Prices can move quickly in cryptocurrency markets. Liquidity, or the ease that an asset can be bought or sold at a stable price on a given market, is important to any kind of trading. But when it comes to the fragmented cryptocurrency market — which is now served by more than 1,000 exchanges big and small — traders sometimes experience large price differences and spreads between different platforms, especially for altcoins.
A Singapore-based licensed brokerage, the Broctagon Fintech Group, says it wants to improve the cryptocurrency industry’s liquidity problem by proposing a new global standard for connecting crypto exchanges. The company today announced the launch of WorldBook, a cryptocurrency STP (straight-through-processing) network with an aggregated liquidity pool.
“We found that Bitcoin had an average negative spread of US$10, even amongst the major exchanges. This means that with over US$15.5 trillion in trading volume over the past year, traders could have saved US$5.7 billion in spreads and this is for Bitcoin alone, which is already the most efficient and liquid digital asset,” said Don Guo, co-founder and CEO of Broctagon Fintech Group, in a statement. “The price disparity could only be worse for the thousands of altcoins across many smaller exchanges.”
WorldBook aims to aggregate the individual order books of crypto exchanges to create a unified order book that displays to users a global price discovery and best bid and offer. Instead of each crypto exchange operating in its own silo that could represent less than 1% of the total industry, crypto exchanges that are part of an aggregated liquidity pool could gain access to real-time pricing for up to 85% of the market, according to Broctagon.
“We engineered the WorldBook infrastructure taking a page from the fundamentals of foreign exchange (FX) interbank liquidity,” Guo said. “With our experience as a regulated FX liquidity provider, we believe the Prime of Prime (PoP) model has the potential to disrupt the industry.”
“Liquidity challenges exist for newer and established exchanges alike. The former requires extensive capital for marketing to capture enough users for a liquid order book while the latter often pay hefty fees for external market maker services to drive profitability,” Guo added. “The smaller exchanges [also] face the challenge of liquidity,” Guo added. “We bridge the liquidity from the different major exchanges and we push it to the smaller exchanges.”
According to Broctagon, exchanges can connect to the WorldBook platform for free with the platform, and the platform takes a trading volume-based fee. With the bid and ask prices coming from different sources, Guo said exchanges could potentially get a negative spread most of the time. “It gives an arbitrage opportunity and it gives our clients a lower cost compared to the trading volume fees that we charge. So it’s a win-win situation for everyone.”
The platform is already connected to major exchanges including Binance, Huobi, OKEx and Kraken, according to Broctagon, which aims to have 40 exchanges on board by next year.
Beyond a liquidity network, Worldbook is also an open initiative to foster greater collaboration in the industry. Its members include Huobi Group, FCA-regulated Archax, BitKub, RegTech companies such as Horangi and Cypnopsis as well as decentralized finance (DeFi) and blockchain firms like Hodlnaut and Bholdus.