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FLASHBACK FRIDAY: Bitcoin Never Sleeps: How Pantera Capital's Dan Morehead Trades The Digital Currency

Traders Magazine Online News, January 19, 2018

John D'Antona Jr.

Bitcoin. Ether. Ripple.

The list of tradable cybercurrencies goes on and on and everyone seems to be talking about these new securities as much as President Donald Trump and his Tweets these days. As the search for yield and alpha remains a central focus among institutional investors and the dreams of striking it rich are the focus for Joe Q Public, bitcoin remains the crypto everyone is talking about.

However, just recently there has been a pullback in these nascent markets. Bitcoin has lost about half its value since December – toppling from its high of $19000 to about $10000. Other cryptos are also in play, as Ripple, Ethereum and others are making news as alternative currencies with upside potential.

And the crypto trading universe continues to expand. Republic Protocol, a new blockchain project with ties to Kyber Network and other well-known projects in the space, has announced they will be building a decentralized dark pool for the trading of crypto assets. Initially, the company will allow large-scale trading between bitcoin, Ethereum and Ethereum-based tokens on a hidden order book, while on a public blockchain, to not affect the pricing of those assets.

In equities, dark pools are estimated to represent approximately 10-15% of the trading volume of all US stock trades.

Cryptocurrency trading has exploded recently, as daily trading volume has reached approximately $50 billion with a total market cap over $750 billion in upwards of 100 cryptocurrencies. With institutional investors arriving into the cryptocurrency market, the development of alternative trading systems is critical for trading large blocks of cryptographic assets while maintaining minimal price slippage and market impact.

Republic Protocol is proposing a decentralized open-source dark pool protocol facilitating atomic swaps between cryptocurrency pairs across the Bitcoin and Ethereum blockchains. Trades are placed on a hidden order book and are matched through an engine built on a multi-party computation protocol. This provides order execution without exposing market sensitive information such as price and volume at a certain position, which would provide an advantage to other traders.

Republic removes the need for a trusted intermediary to operate a dark pool and provides crypto-economic incentives through a protocol token for governance; enabling the development of a secure, decentralized, scalable dark pool protocol capable of handling billions in trading volume daily.

“Dark pools represent a large percentage of daily trading in traditional financial markets for a reason,” said Taiyang Zhang, CEO of Republic Protocol. “A dark pool enables institutional traders to protect their hand from public view while not adversely affect market prices when they are buying and selling large orders. We feel like there is an incredible opportunity to apply this proven concept to the world of cryptocurrency trading while also utilizing the inherent security of the blockchain.”

But, there are concerns in this new and completely unregulated market. Just this week, BitConnect, a cryptocurrency exchange closed it trading and lending platforms. On its website, BitConnect blamed media reports and a pair of Cease and Desist Letters it had received from Texas and North Carolina as the chief reasons for the closure.

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