Optimal Settings of Cryptocurrency Trading Pairs

Di Zhang, Youzhou Zhou, Hengyan Liu, Bintao Hu, Wenzhang Zhang, Angelos Stefanidis

Abstract: The goal of cryptocurrencies is decentralization, but it is impractical to set up a trading market between every two currencies. To solve this optimization problem, we use a two-stage process: 1) Fill in missing values based on a regularized, truncated eigenvalue decomposition, where the regularization term is used to control what extent missing values should be limited to zero. 2) Search for the optimal trading pairs, based on a branch and bound process, with heuristic search and pruning strategies.The experimental results show that: 1) If the number of denominated coins is not limited, we will get a more decentralized trading pair setting, which advocates the establishment of trading pairs directly between large currency pairs. 2) There is a certain room for optimization in all exchanges. The setting of inappropriate trading pairs is mainly caused by subjectively setting small coins to quote or failing to track emerging big coins in time. 3) Too few trading pairs will lead to low coverage; too many trading pairs will need to be adjusted with markets frequently. Exchanges should consider striking an appropriate balance between them.