There is a lot more to cryptocurrency trading than just using popular exchanges. The rise of decentralized trading platforms should not be overlooked. Additionally, there are the so-called dark pools, which offer liquidity outside of the traditional exchanges’ order books. The following exchanges, listed alphabetically, offer this functionality to their respective clients.
One of the bigger centralized exchanges in the world, Bitfinex has no issues when it comes to visible cryptocurrency liquidity. Even so, the company is also trying to appeal to institutional investors and large cryptocurrency holders through its dark pool offering. Its dark pool involves a slightly higher fee than normal trading, but since all trades occur without affecting the visible order book, it is a small price to pay.
Exact details regarding Bitfinex’s dark pool are a bit difficult to come by. Exchanges are not keen on sharing many details regarding monthly volume for these offerings, although that is entirely to be expected. Even so, it is good to see major cryptocurrency exchanges explore dark pool options, as they will offer a lot of potential liquidity to traders around the world.
It is a bit unclear if Kraken is the first major cryptocurrency exchange to offer dark pool activity, but the company introduced this functionality back in 2015. It is still in operation today, and it seemingly helps traders achieve their goals without triggering massive market price swings across the exchange itself. There is a fee associated with Kraken’s dark pool, although an extra 0.1% is not that big of a deal to most users.
2. Republic Protocol
One of the newer market entrants in the world of cryptocurrency dark pool trading is Republic Protocol. The project is a decentralized dark pool which does not focus on just one cryptocurrency. Instead, the project offers atomic trading of Bitcoin, Ethereum, and most ERC20 tokens in a dark pool environment.
To provide this functionality, Republic Protocol raised $33.8 million from cryptocurrency hedge funds earlier this year. The Republic Protocol team will offload all transaction processing to its network. Moreover, its source code is publicly available, which will probably lead to the creation of many more dark pools.
Shortly after Kraken announced its dark pool venture, cryptocurrency broker-dealer TradeZero decided to get in on the action as well. Through a partnership with Bitcoin mogul Jered Kenna, the venture was opened for business in 2016 and is still going strong today. It is evident there is plenty of room for more dark pools in the cryptocurrency industry.