, easy to use, intuitive and fluid.
 Great design of platform
 Little downtime.
Cons:
 The platform is not English and it can be difficult for understanding at times.
 It is based in China that means it is subject to rules and regulations enacted by the
country of residence.
 There is requirement of minimum withdrawal amount.
Kucoin
Kucoin is well-known exchange of third-party that allows the users for selling and
buying cryptocurrency. It is the platform that is regarded often as the cheapest exchanges in
industry because it offers super lower fees of trading.
Pros:

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 It is having largest lists of the supported cryptocurrencies.
 It have ultra-low fees of trading.
 Good levels of liquidity and volumes of trading.
Cons:
 It is not regulated.
 There is no offering of offline wallet.
 It does not support the fiat currency withdrawals and deposits.
Bitfinex
Bitfinex is the well-known name in community of crpto. It was opened officially in
2012 by Bitfinex limited, which is Hong Kong based company. Its site offers the trade
markets for about one hundred sixty cryptocurrencies, for example Monero, Dash, Ethereum
and huge amount of the other coins (Xu 2018).
Pros:
 It is user friendly interface.
 There is availability of Demo.
 There is no fees of deposits and withdrawal for the crypto.
Cons:
 Currently deposits are paused.
 The supported fiat currency is only USD.
 It was hacked recently, hence, it has created doubts regarding this site.
Bitmex

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Bitmex was started in 2014 by the company that is known as HDR Global Trading
Limited. It has performed over $27 billion worth of the Bitcoins. This platform of trading
entails two methods of trading, which are swaps and futures.
Pros:
 The fees are competitive.
 Advanced margin trading.
 Higher liquidity.
 Customizable user interface.
Cons:
 No fiat money.
 It is difficult to use for the beginners.
 No mobile apps.
Answer to Question 3
Uses of Price Ladder and Price Ranges in Trading
Professional traders in the developed markets uses price ladders for getting the
understanding of current supply and demand with the help of analyzing price movement’s
nature and more significantly, order book. In actual sense, Price ladder helps in showing the
orders, which are placed at different ask and bids levels on market. Hence, this is also known
as SuperDOM, in which DOM stands for the depth of market. For the execution of the trades,
professional day traders, prop-trading firms and scalpers around the world uses price ladder.
This is the improvised and refined version of order book or snap quote. It is with of this,
trader can get the experience of the unique vertical form for maximizing efficiency and
profits (Choi 2018).

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Each of the range of trading has support price, the price at which securities are
purchased by traders and resistance price, the price at which securities ate sold. The trader
uses variety of the indicators, for instance price and volume action for entering into or exit
from the trading ranges. Ranges are referred to difference in between lower and higher prices
for index or security over specific time period. These ranges defines difference between
lowest and highest prices traded for the defined period, for instance month, day or year. The
changes amount in range is compared to all overall price, which depicts level of the volatility
that is experienced by particular security. The volatility amount varies from one asset to the
other and from the one security to the other. The investors prefers low volatility. Hence,
prices significantly becoming more volatile are said to show turmoil of some kind in market
(Haokun 2019).
Answer to Question 4
Fundamental versus Technical Analysis
One of the most common methods used by investors for analyzing risks and benefits
associated with the long-term investments in stock market is consists of fundamental analysis
and technical analysis. The long-term investments looks for the investments, which offers
greater probability of maximization of their returns over longer time period. It is with the help
of understanding the differences between technical and fundamental analysis, the long-term
investors gives themselves access to the stock picking strategies, which they can use to make
profitable decision of investment (Haokun 2019).
Fundamental analysis is considered to be more theoretical because it seeks for
determining underlying long-term value of the security. However, technical analysis is
considered to be more practical because it helps in studying financial instruments and
markets as they exists, even when trading activity appears to be rational at times. Technical

