CyberTrade — Whitepaper
The mission of CyberTrade is to provide a safe environment for the crypto community to invest and trade, to accelerate capital growth.
The safe environment is created by avoiding the hack/scam risks associated with trading on ‘centralised’ exchanges, by providing de-centralised, cryptographically secure automated trading services.
The CyberTrade project is designed to be exchange-independent and is at liberty to trade across any 100+ decentralised exchanges operating within the $1+ trillion Market Capital of the cryptocurrency world.
The objective of CyberTrade is to enable crypto investors to safely accelerate capital growth by implementing active trading within a safe, decentralised architecture.
CyberTrade believes that the cryptocurrency ecosystem holds tremendous potential, both for growth/adoption in general and for trading, in particular.
This is illustrated by the following events and trends:-
- Daily trading volume now exceeds $100+ billion per day (All exchanges)
- Increasing government acceptance of Cryptocurrency. For example, on a national scale, China’s Central Bank recently rolled-out its Central Bank Digital Currency (CBDC) [Digital Yuan], Digital Wallets and Digital Currency Electronic Payment (DCEP) system.
- Card payment companies Visa and MasterCard now accept crypto deposits (USA).
- Social companies, such as Square are starting to adopt crypto payments.
- The United States Treasury, Office Of the Comptroller has authorised ‘nationally charted’ banks, state banks and thrifts to offer crypto custody service to customers.
- Within the crypto world, the the number of coins/Tokens and exchanges is constantly rising (As 5th September 2021, Coin Gecko listed listed 9234 Coins/Tokens and 493 crypto exchanges [centralised (CEX)and decentralised (DEX)]) [Note: Not all exchanges are listed on Coingecko].
- Constant innovation within the Cryptocurrency DeFi market segment, is enabling novel new trading instruments. (e.g. Yield farming , Flash loan arbitrage, etc)
This all bodes well for continuing expansion of the cryptocurrency ecosystem and means that there will a rising number crypto investors, looking for the kind of capital growth acceleration that CyberTrade provides).
- Retail investors (e.g. 1 million active Ethereum wallets)
- Financial organisations (e.g. Hedge Funds, Asset/Wealth Management).
- Other DeFi projects.
1. Retail Investors
The vast majority of new crypto traderssign-up to ‘centralised’ exchanges and run the risk of the exchange being hacked or the exchange owners executing an exit scam.
Also, many new crypto traders, lacking in trading expertese, resort to a ‘buy-and-hold’ strategy in which the value of their assets ‘floats’ up-and-down, with the cycles and waves of the general market.
This ‘newbie’ behaviour is both risky and highly sub-optimal because. It s sub optimal because short term price rises on the upswing are constantly wiped out by subsequent falls of the downswing.
The buy-and-hold crypto trader keeps missing the opportunity to realise the incremental profits and generally relies on an overall upward trend, to make profit. Quite often, more than 50% of the possible gain is lost, as illustrated below:-
In the typical ‘wave pattern’ shown, the profit(P) from ‘active trading’ is produced from three ‘long’ trades (P1, P2 and P3) plus the profit from two ‘short’ trades (P4 and P5). That profit is considerably greater than the profit obtained from a passive buy-and-hold strategy, by an amount known as ‘Alpha’.
However, across all of crypto, less than 5% of traders have managed to use applications to perform automated trading to produce Alpha yield to accelerate capital growth.
CyberTrade aims to improve this situation by bringing a new generation of, safe (non-custodial), automated trading services to the mass market.
2. Financial Organisations
In the longer term, CyberTrade could address certain types of financial organisations that can use Cryptocurrency markets to help meet their financial targets.
For example, Wealth Management companies and Hedge funds work on behalf of institutional investors and high net worth individuals to achieve specific financial objectives. Hedge funds appreciate Cryptocurrency, mainly because of its largely uncorrelated relationship to conventional financial markets. Wealth Management companies appreciate the long term capital growth potential of cryptocurrency.
3. Other DeFi Projects
As CyberTrade develops, it may also offer ‘white label’ trading services to other Crypto/DeFi projects.
DeFi Projects often offer an annual rate of return to investors (usually between 5% and 20%) for ‘staking’ or ‘lending’ funds to the project. The projects.
