Deribit Trading bot
Introducing Deribit Cryptocurrency Exchange:
Deribit is a cryptocurrency derivatives exchange allows for Ethereum and Bitcoin trading on Options, Perpetual and futures trading. Deribit keeps its customers’ deposits in their cold storage with most of the funds stored in vaults with multiple banks safes. Though at this point in time, Deribit only accepts Bitcoin and no fiat currency as funds to deposit. Deribit allows fully automated trading through its API.
For futures trading on Deribit, traders receive a cash settlement instead of physical Bitcoin trading, that means the buyer of the futures do not buy the actual Bitcoin and the seller won’t sell the actual Bitcoin and what will be transferred is the transfer of profits and losses at the agreed settlement price of the contract on the expiration price.
The minimum tick size to trade futures is 0.50 USD and all daily settlements happen at the coordinated universal time (UTC) 8 am. The expiration time is also at UTC 8 am at the end of each month. The size for the contracts at Deribit future exchange is 10 USD with initial margin starting at 1.0% with a linear increment of 0.5% per 100 BTC. The delivery price is the Time Weighted Average of Deribit Bitcoin index measured in the half an hour before the UTC 8 am (7:30 am).
At Deribit exchange, Perpetual is a derivative very similar to Futures trading but with no fixed maturity and no exercise limit. The perpetual derivatives are to keep their price close to their underlying cryptocurrency price, which at Deribit exchange is referred to as “Deribit BTC Index”.
The Deribit Perpetual contract is 1 USD per Index Point with a contract size of 10 USD. The minimum tick size 0.50 USD and settlements are done at UTC 8 am. The contract size for trading Prepetuals in Deribit is 10 USD. As mentioned earlier there is no delivery/expiration when trading Prepetuals on Deribit.
Options on Deribit are traded with what so-called the “European style”. This indicates that options cannot be exercised before expiration, but can only be exercised at expiration. Which this happens automatically on Deribit. Options on Deribit are priced in Bitcoin and Ethereum and also viewable on USD.
There are 8 exchanges and the highest and lowest prices are taken out, and the remaining 6 are each at 16.67% accountable for creating an index in Deribit.
Market Making on Deribit:
Deribit does not include an in-house trading desk, therefore all active market makers are the third party Market Makers. The liquidity is provided by these parties and Deribit sees these services as a crucial point to their business. Based on the volume, designated market makers receive tailored agreement on fees.
For automated trading software and trading bots, Deribit provides three forms of integrating to its API, the FIX (financial information eXchange) API, JSON-RPC over Websockets API and JSON-RPC over HTTP.
Deribit utilizes JSON-RPC which is a light-weight remote procedure call protocol. The JSON-RPC specification defines the data structures that are used for the messages that are exchanged between the client software and the server, as well as the rules around their processing.
JSON-RPC is transport agnostic, it doesn’t specify which transport mechanism must be used. The Deribit API supports both Websocket (preferred) and HTTP (with limitations: subscriptions are not supported over HTTP).
Deribit API has public and private methods. The public methods do not require authentication. The private methods use OAuth 2.0 authentication. This means that a valid OAuth access token must be included in the request
Deribit FIX API is a subset of FIX version 4.4, but also includes some tags from 5.0 version and several custom tags. Deribit uses the standard header and trailer structure for all messages.
Empirica’s trading platform has been integrated our trading bots with Deribit API in order to operate Bitcoin trading, so that our customers can use it out of the box. Let’s name some trading bots that can be applied using our trading platform through API integration on Deribit:
- Market Making bot: the service of quoting continuous passive trades prices to provide liquidity, and also be able to make some profits throughout this process.
- Arbitrage bot: takes advantage of small differences between markets. It is a trading activity that makes profits by exploiting the price differences of identical or similar financial instruments on different markets.
- Price mirroring bot: this bot uses liquidity and hedging possibilities from other markets to make the markets in a profitable way.
- Triangular Arbitrage bot: using this bot a trader could use the opportunity of exploiting the arbitrage opportunity from three different FX currencies or Cryptocurrencies.
- Basket Orders bot: with this bot, it is possible to execute trades on multiple coins at the same time with the possibility to hedge against other coins.
- VWAP bot: using this bot a trader can achieve the best price with large order by splitting it into multiple smaller ones throughout the trading day.
- Smart Order Routing bot: with this bot, the trader can find the best price for your order on all crypto exchanges and execute it.
In case you would need help from professional software developers to help you build proprietary trading bots and integrate it with API of Deribit or other crypto exchanges, you can consult with our quant team.