Practicality vs Security is an everyday decision for traders. But, as news of hack compile, that decision curdles into a dilemma.
In this article, we‘ll cover why storing crypto on exchanges is a reality for most traders and how to make the most of it.
As anyone who’s ever sifted through an order book knows, trading opportunities come and go faster than the blink of an eye. For serious traders, waiting for that next tick translates into being “ready for action” at all times. Can’t argue with the logic, but what does it mean from a practical standpoint?
Aside from keeping an eagle eye on the order books, it means having funds locked and loaded on the exchange, ready to capitalize when that volatile moment occurs.
“Loading funds” would translate to moving cryptos on and off an exchange. But, as much as traders would like it to be, crediting and withdrawing coins is not instantaneous. Crediting a crypto exchange requires a confirmation before having the amount made available to trade. And even confirmed, further delays can occur from the exchange itself not crediting the deposit.
Of course, belated operations can take a toll on your P&L — and blood pressure! A couple of bad experiences in, frayed nerves devolve into reluctance — if not outright refusal — to move funds off the exchange. The choice is simple: to have large sums available in a single click or to pray a benevolent deity deposited funds will be promptly credited to your account.
Indeed, the choice is simple, but the rationale is wrong.
Armed with the best intentions, traders are shooting themselves in the foot.
Actually, they are shooting themselves in both feet.
Much in the same way people don’t patron a single restaurant, traders do not frequent a single exchange. Each trader has their pick of exchanges according to potential or preferred transactions. Which means that, for the sake of avoiding unpredictable transfer times, most traders have funds scattered across an array of exchanges.
Combining multiple patronage with reluctance to transfer, traders end up with funds stuck on an array of exchanges.
Today’s exchanges, however, were not meant to store funds indefinitely. By keeping funds into hot wallets — as opposed to cold wallets, traders are exposing their hard-earned coins to cyber-attacks.
Moreover, leaving money stored there leads to a major inefficiency for the crypto ecosystem as a whole: lack of liquidity (soon to be covered in another article).
Sidestepping the debate on coin liquidity and security concerns (which we oughtn’t because custody is the topic du jour in crypto), anyone can agree that having sums stuck anywhere sounds neither good, nor efficient.
Good form would be to switch between hot and cold wallets to balance fund availability and security. Once tech catches up — and allocating funds becomes as quick as cocking a gun — it might happen. Currently, though, there is no better alternative than leaving large amounts of crypto stored and exposed on spot exchanges.
Since traders are willingly taking this risk, we, at bitHolla, want to help them make the most out of it.
The solution we came up with is XRayTrade.
XRayTrade is our rapid crypto trading terminal and one-of-a-kind platform in the crypto sphere.
Once funds are allocated onto the terminal, you can start funneling them across multiple crypto venues — all of which can be monitored on a single screen. Indeed, smarter order routing enables easy trading across multiple exchanges, while features such as customizable macros and click trading cut down on execution time.
Finally, thanks to the implementation of Bitcoin’s lightning network, off-chain transactions will soon bypass most blockchain confirmations (and delays!).
Click here to learn more about XRayTrade and sign up here once you’re ready to level up your trading game!