The DeFi projects are faced with the challenge of how to generate the ‘yield’ that the crypto investors have been promised. Automated cryptocurrency trading is one such way of generating the yield and CyberTrade could provide the underlying trading services for that.
Automated Trading — Historical Precedent
In conventional markets, the trend towards automated trading started around 2003. In European and US stock and foreign exchange markets, automated trading now handles well over 80% of trade volume. Today, little stock market or foreign exchange trading is performed manually.
However, in Cryptocurrency, it is currently the other way around the majority of trading is either manual or passive. The nascent crypto sector has simply not had time to automate much of the trading and there is considerable market potential. CyberTrade will be in the vanguard of the transition to automated trading.
Automated trading can produce good financial returns by systematically orchestrating a range of capabilities:-
· Automated market scanning can help to find many trading opportunities at any point in time (esp. Currency Pairs & Arbitrage opportunities).
· Quick identification of the best currency pair(s) to trade on a particular day.
· Ability to set well chosen stop loss settings.
· Ability to ‘Lock-in’ good profits, using a trailing stop loss.
· Trade with leverage, safely.
· Trade long when the trend is upwards.
· Trade short when the trend is downwards.
· Make extensive use of technical analysis to identify good entry/exit points.
· Make trades favourable risk/reward ratios.
Armed with so many capabilities, the crypto investor has reason to expect that automated trading services can deliver an additional return on investment, the ‘Alpha’ component, to accelerate capital growth.
CyberTrade — Decentralised approach.
Most people in Crypto are familiar with the large ‘centralised’ exchanges such as Binance, Coinbase Pro, Kracken, Bitfinex, Gate.io, Crypto.com, OKEx). Those exchanges are supported by a large organisation and have a centralised IT architecture and central database.
The centralised architecture renders the Centralised exchanges vunerable to ‘hacking’ both from the inside and the outside.
These days, more crypto traders are becoming aware of emerging ‘decentralised’ exchanges, such as Uniswap, PancakeSwap, Sushiswap, dYdX, DeFi Swap, Compound, Balancer etc.
The meteoric rise of Uniswap, illustrated that some investors prefer DEX’s, because of the following factors:
· Convenience (Exchanging/Swapping is quick and easy)
· Anonymity (No intrusive KYC requirements)
· No arbitrary / restrictive withdrawal limits
· Non-custodial (Crypto does not have to be moved from the user’s wallet to an exchange platform prior to swapping). The swap effectively occurs in-wallet.
Some decentralised exchanges enable CyberTrade to perform algorithmic trading. Others enable CyberTrade to perform ‘DeFi style’ trading using ‘recipes’ (aka ‘Lego Bricks’).
DeFi recipes are composed of particular trading ‘steps’, which often include more that one DEX. This gives rise to the term ‘composability’, meaning trades can be ‘composed’ to include several different trading instruments, as a series of steps, across several different DEX. Sometimes the steps are executed one after another. At other times, steps are executed all-at-once (atomically).
Given the choices available, CyberTrade proposes to take the more secure and anonymous (privacy respecting) route of trading on decentralised exchanges.
To CyberTrade, this means that there are virtually unlimited opportunities to trade, using a wide variety of trading instruments, provided by the DEXs.
Moreover, the more ‘open architecture’ of DEXs and a variety of different architectures / implementations, lends itself to the creation of novel and potentially lucrative automated trading services, including flash loan arbitrage trading, liquidity pool mining and trading using derivatives.
Overall, CyberTrade believes that millions of crypto traders, thousands of investment companies and hundreds of other DeFi projects could potentially benefit from automated crypto trading services, as from 2022 onward.
Cryptocurrency trading services
CyberTrade proposes a family of decentralised cryptocurrency trading services-
Crypto network projects using ‘Proof-of-Stake’ as a consensus mechanism, support ‘staking’. That involves allocating / locking-up network tokens as a ‘stake’. The stake is then used to validate transactions in the PoS network (e.g. Ethereum, Cardano etc). Stakers are rewarded with additional network tokens. The staking yield is typically between 5% and 10%, depending on the network.
The crypto investor then has two possible sources of yield: A reward for staking tokens and Token price appreciation.
Crypto Index Farming
Several crypto projects enable investors to invest in a ‘basket’ of crypto currencies, known as an index.
