The different bitcoin traders

08 Jul 2021

The different bitcoin traders

The bitcoin trading ecosystem is unique. Our latest in-depth report focuses on all the different sections of the ecosystem, but it’s also important to look at the traders who participate.

Bitcoin trading is available on more than 450 exchanges, all offering trading infrastructure for participants to buy and sell bitcoin. The users of these platforms vary in kind – and numerous exchanges position themselves to serve the different traders.

This blog post is an extract from our latest report: “The Bitcoin Trading Ecosystem”.

The chart below shows that the average trading size for the pair BTC/USD varies between exchanges and gives us a deeper understanding of the users on each platform. For example, LMAX Digital has the largest average trade size, with a trade size of ~$11,000 in May 2021, according to data made available by the data provider Kaiko. On the other hand, the likes of Binance US, Itbit and Bittrex, seem to be more occupied by smaller traders, with an average trade size of ~$1,000.Average Bitcoin Trade Size by Exchange

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Source: Kaiko

Small fishes

Some market participants are small retail customers seeking to buy or sell bitcoin and other cryptocurrencies vs. their local currency. They primarily participate on exchange platforms as takers and are relatively careless about bid/ask spreads and other fees.

Bigger fishes

We also have more sophisticated market participants who could also be classified as retail traders. These are more price sensitive; they seek platforms where the spreads and fees are lower. You find these traders on the major retail platforms, usually with accounts on several exchanges, and they are relatively active. The battle between exchanges to get these customers is fierce. They could provide a significant revenue stream, but are open to changing platforms. Exchanges seeking to attract these traders must provide tight spreads and relatively low fees, in addition to a hefty marketing budget to remain visible and relevant in the growing market.Then, we have the institutional investors. In crypto, it makes sense to bundle out institutional investors into two types. The crypto-native trader with institutional size (crypto-institutional), and institutional investors from traditional finance (traditional-institutional).

Crypto whales

The crypto-institutional traders seek the best liquidity and the platforms with low latency and robust technology. They trade across most platforms, are comfortable navigating the market, and have crypto as their top priority. These traders handle trades on their own or through brokerages and OTC desks, and use crypto-native derivatives platform to perform more sophisticated trades.

Whales in suits

The traditional-institutional traders are more limited in their setup. They want to trade crypto, but also trade in multiple other assets. Their priority is to trade on familiar systems, in a structure that meets their strict regulatory requirements. Low latency and robust technology are also of utmost importance. Of course, liquidity, fees, fast settlement, and security are important concerns for these investors as well. Still, they face more restrictions on their trading than the crypto-institutions and need to act accordingly.Therefore, we usually see these investors trading on fully regulated and liquid platforms, such as LMAX Digital, CME, or even Coinbase. OTC desks and brokerages are also used, so that the investors are confident that the regulatory requirements needed for their exposure will be prioritized.

Download the report below to learn more about the evolving bitcoin trading ecosystem.