We finished the first quarter of 2018 with a launch of RIALTO.AI platform which marked an important milestone in our development. The platform will represent a fundamental access point for all future products to be offered by RIALTO.AI. Since the opening of the registration on March 12, 2018, over 1,000 users have registered on the platform and this number increases steadily on a daily basis.

During Q1 2018, we have witnessed extreme volatility on crypto markets. Total market capitalization of cryptocurrencies reached its peak at the beginning of January but during the remainder of the quarter, the prices of cryptocurrencies were declining. Total market capitalization has shrunk to only a quarter from its value reached two and a half months ago.

Market report

In the first three months of 2018, cryptocurrency markets suffered a significant decline in value – the market capitalization of all cryptocurrencies, which reached its maximum of $831 billion on January 7, 2018 (coinmarketcap.com), dropped to $254 billion on March 30, 2018, representing an almost 70% decline.

Global Charts / Total Market Capitalization

Market’s decline was steepest at the beginning of the quarter, shortly after the market reached its peak at the beginning of January, while volatility decreased in the second half of the quarter. During the quarter, cryptocurrencies markets were mostly under the influence of negative news:

News that influenced markets significantly

In the next table, we can observe the price change for the 12 largest cryptocurrencies by their market capitalization. We can observe that BTC decline was slightly lower than from the rest, and we can additionally observe relatively lower BTC volatility by looking at high/low price span.

BTC dominance increased in the first quarter of 2018 while it was gradually decreasing towards the end of 2017.

Progress report

ARBITRAGE AND MARKET MAKING

During the first quarter, three exchanges were added to the production environment — two of them were already included in the test environment in the previous quarter.

The main focus during the quarter was on the development of improved market-making bot with the objective to have the faster reaction time to price changes and capability to handle larger number of exchanges and trading pairs. This market-making bot is currently being tested and we expect the full launch in the mid of the second quarter.

In the first quarter of 2018, RIALTO.AI performed market-making activities on 6 exchanges, on two fiat currencies (USD, EUR) and 10 cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), DASH, Monero (XMR), EOS, Bitcoin Gold (BTG), Zcash (ZEC), and Bitcoin Cash (BCH).

The most traded currency pairs in Q1 are presented below (the total number of trades is 35,217, of which 12,397 were made with market making and 22,820 while hedging those trades).

Comparison of the distribution of trades between Q1 2018 and Q1 2018.

Number of trades, made by Market Making in different pairs through periods

In this quarter, we observed that the trading was more concentrated on a few trading pairs, compared to the previous quarter when it was more evenly spread between different pairs. The most interesting trading pairs were changing through the quarter as shown in the last chart. The cryptocurrency that was traded the most was XRP, mainly against BTC and USD.

It is significant that at the beginning, the number of trades was relatively low with high profit per trade, which changed in later periods when the number of trades increased while profitability declined.

Summary of RIALTO.AI Market Making trades and profits in Q1

Next table shows the profit of market-making operations in relation to the value of platform funds used for trading in this quarter. A simple projection is also calculated to annualize the data.

Profitability of market-making operations decreased through Q1. The main reason was decreasing volatility and liquidity on cryptocurrency exchanges. In the next chart, we can observe that overall profit is strongly correlated to the traded volume on markets.

Aggregated volume of trading (data from cryptocompare.com) compared with RIALTO.AI MM profit

Platform funds, deployed by market making, consisted of all the cryptocurrencies and fiat currencies used in trading (USD, EUR, Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), DASH, Monero (XMR), EOS, Bitcoin Gold (BTG), Zcash (ZEC) and Bitcoin Cash (BCH)).

The amounts of cryptocurrencies that we used remained mainly steady. However, because of the dynamics of the markets, the USD values of individual cryptocurrencies were changing through time, as shown in the chart below. USD values were calculated using close prices at the end date of the corresponding periods.

USD Value of funds in DAP for RIALTO.AI Market Making

Altogether, the algorithm has executed 12,397 trades in market making and 22,820 while hedging those trades. The average profitability per trade of $28.4 was reached. Time dynamic of profitability was in decline, mainly as a consequence of declining volatility and traded volume on the cryptocurrency markets.

Absolute profit reached in this quarter (including trading period starting on December 23, 2017) was $235,835.

AI TRADING BOT

During Q1 2018, we were focusing on improvement of our infrastructure for trading, because we came to a conclusion that it needed to be more advanced for running multiple strategies at the same time in different time intervals. From December 1, 2017, to March 31, 2018, trade bot achieved 1.03% return running just 4 long-only strategies. Since we are running long-only strategies, the result is promising considering the Bitcoin return of -36% and Ethereum return of -54% in the same time period.

There were, in the meantime, periods when the trade bot was not active because of new infrastructure deployment process, therefore the results are not totally comparable. However, in the first quarter of 2018, we increased our tested portfolio above $50,000 but below $100,000. In Q2 2018 we plan to finish the new infrastructure and continue with the testing of new strategies.

AI Trading Bot is a research-based project marked with an unpredictable timeline for achieving deployment phase.

Future plans

In the third quarter, we will migrate all market-making activities to the new trading bot. Initial tests have been promising, and we anticipate better reaction speed of the new trading bot to increase trade profitability. In addition, we expect to deploy market-making activities on 3–4 additional exchanges; two are completely new crypto exchanges where RIALTO.AI has been invited to provide liquidity at their launch.

Algorithms are still continuously monitored, and certain parameters are also adjusted by our traders. Our objective is to extend the operations of the arbitrage and market-making activities to 24/7 by the end of the third quarter.

In Q2 2018, we will be adding new products to our market-making activities. As mentioned in the last quarterly report, with the launch of CTIs (crypto traded indices, i.e. index trackers on crypto indices) we will take the role of designated market-maker and generate additional trading profits.

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Full downloadable version of the report is accessible here.

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