CyberTrade proposes to monitor the returns of such indexes and enable investors to dynamically dip-in-and-out of such indexes to optimise the possible return from such indexes.
- High growth/risk Index (e.g. DeFi Index)
- Medium growth/risk Index (e.g. Top 10 Crypto Index)
- Low growth/risk (e.g. All Crypto Index)
Farming such indexes helps to optimise returns, over time, for example when bitcoin indexes cool off and alt-coin indexes warm up.
DeFi Yield Farming
Yield Farming (aka Liquidity Mining) is similar to staking but is more complicated.
In general, Yield Farming involves encouraging the adoption of a DeFi Decentralised Exchange (DEX) protocol by incentivising Crypto Investors using a separate ‘Governance’ reward ‘ token(s).
The Governance token is valued because a) It enables the Crypto investor to have a say in the future direction of the DEX / protocol and b) Rewards the investor, in governance tokens for supporting the DEX / protocol.
In many cases, ‘support’ for the DEX / protocol is provided by adding funds (Liquidity) to one or more Liquidity Pools operated by the DEX protocol.
Some Liquidity Pools pay rewards using several tokens, which, in turn, can be deposited into other Liquidity Pools to earn rewards. Sophisticated Yield Farmers are able to ‘stack’ Yield across multiple tokens.
On ‘Lending’ platforms, the Yield Farmer can borrow against the rewards on one protocol to make say, a leveraged trade elsewhere. The situation can quickly become complicated and potentially, lucrative.
Often, receiving rewards is the only primary market by which the reward token can be obtained and commitment to the liquidity pool helps ensure its scarcity. This means that general crypto investor interest in the project can make the token price climb substantially on open secondary markets, due to restricted supply & good demand.
New decentralised DEX protocols often use their new governance / reward tokens to kickstart the project by providing high liquidity incentives which attract investors to ‘farm’ the new token(s) by providing liquidity. Total Value Locked (TVL) is a metric for measuring the popularity of a protocol.
Crypto Investor, Yield Farmers, use their knowledge of existing and new DEX / protocols, together with knowledge of Liquidity Pools/Rewards, to craft complicated transaction chains to maximise yield.
The design of CyberTrade incorporates two standard types of Arbitrage Trading:
a) Triangular Arbitrage which takes advantage of differences between currency pairs, on a single DEX exchange.
b) Cross-Exchange Arbitrage, designed to take advantage of differences between currency pairs on different DEX exchanges.
DeFi Flash Loan Arbitrage Trading
The surprising ability to obtain an instantaneous uncollateralised crypto loan has provided a foundation for innovative forms of trading within DeFi. For example, it is possible to use a large flash loan to finance an instantaneous arbitrage trading opportunity.
DeFi Market Making
A DeFi market making service whereby, funds are invested in one or more liquidity pools to earn rewards for providing liquidity. Rewards are calculated based on time, order spreads and order sizes to align mining risks and rewards.
Front running on DEX involves interrogating the transaction ordering queue to identify possible trading opportunities. For example it may be possible to front run a large buy order, by paying more for gas and jumping the queue, buying just before the large purchase and selling just after the purchase to make a profit from the effect of the large purchase on price.
Cryptocurrency Pair Trading
The design of CyberTrade incorporates a comprehensive range of currency pair trading instruments. Including:-
Day Trading (hours)
Swing Trading (Days)
CyberTrade believes that trading activity needs to take place within a disciplined, structured environment having the fullest possible market awareness.
In the CyberTrade architecture, the market awareness comes from the combination of three forms of analysis:-
· ‘Technical Analysis’ (Moving averages, Indicators, oscillators, etc)
· ‘Fundamental Analysis’ (On-chain data)
· ‘Sentiment Analysis’. (Social networks)
CyberTrade pays particular attention to Technical Analysis and shall employ the full range of Technical Analysis tools, as illustrated:-
The design of the CyberTrade trading services includes, built-in candlestick charting capabilities (to display Open/High/Low/Close information), Built in Pattern recognition (e.g. Cup and handle, Double Top/Bottom, Flag and pennant, Head and shoulders etc, Integral Candlestick Pattern recognition, (Simple and Complex) as well as a full library of trading indicators (Support & Resistance, Trend, Momentum, Volume, Volatility, Breadth etc)
An important innovation is the inclusion of Machine Learning. This is especially useful since the services can be trained to identify ‘patterns’ in the trading charts. Pattern recognition is difficult to do using conventional IT techniques. The ability for machine learning to easily recognise both chart patterns and candlestick patterns is valuable as they are useful ‘high level’ indicators of likely market movement.
