The news flow over the past few days has been kind to CoinRoutes. We have been validated on three fronts. First, on Monday morning, we learned that the concept we introduced first, “dark liquidity aggregation,” was valued by blockchain investors to the tune of over $30 million. Next, we were pleased to see that the market insight enabled by our software, made on Feb 6th in this very blog, has proven quite accurate. Finally, we just read how one of the largest traders of Crypto-assets and Futures, DRW, has joined our call for futures to be settled physically, instead of by a poorly constructed, easy to manipulate index value.
We introduced the concept of “dark liquidity aggregation ” in the fall in our initial CoinRoutes Whitepaper, and subsequently unveiled the RouteCoin network as a solution in our January whitepaper. Thus, we found it particularly interesting that a market model, introduced later, has already been funded by well known investors in the crypto space to the tune of 35,000 Ether. This project, called the Republic Protocol is actually quite complimentary to our RouteCoin network, as it represents a decentralized, tokenized network for matching institutional crypto trading interests. Such dark pools, however, need to co-exist in a market structure that includes displayed markets which provide price discovery. Completely dark networks do not solve the problem of integrating the liquidity seeking function with displayed liquidity, or the problem of linking together multiple markets. That is what the fully distributed RouteCoin network is designed to do. It will enable smart order routers to seek liquidity efficiently across multiple market models, which will help integrate a market that is fragmented, uncoordinated, and, quite frankly needs to mature in order to attract institutional investors.
This chart shows the CoinRoutes Consolidated Best Bid and Offer for BitCoin USD for the last two weeks. Notice on February 6th the clear bottom formed in the chart, and refer back to my post on the same day in this blog. I noticed that the fall in the BitCoin price was substantially more organized than the rally had been, and surmised that the bottom was fast approaching. I will consider it lucky to have almost perfectly called the bottom, but the fact is that the CoinRoutes software enabled me to assess not only the price, but also the market structure internals that informed my thought process. I am always reticent to take “victory laps” as that sort of hubris almost always presages a humbling experience, but this time, since the rationale is sound, I have allowed myself the indulgence…
Lastly, I want to give a “thumbs up” to DRW to agreeing with our call for physical settlement of crypto assets. As we pointed out in the ViableMkts blog in November, the uncoordinated nature of the spot market is open to manipulation. We also made it clear that physical settlement of BitCoin is not a difficult process, since it is precisely what the network is built for.