Optimal Settings for Cryptocurrency Trading Pairs

Research output: Contribution to conferencePaper

Abstract

The goal of cryptocurrencies is decentralization. In
principle, all currencies have equal status. Unlike traditional stock
markets, there is no default currency of denomination (fiat), thus
the trading pairs can be set freely. However, it is impractical
to set up a trading market between every two currencies. In
order to control management costs and ensure sufficient liquidity,
crypto-exchanges must give priority to covering those large-volume
trading pairs and ensure that all coins are reachable. To solve
this optimization problem, we use a two-stage process: 1) Fill
in missing values based on a regularized, truncated eigenvalue
decomposition, where the regularization term is used to control
what extent missing values should be limited to zero. 2) Search
for the optimal trading pairs, based on a branch and bound
process, with heuristic search and pruning strategies.
The experimental results show that: 1) If the number of
denominated coins is not limited, we will get a more decentralized
trading pair settings, which advocates the establishment of
trading pairs directly between large currency pairs. 2) There
is a certain room for optimization in all exchanges. The setting
of inappropriate trading pairs is mainly caused by subjectively
setting small coins to quote, or failing to track emerging big
coins in time. 3) Too few trading pairs will lead to low coverage;
too many trading pairs will need to be adjusted with markets
frequently. Exchanges should consider striking an appropriate
balance between them.
Original languageEnglish
Publication statusSubmitted - 2023
EventThe Web Conference 2024: The 3rd International Cryptoasset Analytics Workshop (CAAW) -
Duration: 15 Feb 2024 → …

Conference

ConferenceThe Web Conference 2024
Period15/02/24 → …

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