The CyberTrade trading services shall make use of foundational concepts of Dow Theory and Wave Theory. These are used to help predict future price direction based upon past price data and a good understanding of market cycle / wave behaviour.
The Elliot wave principle states that market prices unfold in a specific pattern, reflecting collective investor psychology which moves, between optimism and pessimism, in natural cycles or waves. In the above example, waves 1, 3 and 5 are Impulse waves. Waves 2 and 4 are smaller retracements.
Overall, the Elliot wave principle provides a reliable framework for entering and exiting the market, with good risk to reward ratio and chance to make a profit. This provides a good basis for ‘active trading’ and achieving a substantial increase in profits (50% +), compared to a simple ‘buy and hold’ strategy.
The Application of the Elliot wave principle requires good pattern recognition. CyberTrade proposes to use Artificial Intelligence/ Machine Learning to train algorithms to assist with the wave/pattern recognition.
To perform Fundamental Analysis, CyberTrade shall gather on-chain data (numbers of addresses, transaction volume, transaction values, Trends etc) and analyse it to provide reliable data on the health of particular networks. The data will be added to trend lines for each network, enabling comparisons between networks.
CyberTrade has identified the following Indicators as being useful in a trading context.
Network value-to-transaction ratio (NVT) Directional Indicator
The NVT ratio is the Network Valuation divided by the transaction value flowing through the network. Smoothing is applied to the transactional component. The NVT signal is an indicator that is responsive enough to use as a trading indicator.
Correlation Directional Indicator (CDI)
CDI shows if crypto assets are becoming more or less correlated. Greater correlation generally means a bearish trend while less correlation mans a more bullish trend.
Mining Cost Indicator [Blockchain]
The average of fees generated for processing transactions on the blockchain. If the fees are really low or really high, the indicator acts an ‘alert’ to trigger further investigation.
Current Usage Indicators
Unique Addresses (Daily). A count of the number of daily unique users. A relative indicator. If the unique addresses trend is increasing, that is bullish for crypto markets. A count of the estimated $(USD) transaction value. If the value is increasing, that is bullish for crypto markets.
Transaction Value (Daily).
Transaction Value (Daily). A count of the estimated $(USD), transaction value daily. If the amount is increasing, that is bullish for crypto markets.
Current Valuation Ratios
Current ratios track current relative network value.
The NVT ratio is similar to a P/E ratio in equities markets and is a core valuation metric in crypto analysis. Under valued is < 55 and Over valued is > 75
Market Value Realised Value (MVRV) Under values is < 1.2 and Over valued is > 3.2
Long-term Valuation Indicators
Mayer Multiple. Calculates price against the 200-day moving average. Bullish is < 10 and Bearish is > 2.4
Mining P/BE ratio. Shows the value ratio of price to miners’ break-even cost. Gives a ratio of price relative to production cost. Bullish is < 1.2 and Bearish is > 3.2
Fundamental and Technical Analysis is complimented by Sentiment analysis. The job of sentiment analysis is to interpret changes in public interest. A sustained uptrend accompanied by moderately increasing public interest often leads to trend continuation. A sustained uptrend accompanied by a spike in public interest (FOMO) often results in retrenchment. Correlating price movement with public interest can predict future price movement.
Public interest is measured by social feeds which track the number of key-word mentions on major social networking sites.
For example, Twitter shall be used to monitor social sentiment towards the cryptosphere, because it is an excellent source for the following reasons:-
· There are over 6,000 tweets per second
· Messages are concise and quickly scanned
· Sentiment can be driven by news, which often breaks on Twitter first.
Scanning the messages, produces data that is then scored. Scores are aggregated per coin/token and added to a trendline. Trend analytics are then used to produce actionable data, for example as a sentiment trading indicator.
Routes to Market
CyberTrade plans to tailor trading services for markets, including:- the retail investor, the wealth/asset management market, and the DeFi projects market.
