Cryptocurrency market making in the Ripple network

Jakob Brezigar (2016) Cryptocurrency market making in the Ripple network. EngD thesis.

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Abstract

Market maker provides counterparty for buyers and sellers of financial instruments in transaction settlement. Market makers quote the bid price and the ask price at the same time. This price setting process is called market making. This thesis covers theoretical and practical basis for implementation of autonomous market making algorithm for a promising cryptocurrency market called Ripple. We summarize market making theory, how Ripple cryptocurrency protocol works and how price formation process (market microstructure) takes place. We choose and describe predictive and non-predictive market making models. Main challenges are the setting of bid and ask price, adverse selection problem, maintenance of currency inventory balance. We collect data needed for the simulation and we provide trading results for the selected models. We conclude that predictive market making model of Das is more successful than non-predictive model due to the ability to predict the true market value. We suggest possible improvements and guidance for further development.

Item Type:

Thesis (EngD thesis)

Keywords:

Ripple protocol, market maker, liquidity provider, cryptocurrency, bitcoin, forex trading

Number of Pages:

Language of Content:

Slovenian

Mentor / Comentors:

Name and Surname	ID	Function
prof. dr. Branko Šter	283	Mentor

Link to COBISS:

http://www.cobiss.si/scripts/cobiss?command=search&base=51012&select=(ID=1537050563)

Institution:

University of Ljubljana

Department:

Faculty of Computer and Information Science

Item ID:

3411

Date Deposited:

15 Jul 2016 10:24

Last Modified:

03 Aug 2016 15:23

URI:

http://eprints.fri.uni-lj.si/id/eprint/3411

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