WHAT IS AN
EXCHANGE

An exchange is an online platform where individuals can buy, sell, and trade various cryptocurrencies. In other words, it serves as a marketplace for digital currencies, where buyers and sellers come together to exchange one cryptocurrency for another or fiat currencies like the US dollar or the Euro.

Exchanges have become essential to the digital assets ecosystem, providing liquidity and access to various digital assets. Most exchanges operate 24/7 and can be accessed from anywhere worldwide, making them a convenient option for people who want to invest in digital assets or trade them regularly. The exchanges can vary in terms of their features, services, and fees. Some exchanges may offer a wide range of cryptocurrencies to trade, while others may have a more limited selection.

Some exchanges may charge higher fees, while others offer lower fees but fewer features. It’s important to research and compare different exchanges to find one that best fits their needs.

TYPES OF
EXCHANGES

Arbtrust works with centralized exchanges (CEX) – Which is a type of exchange operated by a company or organization that acts as a trusted intermediary between buyers and sellers of digital assets. In a CEX, the exchange platform holds custody of user funds and manages the buying and selling of digital assets on behalf of its users.

In a centralized exchange, users must register an account and go through a verification process to ensure compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Users then deposit funds into their accounts, which are held by the exchange until they decide to withdraw them. The exchange matches buy and sell orders from users and executes trades on their behalf.

Centralized exchanges typically offer a wide variety of digital assets to trade and advanced trading tools such as margin trading and stop-loss orders. They also provide users with a user-friendly interface and customer support.

These platforms are designed to facilitate the buying and selling of digital currencies, such as Bitcoin and Ethereum, and function similarly to traditional online brokerage platforms. Essentially, they provide users with the tools they need to purchase and sell digital assets while also reflecting the current market prices of these currencies.

Once a digital asset has been acquired through an exchange, it can be converted into U.S. Dollars and either left as cash within the account or withdrawn to a fiduciary bank account. Like traditional stock exchanges, crypto exchanges allow traders to buy, sell, operate futures, and run long-short strategies. However, while stock exchanges are limited to trading company shares, crypto exchanges enable traders to deal in a wide range of digital currencies.

When selecting an exchange to work with, we carefully consider several key factors, as mentioned before. These include the exchange’s history, liquidity, technology, servers, and security measures. Additionally, factors such as supported assets, fees, payment methods, market history, owners’ background, and history, reserves, and liquidity are also considered.

As a digital asset management company, Arbtrust holds its investments in USDT/USDC and relies on these assets to operate its pure arbitrage strategy. This means the assets must be left within a digital currency exchange to facilitate trading. However, there are risks associated with exchanges, including the possibility of liquidity issues and the potential for compliance failures. To mitigate these risks, Arbtrust works with several different exchanges and carefully evaluates each exchange’s risk management capabilities. This approach increases the speed of operations and profit opportunities and enhances risk management by mitigating the potential for idiosyncratic risks.