Cryptocurrency Tools For The Future 16 Nov 2022

How Info Rhino Limited are building tools for the cryptocurrency market of the future

We are excited to announce more information on upcoming cryptocurrency platform Crypto Statto, and put some more ideas together on how we see our platform being useful for our customer base. Whilst we can be thought of as being a highly versatile software solutions and Business Intelligence consultancy, we have been working on products in this space for many years. Read on...

Do please contact us if you wish to know more about any of this - www.inforhino.co.uk/contact

You may be keen to use our technical expertise to develop solutions for your own platforms too. We are experts in building systems in fintech.

None of this article should be taken as financial advice and is merely opinion.

Traditional markets vs cryptocurrency markets

We hear of cryptocurrency being more volatile than traditional markets. Much discussion is made regarding unregulated markets. The latest FTX financial event feels more like a a traditional Ponzi scheme which has little to do with the actual cryptocurrencies themselves. The same types of leverage takes place in the cryptocurrency world that happens in that happened in traditional financial markets.

Deciding on which camp to place yourself within. We have the existing financial architecture that has evolved over 200 years with many sophisticated mechanisms to help manage the financial ecosystem. On the other side we have a newer technology with significant capabilities to apply "lessons learned" to its architecture. The real advantage we see from blockchain technologies is the ability to have autonomous consensus-based decentralised applications managing the financial ecosystem.

Developing on the blockchain

Perhaps the biggest challenge to developing around the blockchain ecosystem is the uncertainty as to which cryptocurrency blockchain smart-contract DAO, will be long-lasting enough for a company to to decide to invest into building solutions for. It is not just a case of deciding on a technology as there is an absolute overriding factor - the tokenomics of the cryptocurrency. Another major challenge is that many smart contract blockchains may feature upgrades leaving previous smart contracts unusable. Some blockchain tokens found themselves rendered almost unviable economically due to high costs of processing transaction fees for smart contracts - Hex being one such example. We do see challenges due to the continual flood of discussions on regulators taking action on certain tokens, as to whether they are a security or not.

We have significant experience developing technology solutions within financial institutions. Our view is that there are many ways in which we can help to add more resilience to the cryptocurrency space by providing tools metrics and analysis on this space.

We wanted to discuss a little more regarding our work on launching an upcoming cryptocurrency platform called Crypto Statto.

The availability of data

One of the interesting things we see is that the financial markets use data providers such as Bloomberg, Telekurs, Reuters, Moodys, Standard and Poor. Financial institutions allocate significant capital to obtain data on the market. Regulators expect significant reporting on each individual financial institution's activities, and data is flowing constantly between these institutions. Possibly because most don't focus on the cryptocurrency markets, many are not aware of the wealth amount of information available at far lower prices than within the traditional financial markets.

Some of our development in progress

Crypto currency data retrieval

Our upcoming platform Crypto Statto sources data from different cryptocurrency data providers. These platforms do require recognition, and often require payment. Despite this, we still need to find a way to get that data into to a system where we can analyse it and present it. We have written a powerful tool in dot net core that can retrieve data in highly flexible way from APIs and save this to a repository.

Our cryptocurrency website using web data platform (WDP)

The WDP features many components that works with data to make it easy to provide the information to users and traffic to the website. we are currently adding payment handling very likely to be by taking payments in cryptocurrency rather than traditional Tash one because it's more secure and two because it makes far more sense to offer this solution in multiple jurisdictions. The website works by presenting reports based upon data we have collected and analysed. There are articles and also much of it information is made available via an API. We are currently implementing a pricing module to charge users small amounts for access to certain resources.

We are looking to provide free access to a tops of users to certain information, and are working on on that part at the moment. Whilst slightly behind, we are hoping to launch a basic website within 2022.

Info Rhino's overall goal with Crypto Statto aims to help with further democratisation of the cryptocurrency space, by providing simpler mechanisms for users to work with information which is, let's be frank, complicated.

To do this we are looking at developing multiple tools to help clients manage risk. We often hear about bots and high frequency trading (HFT), magical approaches that are not available to the average retail investor. This is for multiple reasons outside the scope of this article. However, two key barriers to entry are; 1) capability to assimilate information from different sources, 2) to be capable to develop the software to use that information to drive trade signals/trade instructions. Indeed, it is more complicated than that as we must also manage portfolio positions continuously, rebalancing portfolio asset weightings based upon varying risk factors. It can quickly become the case, building the types of systems seen inside major financial institutions - Investment Banks, Hedge Funds, Pension Funds. That requires serious capital. as individual retail investors and small businesses and looking to manage and balance their positions we don't need that level of scrutiny on our portfolio management.

