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The Block Trading feature is specifically for crypto ‘whales’ where the minimum threshold is kept for an order of 10 Bitcoins or 100 Ether tokens.
Popular cryptocurrency exchange Gemini that is operated by the Bitcoin billionaires – Winklevoss Twins, made an important announcement of Monday of allowing block trading for Bitcoin and Ether tokens which will be started later this week. The new feature is said to have been introduced to subside the effect of huge price fluctuations in Bitcoin and Ether prices due to huge buy/sell orders.
Thus using this new feature introduced by Gemini, customers will be able to make high-volume trades that won’t be reflected in the exchange’s order book until the time they have been filed. This will allow the crypto ‘whales’ to continuously trade outside the exchange such that a single trade can have a collective outsized effect on the market.
The minimum threshold is kept for an order of 10 Bitcoins or 100 Ether tokens which means that this feature can’t be used by small traders. Geminin in its blog post writes that the block trading feature is a way to create “an additional mechanism to source liquidity when trading in greater size.”
All the transactions made using the block-trading platform will be placed in a 10-minute delay while ensuring that all the participants in the market get an access to pricing and liquidity information without having large immediate effects on the price. In its blog post, Gemini writes: “In accordance with our commitment to an equitable, transparent, and rules-based marketplace, block orders will be electronically broadcast to participating market makers simultaneously, ensuring best execution and price discovery for those participating in the program.”
The other option is to place the over-the-counter trade orders that take place outside the exchange by splitting trade orders into smaller chunks while further reducing the impact to supply and demand. Reuters recently reported that there are a few firms in the U.S who do such over-the-counter trades including Circle, Cumberland Mining (a division of DRW Holdings) and Genesis Global Trading.
Block trading is one of the most commonly used approaches by hedge funds and institutional investors in the stock market in order to reduce the effect of dramatically fluctuating prices in the open market.
While explaining how this block trading platform will function, Gemini in its blog post writes:
“Any customer can place a block order that specifies: (i) buy or sell, (ii) quantity, (iii) minimum required fill quantity, (iv) and a price limit (the ‘Indication of Interest’). Market makers only receive quantity, minimum quantity, and the collar price — they do not receive any other information (i.e., side, price limit, etc.) related to the block order. If a market maker agrees to ‘make a market’ that satisfies the Indication of Interest, the block order will be filled.”
This new feature is expected to Gemini and edge over its other competitors.