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Crypto Exchange Low Latency

Author: Nicolas Tang Date: December 22, 2020

The cryptocurrency market is known to be extremely volatile. Therefore, the prices (data) change within fractions of milliseconds. For a computer network to adapt to this rapidly changing data, it must be optimized to analyze large volumes of data within very short time intervals. In short, the network should operate with the least possible delay (low latency).

The lower the latency or delay in any computer network, the more efficient the network becomes.

Latency in crypto exchanges

Cryptocurrency exchanges are responsible for relaying the real-time prices of the crypto assets that they offer their users. Since these crypto prices change within milliseconds, exchanges should be built to process data fast enough to update the real-time prices and also process the actions of the traders.

For cryptocurrency exchange platforms, especially those dealing with crypto derivatives, latency determines how successful a trader can become.

Why low latency is an important crypto exchange feature

For a trader, it is always very exciting o place and close trades exactly at the anticipated price. However, with cryptocurrencies where prices are very volatile, it could be very hard to accomplish this with some exchange platforms. For example, a trader could anticipate placing a long CFD trade on Bitcoin at $6,636.6. However, by the time the order is placed, the price has already jumped to $6,636.9. If according to the trader the contract was to be closed at $6,637.0, the profit margin has already reduced.

Why is it Important?

Cryptocurrency exchanges with low latency make it possible for traders to access the real market prices in real-time. Traders’ orders are also processed in microseconds to ensure that they are placed at the anticipated price levels.

At the same time, closing orders in low latency crypto exchanges take place efficiently. The trade is normally closed at the exact price where the trader opts out. For instance, a trader could have bought a BTCUSD CFD pair at $6597.0 targeting to close the order at $6597.7. Then, when the price gets to $6507.7 and the trader places a request to close the trade, it takes one second for the request to be executed. So, by the time of closing the order, the price slides back to below $6576.9. The order ends up being closed at a loss and it was not the case at the time the trader was placing the request.

Therefore, the lower the latency of a crypto exchange, the more profitable it becomes to trade on a crypto exchange. With low latency, traders can place orders exactly at the price they intend to. Also, they can close the orders at the exact price they want to.

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