An alternative way to accumulate gold

Remembering that this is not financial advice, but a hypothetical way to potentially accumulate profits.

Let's give a very simple example that does not consider cryptocurrency, but simply gold. We can think - what is gold? It is a precious metal, which doesn't tarnish through oxidation. It has been used for thousands of years as a medium of exchange store of value and unit of account. Gold is a tier 1 capital asset under Basel regulations, meaning it has a zero risk rating. Now here is the challenge. Gold is not an interest bearing asset, if you would like more gold, we either have to keep buying more, or move between gold and another asset and back again trying to take advantage of fluctuating prices in the market. As a retail investor this is incredibly complicated. It is almost impossible to keep buying gold and sending it back to gold distributors, and then on days when the price drops buy it back again. So most keep buying gold, and keep adding more to their portfolio. When they do sell it is because there has been big movement to the upside - profits. Institutional investors can use commercial paper, paper gold, futures, options, etc.

Many financial experts discuss the dollar cost averaging as a way to accumulate assets over time, hopefully taking advantage of fluctuations in the market. We can think of it in terms of "not putting all your eggs in one basket". Rather than making a single purchase, perhaps making three smaller purchases may spread the cost and allow you to accumulate more gold.

A possible gold trading strategy for a retail investor

Many will be aware that we can put money onto a gold Fiat account. The basic idea is that you pay in your denominated fiat currency a certain amount of money and this gets automatically converted to gold which is held in a Swiss vault. You are effectively backing your Fiat currency with gold. The first illusion to shatter is that gold is a stable asset that never fluctuates in terms of price. In terms of British Pounds, gold was £950 in 2018 and has been as high as £1550 in 2020 and in 2022. on many a day we can see that the price of gold has varied by as much as £50 on a single day. This should get some people thinking, so imagine if I brought gold on a day where it dropped by between 5% and 10% from a recent high high, and sold gold when it went up by 5% or 10% from a recent high?

Gold markets are International, whilst gold is typically valued based upon the LBMA, what's a human constantly checking the price is not something we want to do do just to try and buy or sell a small amount of gold on a daily basis. ideally a small amount of cloud could track the price and generate trade signal events which hopefully we could see taking this further if there was a way to automate this we could build a relatively simple application to take small amounts of capital from one account and allocated to another based upon prices.

If we take this to the next level we may decide to try to determine points at which we felt the price could increase significantly or drop to try and manage a risk.

To take us to the third level we would ideally be able to do backtesting, to further assure ourselves that what we have built is effective.

This is very much our ethos, trying to break down what is a complicated arena into small usable solutions that can help not just the retail investor but professional investors too.

Automated trading with Crypto Statto?

It is not our intention to interface with different exchanges and manage positions on behalf of our customers. Instead we can consume semi-realtime and historical information to generate analytics that could be actionable by our customers. objective is to provide information in a dashboard front-end on our website and additionally allow this to be consumed to upcoming APIs.

Helping the individual

Cryptocurrency exchanges available to the retail investor provide tools that not even traders in financial institutions get exposure to without paying significant amounts of licence fees. Whether you find this useful or not? Seeing the order book, for many Traders is a key part of their trading strategy. Despite this, what we don't see is a mechanism which corrects a lot of the faults with individual exchanges. Without naming the exchange, whilst we can go into individual trade pairs to see the the recent orders, in the aggregate order history screen we can only see trades orders that are older than a few days - completely impractical. Now that we have a significant technology working with respect to retrieving and interacting with data from different exchanges, we may start adding tools within our platform to give users customise reviews of their trading positions to help them have a better perspective on what they are doing.

Speaking as an individual, there are times when moving coins between different coins on swings can help to accumulate more coins without necessarily risking much in terms of your Net Asset Value (NAV).

Derisking warm storage - cryptocurrency exchanges

Thinking about the top 100 cryptocurrencies including Bitcoin, Ethereum, Solana, Litecoin. It seems that just as we find there to be a deposit protection scheme for traditional fiat banking, we also need to think about assets at risk on different currency exchanges and platforms. We might find ourselves wanting to move assets on/off exchange quite quickly. Settlement happening once certain prices are hit moving assets to cold storage. We may find ourselves in some circumstances using custody solutions by third parties.

Thanks in advance - Info Rhino Limited

We hope this article has helped provide further insights into how we see our platform being useful to our customers. We feel that the as cryptocurrency is still very much in the speculation phase, we have to acknowledge that certain amounts of risk-taking through trading and portfolio management will be necessary.

Written with StackEdit.