Core Trading Platform, First and Foremost
In part, I blame the uneducated/uninformed investor for taking a loss on the downturn of Crypto. Shame on us. On the other hand, the crypto currency exchange markets, such as Coinbase, make it so easy to make a purchase of Bitcoin. The Coinbase exchange, iPhone app provides a “Simple” trading screen so none of the “Advanced” features are present. In fact, the Coinbase iPhone app doesn’t even expose/mention the more “Advanced” capabilities which, if leveraged, could have prevented investors’ significant losses.
If any type of regulatory body, such as the U.S. SECURITIES AND
EXCHANGE COMMISSION (SEC) steps in to attempt to regulate these crypto exchanges, there are several minimally intrusive opportunities to prevent a “crypto crash” in the future. A few suggestions:
- Education, specifically around hedging risk by using features already built into the crypto exchange platforms, such as a “Stop Limit Order”. Curtailing risk in the future may look like a required one hour online course and quiz before allowing an investor to execute transactions. For example, the Series 7, General Securities Representative Qualification Examination.
- Temporary halt in trading like we see within stock markets. For example, volatility halts are single stock circuit breaker halts that trigger 5-minute halts on fast price spikes or drops that exceed the acceptable trading price range (ATPR) for 15-seconds. The ATPR is calculated as the average price of the previous 5-minute trading period.
- Financial products available to the retail investor for hedging crypto losses, e.g. currency swaps but using crypto on one side of the swap?
Opportunity to Hedge Cryptocurrency Losses and Volatility
When buying stocks, traders have the ability to put in buy and sell orders that expand beyond real-time (i.e. current market value) or end-of-day (EOD) transactions. A SELL order that remains open allows the trader to minimize his risk by stating the amount he is willing to lose. For example, a SELL order can specify the stock price to exit the position and the volume owned to sell, i.e. total or a subset of stocks owned.
Traders can also put in a BUY order, good until canceled, allowing a trader to specify when he is willing to take a position in the stock.
What is a Good Til Canceled?
Good til canceled (GTC) order is an investment order to buy or sell a security or stock at a specified set price that remains in effect or active until it is executed, or the investor cancels the order.https://thebusinessprofessor.com/en_US/investments-trading-financial-markets/good-til-cancelled-definition
It was unclear to me from the Coinbase.com documentation how long the Limit Orders are good until. Limit Orders have the potential to minimize your risk exposure.
Limit orders: Limit orders allow you to manually select the maximum price for your buy order and minimum price for your sell order — it will execute only if that price is hit (which means there’s no guarantee your trade will be executed). As a buyer, you might want to use a limit order if you believe the market is moving lower. One important thing to remember: all the prices you see in the order book all represent limit orders, because market orders get filled right away.https://www.coinbase.com/learn/advanced-trading/what-is-an-order-book
What is a stop limit order?
Stop-limit orders allow you to automatically place a limit order to buy or sell when an asset’s price reaches a specified value, known as the stop price. This type of order can help traders protect profits and limit losses.https://www.coinbase.com/learn/advanced-trading/order-types#stop-limit-order
I reached out to Coinbase Support on Twitter for comment regarding how long limit orders are good until, and they responded swiftly, “Good til Canceled” as I would expect. Excellent support.
Hi there, happy to answer your question about limits orders. You are correct, they are good til canceled: if posted, the Order will remain on the Order Book until canceled by you (the Trader). Hope this helps, all the best!@CoinbaseSupport
Content is for informational purposes and is not investment advice. Investing in crypto comes with risk.