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analysis evaluates the securities with the help of statistics. Investors and analysts uses the
data on the market activity for instance stock prices, historical return and trades volume to
chart the patterns in movement of securities. In comparison to fundamental analysis that
attempts for showing intrinsic value of the specific market or security, technical analysis is
meant for providing insights on security’s future activity or market as a whole (Jackson
2017).
Answer to Question 5
Strategies Used in Trading Cryptocurrencies
Short-term trading is the most common approaches of trading that is used in today’s
markets. Often used by the stock market and forex traders of market, short-term trading has
extremely become popular with the traders of crypto and because of higher volatility of the
cryptocurrencies. Following are the most favorite strategies of trading used by the traders of
crypto on reliable and high performing DEX:
 Daily Support or Resistance Levels: All the strategies of short-term trading in the
market of volatile cryptocurrency market are required to be based on detailed
technical analysis. The aim of short-term traders for small to the moderate gains as
time frame is quite narrow. At all such levels such as entry, stop loss and take profit
should be quite precise. The strategy of trading based on support of intra-day and
levels of resistance is most popular strategies for the traders of short-term (Navadkar,
Nighot and Wantmure 2018).
 Hammer Pattern: The pattern of Hammer candlestick has proved to be most
effective strategies of short-term trading. This pattern is based on candle, which looks
like hammer that is long lower wick and the short body at top of candlestick with the
little or no upper wick. It occurs in bearish market. The hammer candle formation

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suggest that market tries to create short-term bottom at least. The second candle
following hammer candle needs to be strong bullish candle that is also pointing
towards market reversal.
 Trend Lines: The strategy of trend line is the most basic strategies trader of
cryptocurrency can use in the active trading. The trader are required to closely watch
for identifying trend lines that connects at least three consecutive highs or lows (Jani
2018).
Answer to Question 6
Derivatives Markets and Leveraged Trading
Derivatives can be either exchange traded or it can be traded over the counter. The
exchange is referred to formally established stock exchange in which securities are being
traded and they are having defined set of the rules for participants. However, OTC is dealer
oriented securities market that is unorganized market where trading happen by the way of
emails, phone or others. The trading of derivative on exchange are regulated and
standardized. However, OTC derivatives is consists of greater proportion of the derivatives
contracts but it carries the higher counterparty risks and it is unregulated. These particular
financial instruments helps in making profit by the help of betting on future value of
underlying assets (Silva et al. 2019).
Leverage trading is also known as margin trading. It is the system that allows trader
for opening the positions that is much larger than that of his own capital. The trader are
required for only investing certain percentage of positions that is affected by various changes
and factors between brokers, platforms and instruments. Leverage is the facility that helps in
enabling to get much of the larger exposure to market in which trader is trading than the
amount that is deposited by trader for opening trade (Van Adrichem 2018).

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Reference
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Bitcoin Exchange Rate with Trading Volume: An Analysis of High Frequency Data in High
Volatility Environment. International Journal of Advanced Engineering, Management and
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Bakar, N.A. and Rosbi, S., Bitcoin transaction framework analysis from perspective of
Islamic Finance: A contemporary challenge of Islamic Finance in digital money globalization
condition.
Bauriya, A., Tikone, A., Nandgaonkar, P. and Sakure, K.S., 2019. Real-Time Cryptocurrency
Trading System.
Bulut, A., 2018. Cryptocurrencies in the New Economy. Journal of International Trade,
Logistics and Law, 4(2), pp.45-52.
Choi, J., 2018. Modeling the integrated customer loyalty program on blockchain technology
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Communication Engineering, 4(2), pp.388-391.
Haokun, S., 2019. Security Analysis of Cryptocurrencies in ConsensusAlgorithm.
Jackson, P., 2017. Cryptocurrency: The Ultimate Beginner? s Guide to Trading and Investing
in Cryptocurrency for Maximum Profit. CreateSpace Independent Publishing Platform.
Jani, S., 2018. An Overview of Ripple Technology & its Comparison with Bitcoin
Technology.
Navadkar, V.H., Nighot, A. and Wantmure, R., 2018. Overview of blockchain technology in
government/public sectors. International Research Journal of Engineering and
Technology, 5(6), pp.2287-2292.