Email of the day on bidding below the market.
Comment of the Day

March 25 2021

Commentary by Eoin Treacy

Email of the day on bidding below the market.

Thank you, Eoin, for your work and sincerity about your portfolio. If I understand correctly, you have bids under the spot for gold due to probability that the yields shoot higher, consequently pressing the gold further down?

If that's correct, would you argue the same for BTC/ETH?

Eoin Treacy's view

Thank you for this question which may be of interest to other subscribers. After the flash crash in 2010 it became clear that short-term outsized moves are not only possible but also likely.

The vast majority of trading is now algorithmically based. My central point is that an algorithm can be taught what to buy using an infinity of different metrics. However, there is only a very small number of ways of telling a computer how much to buy. That’s particularly true when we are talking about very short-term trading. It basically comes down to volatility and interest rates.

This limitation in how positions are sized creates herding activity in automated markets in just the same way we would expect from human controlled markets.

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