Cutting Through Crypto’s Complexity in Search of the Optimal Trade

As crypto trading seemingly becomes ever more complex, with liquidity and opportunities fragmented across many different chains, CEXs, and DEXs, traders find that the idea of a “perfect trade,” where there is complete insight, control, and predictability over the outcome, is ever more elusive. However, one-stop trading shops, such as cross-chain protocol RocketX, are now providing a way to rise above the noise and seek out the market opportunities with the most potential – no matter where they exist.

Trading has evolved a long way from its rudimentary beginnings of bartering for goods. However, even the sophistication of structured derivatives and high-speed algorithmic trading systems that are now staple features of TradFi can’t compete with the inherent complexity that now exists in the crypto markets. Due to a fundamentally different market structure, many more variables are involved when trading digital assets, making it far more challenging to gain critical insights into the profitability or risk of any particular position.

A Unique Set of Challenges

To draw a comparison, a stock trader typically has only one venue on which they can trade a given asset in their home jurisdiction, making price discovery relatively straightforward. In contrast, cryptocurrencies can generally be listed on any centralized trading venue, while DEXs can list any token issued on a supported underlying blockchain. As a result, there is no unified price and, indeed, plenty of opportunities for arbitrage across different platforms.

However, the many other variables involved make it difficult to identify such opportunities. Different blockchain platforms can vary in settlement times, meaning there will be differences in slippage. There are also variations in gas prices and platform fees, which can make a significant difference to profitability, particularly when trading at leverage – yet another variable.

Crypto’s market structure also leads to fragmentation of liquidity across many different trading venues, meaning that many smaller trading platforms may be unable to support large trades due to insufficient depth of liquidity. Furthermore, the fact that many platforms don’t offer self-custodial trading means that traders may find themselves holding balances across multiple exchanges – and exposing their holdings to the risks of hacks or collapses.

In the blockchain sphere, cross-chain swaps can also introduce yet more complexity. Historically, the only way to transfer value between blockchains was by using a CEX. The emergence of bridges has alleviated some of the clunkiness involved, but asset bridging can still be a multi-step process for many traders.

Seeking Straightforward Information

Despite all this complexity, throughout the ages that trading has existed, the fundamental needs of a trader haven’t changed. They simply need enough information to answer the question – will this trade be more or less profitable than that trade?

One project that could now make it easier to answer this question is RocketX. It aims to be a one-stop shop for DeFi users, simplifying access to the hundreds of blockchains, explorers, exchanges, and wallets via a single, secure user interface. The RocketX protocol aggregates over $100 billion worth of liquidity from over 450 CEXs and DEXs, working like a search engine to find the best prices at the best rates based on variables including slippage. Users have access to liquidity from over 200 DeFi ecosystems, with a rapid response time of under one millisecond.

RocketX also includes its own integrated cross-chain bridge with access to over 20,000 assets, allowing traders to swap any token for any token, regardless of the platform on which it was issued. All transactions are fully self-custodial, allowing traders to receive tokens into any wallet address of their choice.

The RocketX API has also just launched in beta, allowing application developers to integrate the protocol’s powerful trading functionality into their own dApps. The project also offers a share of platform fees with app partners, providing an additional revenue source for the app.

TradFi Movers Join the Fray

The complexity inherent in the crypto markets is not going away – in fact, all the signals show that the landscape is set to become even more expansive and layered as TradFi continues to extend its reach into the digital asset sector. In early December, French banking giant Société Générale announced that it was launching its own euro-backed stablecoin, called EUR CoinVertible, which will be available to customers using its investment banking services.

The move came only days after Brazil’s largest lender, Itau Unibanco, announced it would launch crypto trading services for its clients. Furthermore, the recent rally in crypto prices means that trading volumes on established platforms are surging, indicating that there is still further potential for growth in the digital asset services sector.

The growing anticipation of Bitcoin ETFs and the upcoming halving means that traders should expect more market action and yet more complexity and fragmentation ahead. However, this will be tempered by the increasing recognition that there’s a growing appetite for tools and services that can cut through the complexity and make the crypto trading experience more appealing.