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Why is low latency necessary for cryptocurrency exchanges?

Why is low latency necessary for cryptocurrency exchanges?

Latency – can be referred to as the speed of data transmission or sometimes even the delay in data transfer. Low latency is preferred in the cryptocurrency market due to the volatility it has and therefore becomes important for online traders, how fast they can place their buy and sell orders. 

In this article, we will discuss the effects of low latency on the crypto market, online trading, traders and high frequency trading.

Low latency effect on trading:

Low latency means that the data moves from one place to another quickly and without any delay. In an extremely volatile market as in the case of the cryptocurrency it is important for an online trader to trade with low latency.

In a highly competitive market like crypto where prices fluctuate within milliseconds, every online trader wants that their order gets confirmed as soon as the hit buy or sell order. A slight delay in processing order will result in price fluctuation and hence not ideal in the long run for a trader.

With so much to offer every trader is demanding low latency and many online exchanges like Australian cryptocurrency exchanges, deploying the latest technology to decrease the order processing time

Effect of low latency on HFT:

High-frequency trading (HFT) is an automated trading platform that allows big institutions like central banks and hedge funds that trade millions of orders at high speed.

Automated trading is not new to the cryptocurrency market and it serves best in the interest of a trader to have an edge over the market as a cryptocurrency market operates 24*7 and has high volatility. Let the algorithm handle but a trader still needs to analyze the market condition and adapt accordingly.

High-frequency automated trading can make many trades with a fraction of seconds even on small price fluctuations. To give the algorithm an edge over the market low latency is essential as the orders will be executed without delay and both entry and exit points of any trade are accurate. Ausfinex, the best crypto trading platform in Australia is the best trading platform to trade cryptocurrencies with confidence.

Effect of low latency on the crypto market

Many believe that low latency will ease in finding the real value of an asset faster than ever before. While some are skeptical that this will lead to more price fluctuations in the short run and others believe that looking at the volatility of the crypto market these fluctuations will stabilize in the long run.

Most individual online traders can not afford the fast internet and thus give undue advantage to big institutions like hedge funds and banks. Low latency will give the powerful money house to exploit the individual traders as they have more opportunity to get ahead and leave little to no opportunities for others.

Looking at the current crypto market scenario it is evident that low latency is the future of the cryptocurrency market. Average internet speed increasing, low latency speed should be available in the coming years.

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