Gemini exchange, based out of New York’s Flatiron District, is launching what may be a first within the Bitcoin ecosystem - daily Bitcoin auctions.
The very first official auction on Gemini will be a BTC/USD pairing and will occur today at
4:00pm Eastern Time. Future auctions will occur every day, including weekends and holidays, at 4:00pm ET.
Tyler Winklevoss, Gemini Chief Executive Officer, said to Bloomberg:
"We believe this is the first-ever end-of-day Bitcoin exchange auction. Auctions create greater price discovery and liquidity, resulting in a very meaningful final auction price. If you were building a securities exchange today, an auction would be a core feature."
All verified Gemini customers can enter the Auction-Only Market and Auction-Only Limit Orders to buy or to sell beginning at 5:00pm ET on the prior day until 4:00pm ET for that day’s auction.
For example, for Wednesday’s auction, you can place orders between Tuesday at 5:00 pm ET and Wednesday at 4:00pm ET. Other currency pairing auctions are expected to begin in the weeks to come.
Why auctions?
Auctions are new to the world of Bitcoin but are universally implemented by traditional asset exchanges like the New York Stock Exchange, Nasdaq, and Bats.
Gemini’s auction feature aims to facilitate high volumes of trading by finding the price at which the greatest aggregate buy demand and aggregate sell demand can be fulfilled. Because this occurs at a single final auction price, neither party has to pay to cross the bid–ask spread.
There are several market advantages to creating a feature like this, and, first and foremost, is an ability to reduce the cost of acquiring Bitcoin.
Chris Concannon, Bats CEO, said to Bloomberg in an e-mailed statement:
“We view the launch of an end-of-day auction as a significant step forward for Gemini and the Bitcoin industry.”
Any risks?
A level of price stability is gained when you execute a large trade size, similar to over-the-counter (OTC) trading quantities on the exchange without having to worry about price slippage. This is a critical benefit for customers concerned with exchange liquidity.
The auction trades are executed on the Gemini platform, making for a much more seamless operation, unlike over-the-counter trades that can require phone calls, emails, specialized paperwork, risks during funds transfer, etc. And instances of counterparty risk are also removed.
As auction trades are settled immediately from pre-funded accounts, they are ready for immediate transfer, eliminating the risk of a trade not settling, unlike OTC trades that settle at some later time.