Like many aspects of the cryptocurrency space, digital currency exchanges are dealing with the concerns associated with scaling as their customer bases grow. For the digital asset exchange Gemini, the project of the Winklevoss twins, one means of adapting to increased demand has to do with the size of orders offered to users. According to Coin Journal, Gemini will offer its investors the chance to place large orders outside of the company's order book. Effectively, this means that Gemini will be better able to compete with digital asset exchanges that specialize in high-volume traditing of cryptocurrencies.
Block Trades Become Available This Week
Beginning at 9:30 a.m. ET this Thursday, Gemini users will be able to place so-called "block trades." Block trades are large orders that are settled between a customer and a market maker directly and outside of the open market. They are contrasted against central limit order books, which typically do not allow orders to exceed the liquidity of the book overall.
Gemini customers choosing to make block trades will specify whether or not they are buying or selling as well as the quantity of the currency they aim to buy or sell, a minimum quantity that must be guaranteed in order to fill the order, and a limit price. If the market maker agrees to the terms, the order will be filled.
Next Steps for Gemini
Gemini's addition of block trading will allow the exchange to compete with large-volume institutional trader exchanges, including hedge funds and banks. The unique feature for Gemini is the use of block cryptocurrency trading in particular; equities and futures markets have utilized this mechanism as a means to protecting security prices from unnecessary impact by large trades. In these markets, these transactions are referred to as "over-the-counter" (OTC) orders, distinguished from those which take place on a formal exchange.
Should Gemini's program become successful, it is likely to make its way into other digital asset exchanges. Analysts point to Gemini's main rival, Coinbase's GDAX exchange, as a likely adopter of block trading depending upon Gemini's success. Although block trading will be available to all Gemini customers, a user must hold at least 10 bitcoin or 100 ether in order to place a block order.
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