The Life of a Ripple Market Maker

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Market makers in the 1980s. Photo: Baer Tierkel

A primary component of Ripple is the ability to send and receive money in any currency, a feature facilitated by market makers trading on the protocol.

As such, market makers are a key player within the ecosystem by not only providing liquidity but also helping to keep spreads low, adding utility and reducing cost for entities transacting on the Ripple protocol.

While market making is typically done by professional firms, especially in the case of traditional markets, Ripple’s open nature—anyone can directly access the protocol—has given fresh upstarts and spunky individuals new opportunities to participate.

For Anthony Milas, a musician from New Zealand, market making on Ripple started as a curious hobby that developed into something more substantial. Taking advantage of arbitrage opportunities in a burgeoning market, Anthony has earned in the high seven figures (XRP), having started out with only 1000 XRP.

Did you have a finance or trading background before you got into this?

A few years ago I taught myself about stock markets and forex markets. I did that for maybe about a year, figuring things out and getting comfortable with the landscape. I worked with a friend, coding an automated trader that worked over FIX. We ended up with something that traded profitably so long as we didn’t have to pay any commissions.

How did you find out about Ripple?

I found out about Ripple about a year and a half ago. Around that time, Ripple Labs was doing a giveaway. You’d give them your email address and you’d receive a thousand XRP. It got me really interested in Ripple straightaway. In a sense, it’s like a parallel forex market except it’s still inefficient. In the forex market, you have to work really hard because you’re up against established banks and financial institutions with multi-million dollar infrastructures that are squeezing everything out of the market. They had the first-mover advantage.

On the other hand, Ripple was brand new, this blossoming market where no one was really doing much at all at the time. Almost immediately, I identified a simple arbitrage opportunity and started trading that by hand to see whether or not it would work, what the ins and outs were. I ended up turning my 1000 XRP into 17,000 in the span of a couple weeks. I was hooked. I wrote a tool to assist my manual trading. When I learned enough, I automated it.

When I first started trading on Ripple, I didn’t tell anyone what I was doing. If I had questions, I wouldn’t ask. Instead, I’d try to figure things out on my own. That gave me a decent head start. There were a lot more arbitrage opportunities than I’d expected.

Could you explain what arbitrage is?

Arbitrage, in a sense, is similar to the traditional retail and wholesale system. You buy something at one price, sell it at another, and you take the middle—in its most basic sense. Except now, you’re doing it with assets. In terms of the arbitrage I was doing—you’d buy one currency, trade it for another, and then trade it back for the currency you started with. Generally, you should end up with less money than you started with. But once in a while, if an arbitrage opportunity exists, you end up with more.

Do you have a day job?

I’m actually a musician, which is my main focus. But the thing is, I found that if I focused only on my music, I’d get a bit imbalanced. Coding, for me, is a healthy distraction. Together, they work really well. There’s the analytical and the logical side. And then there’s the creative side. I do either as it suits me.

What are you working on now?

I’m working pretty hard on the bot and its structure at the moment. I had to teach myself Node.js, object oriented design, and asynchronous design patterns to build it. I came from a low-level, procedural programming background so I’m still figuring things out, putting pieces of the puzzle together. There’s a lot of subtleties that are difficult to get them nailed right.

So what’s the secret sauce behind building a successful trading bot?

Ideally, your bot just trades and makes money. But there are a lot of variables you have to take into consideration. Placing a trade, for instance, is not that simple. You have to pick the price and hope that the order fills. If you’re asleep and it’s placing a whole bunch of trades at different amounts, you’re going to have a problem. So fine-tuning when it trades and how it trades is obviously important.

I’ve been extremely conservative with my design. At the slightest sign of trouble, all trading stops. I have a system that monitors open orders. If any sort of basic limits get hit, then trading is halted. There’s also things like timing. You might place an order and it doesn’t fill. So how long do you wait? Do you cancel? Has it not filled because the order didn’t reach the market? Market structure can also be tricky. Some gateways might add a commission on a trade, which you have to include in your algorithms.

Any chance you’ll tell us how much money you’ve made?

It’s in the seven figures (XRP). I haven’t cashed out of anything. I believe in Ripple in the long term. The ground is moving beneath finance, especially with Bitcoin and everything happening around it. Some of it is truly compelling. But a lot of it—if it’s not snake oil, it’s very reactive, where it’s, “destroy the old, and here’s the new.”

For me personally, I kind of feel like the best way forward is for the old and the new to work together. I see that happening with Ripple.

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