High Frequency Trading Crypto Explained

Explaining high frequency trading, how it works, and how it's now being used in the crypto market.

Filip Dimkovski
By Filip Dimkovski
Romi Hector
Edited by Romi Hector

Published May 30, 2022.

What Is High Frequency Trading Crypto?

High frequency trading (HFT) is a trading approach that capitalizes on small market price differences and inefficiencies to make a profit. The more unstable a market is, the bigger the profits.

In the past, HFT has been primarily used in the stock market and the forex market—specifically, in markets and assets where there's a lot of volatility and big price differences every day. In recent years, many have seen the volatility of the crypto market, so it's no surprise that people have been thinking of a way to implement HFT in digital currency too.

How Does High Frequency Trading Crypto Work?

As a trading style, HFT is primarily done with the help of computers, as humans cannot perform at the same speed and accuracy. With the use of advanced algorithms and supercomputers in a low-latency environment, there have been days where HFT has generated over 800,000 profitable trades in less than 24 hours.

This is how HFT works as a trading style in general, and it works the same with crypto. Crypto is a volatile market where oscillations of 5-10% in a day are not uncommon. So, there is a lot of room for profit as long as one gets access to reliable algorithms and a good trading environment.

Is High Frequency Trading Profitable?

Yes, high frequency trading can be profitable, though it's not easy to pull off. HFT requires a good trading algorithm to detect and use even the smallest market discrepancies. You also need to have incredibly fast access to the server of crypto prices. So, to summarize, HFT can definitely be profitable, but it's not easy to do consistently.