Route 1 — Direct to the retail investment market
According to the Statista data platform, the number of blockchain wallets has been growing dramatically since the creation of Bitcoin in 2009 and reached over 50m as of June 2020. Estimates put the figure over 100m as of April 2021.
CyberTrade believes that the vast majority (80%+), are owned by private individuals, engaging in some form of cryptocurrency investment.
However, as described above, any individual interested in growing crypto assets by trading, has an almost impossible learning curve to climb.
Automated trading services can solve the learning curve problem for tens of millions of retail investors.
CyberTrade proposes to offer automatic trading services to address the problem.
In the initial stages, CyberTrade plans to address the retail trader market.
The retail investor smart phone apps shall be designed as ‘fire-and-forget’ applications, requiring little or no input from the investor/trader. Retail traders simply need to download the trading app, allocate funds and indicate risk appetite. Then, the CyberTrade app will use CyberTrade services to trade automatically. Progress being displayed app/web3 wallet.
Route 2 — Decentralised Finance (DeFi) Projects
As of December 2020 CoinGecko categorised 100 projects as being in the Decentralised Finance (DeFi) sector, with more projects being added periodically.
Many DeFi projects face similar issues:-
· Constant innovation
· Competition is fierce
· Security is paramount
· Customers gravitate quickly to companies offering best returns
· New revenues streams must be developed to stay competitive
CyberTrade proposes to provide ready-made, cryptocurrency trading services (under licence) to other DeFi projects. For example, Scalp Trading, Day Trading, Arbitrage Trading, etc.
DeFi companies may be assured that the services are secure, performant and have proven revenue generating capabilities.
The trading services API’s enable the rapid incorporation of those services into many different DeFi applications. Third party applications would simply use the CyberTrade services to trade automatically.
Route 3— Direct to financial organisations
Some financial organisations are now interested in Cryptocurrencies, for example, Hedge Funds and Asset Management companies. Such organisations are often representing wealthy families or individuals who want exposure to Cryptocurrencies.
For such organisations, in the medium term, CyberTrade proposes to make trading services available to suitable financial services organisations.
In general, CyberTrade shall deliver trading services via smart phone apps, designed to be ‘fire-and-forget’ automated trading applications, requiring little or no input from the investor/trader.
Mostly, crypto investors simply need to download the trading app, allocate funds and indicate risk appetite. Then, the CyberTrade app will use CyberTrade services to trade automatically. Progress being displayed app/web3 wallet.
New Trading Experience
CyberTrade intends crypto trading to become a largely invisible, background automated process. Controlled from a minimalist controller app (CyberTrade or Third Party), having controls for start/stop, funding and risk appetite.
Once the settings are chosen, CyberTrade expects it’s services will operate in a ‘fire-and -forget’ mode, generating yield and adding it to the investors funds on a continuous basis to achieve capital growth.
A non-custodial decentralised application (dApp) enables each investor to start/stop trading and to deposit/withdraw funds.
A ‘mobile-first’ approach will develop minimalist interfaces for smart phones first and subsequent p.c. applications will appear only where absolutely necessary.
CyberTrade is an adherent to the Agile Scrum process framework for managing software development. Scrum operates as a workflow comprising a number of ceremonies: Backlog refinement, Sprint Planning, The Sprint, Daily Scrum, Sprint review and Sprint retrospective. The Product owner, development team and the Scrum Master collaborate to produce working software in each sprint. The main goal being to get working software into the hands of users as soon as possible.
The founder of CyberTrade is a certified Project Manager and Scrum Master (Scrum.Org) and holds certifications Professional Scrum Master (PSM) Level 1 and Level 2 certifications, as well as Prince2 certification at both Foundation and Practitioner level. Using decades of software delivery experience, the founder will be bringing new services to market in an efficient and timely manner.
CyberTrade intends to build its Business based on the quality of its trading services coupled with extreme ease of use. Once developed, CyberTrade trading services will undergo full functional and non-functional IT testing. Trading services are to be back tested and paper traded testing, prior to go-live. Testing shall also include a ‘black swan’ event (e.g. Corona virus shock March 2020) to test resilience under difficult conditions.
As CyberTrade develops and releases automated trading services, it may be necessary to operate the trading service by introducing a specific token (for example an ERC20 token).
Token decisions are expected to be made on a case-by-case basis. Tokens will not be created, where there is no genuine need for a token.