Algorithmic trading in digital-asset markets

Market structure

Digital-asset markets differ from traditional ones in several ways that matter for automated trading. They trade continuously, every day of the year, with no opening or closing auction. Liquidity is spread across many independent venues, each running its own order book, fee schedule and rules. Many pairs are quoted against stablecoins rather than a national currency, and spot trading sits alongside perpetual futures, dated futures and options.

Continuous trading makes automation close to a necessity. No human desk can watch every venue through every night and weekend, and some of the sharpest moves happen when traditional markets are closed.

Access through APIs

Almost every major exchange offers two kinds of interface. REST APIs handle account queries and order management through individual requests. WebSocket APIs stream market data and order updates in real time. Each venue sets rate limits on how many requests a client may send, and systems must be designed to stay well within them.

API keys carry permissions. Good practice is to issue keys that can trade but cannot withdraw funds, and to restrict them to known server addresses. That way a leaked key cannot be used to move assets off the exchange.

Fees and liquidity

Exchanges usually charge different fees to makers, whose orders rest on the book, and takers, whose orders trade against it. Rates fall as monthly trading volume rises, and some venues pay rebates to makers. For strategies with small margins per trade, the fee tier and the choice between passive and aggressive orders often decide whether the strategy is viable.

Settlement and transfers

A trade on an exchange settles almost immediately on that exchange’s internal ledger. Moving assets between exchanges is different. It requires an on-chain transfer, which takes time to confirm, incurs network fees and depends on the exchange processing deposits and withdrawals promptly. For this reason, strategies that operate across venues hold working inventory on each one and rebalance between them in planned batches rather than moving funds for every trade.

Custody and venue risk

Assets held on an exchange depend on that exchange. Operational outages, withdrawal suspensions and, in rare cases, insolvency are real risks. A common discipline is to keep only the balances needed for trading on each venue, and to hold reserves in self-custody under the firm’s own control. Spreading activity across several reputable venues also limits the damage if any one of them becomes unavailable.

Accounts, verification and regulation

Professional participants usually trade through corporate accounts. Opening one involves know-your-business checks: the exchange verifies the company’s registration, ownership, directors, source of funds and the purpose of the account. Rules on digital assets continue to develop and differ by jurisdiction, so firms need to follow the requirements of each venue and each country they deal with.