THE POWER OF SPEED: HOW HIGH-FREQUENCY TRADING IS TRANSFORMING CRYPTO MARKETS

High-Frequency Trading (HFT) is a type of algorithmic trading that executes high-volume transactions within milliseconds using automated software and ultra-fast hardware. According to CryptoCompare and Coin Metrics, approximately 80% of the trading volume on major crypto exchanges is based on HFT and algorithmic trading (CryptoCompare, 2023; Coin Metrics, 2023).

HFT provides liquidity to the markets, reducing transaction costs, while also potentially increasing volatility and making competition difficult for small investors (OKX, 2023). HFT traders minimize data latency by locating close to exchanges with colocation services and profit from price differences. For example, differences in the price of the same crypto asset on different exchanges are exploited (Bitlo Akademi, 2021). However, it is argued that HFT can lead to unethical practices such as "front running" and increase the risk of market manipulation (Rankia, 2024).

HFT reshapes crypto trading with speed and automation, while regulatory bodies are developing new rules to oversee these activities (TCMB, 2018).

In conclusion, HFT offers both opportunities in crypto markets and highlights the need for regulation for fair competition and market stability.