Homegrown web3 venture CoinSwitch unveiled CoinSwitch Pro, a cross-exchange crypto trading platform, earlier today. The service will allow users to trade crypto tokens across multiple exchanges — of which there are three listed so far — without needing to login to every exchange separately.
In an interview with Mint, Ashish Kumar Singhal, cofounder and chief executive of CoinSwitch, said that the multi-exchange platform comes as an answer to recent issues of liquidity in centralized crypto exchanges, highlighted by the bankruptcy of one of the world’s largest crypto exchanges, FTX.
The platform offers users the ability to view and select the token prices across exchanges, while also displaying the 24-hour trading volume and value — thus reflecting liquidity of each platform.
“Alongside liquidity, since the service lists price differences of tokens across exchanges, a cross-exchange platform will also allow users to make the most of arbitrage — thus buying tokens on one exchange and selling on another,” Singhal said.
Arbitrage is the act of buying an entity at one place, such as an exchange, and selling at a higher price in near-instant time durations on a second exchange — thus earning slim-margin profits. Regular equity investors typically look at algorithmic trading as ways to earn through arbitrage.
The arbitrage factor can lead to a price difference of up to 3% across tokens in exchanges seen on CoinSwitch Pro — a factor that is not seen in an equity exchange. Singhal states that the key difference between equity and crypto exchanges is in how crypto exchanges offer tokens to trade directly to consumers, and is not linked to other exchanges.
“This leads to the creation of silos in every exchange, and the liquidity of a token in a particular exchange causes the price of the token to fluctuate to a higher margin — than such fluctuation in equity markets,” Singhal said.
However, he added that the arbitrage opportunity of crypto tokens could be “specifically worrying in India, since the volumes are less.”
“As a result, the spread of a token traded across exchanges in India is higher, and that makes the difference of the price of a token across exchanges more visible. This could be a concern for retail crypto investors in India,” he said.
Enabling cross-exchange trading could reduce this price difference, Singhal said, since transactions could tap the order books of multiple crypto exchanges during a trade.
CoinSwitch will charge users a transaction fee for trades executed on the platform, which will differ with exchanges on the platform. While the commission is lowest for CoinSwitch’s own exchange, CoinSwitchX, for any trading volume, the amount is twice on WazirX, and 4x on CoinDCX.
For instance, for crypto investments lower than ₹2.5 lakh per 30 days, trades executed on CoinSwitchX will attract a 0.1% platform fee. The same would be 0.2% on WazirX, and 0.4% on CoinDCX. Only three exchanges are listed on the platform right now, which Singhal said would be expanded in the future.
The executive also said that with crypto trading volumes being exceedingly low at the moment in comparison to last year, the bear (or down market) cycle for cryptocurrencies would remain for at least until the end of next year.
“As policies clarify regulatory issues and the price and liquidity of tokens stabilize in exchanges, we expect the bear market cycle in crypto right now to ease up some time around the end of next year,” Singhal said.