FAQ

A: Cesium is a software tool you can connect to your cryptocurrency trading accounts via API keys.  Cesium will then follow your instruction to perform automated trading on your behalf; without you needing to react manually or be present at a computer during an event.   Cesium is designed with one objective: to act as a tool in helping you to react to “dislocations” in cryptocurrency trading pairs.

A: A “dislocation” is an event where the price of a trading pair in one exchange (the dislocation exchange) moves significantly away from the price of the same trading pair on other exchanges (the remaining exchanges). This can be either a dislocation up or down from the rest of the pack. As an example, the BTC_USD (bitcoin in terms of USD) pair trades on Coinbase, Bitfinex, Binance, Poloniex, and Kraken.   If the price on Kraken quickly snaps down to $2800, while all other exchanges’ BTC_USD pairs are trading around $3500, after Kraken was just trading along with the pack around $3500, this could constitute a dislocation, and Cesium would respond on your behalf if you have an active trading plan for this pair in Kraken.   In many cases, the dislocation resolves within seconds, with price converging back to or near the pack’s average price.  Dislocations can only exist where there are multiple and fragmented venues to trade the same pair.  Thus, they are essentially unique to the realm of Cryptocurrency trading markets.

A: Cryptocurrencies are traded on hundreds of exchanges spread out geographically throughout the world.  Each exchange is a “silo” unto itself.  If you have money in an account in one exchange, that money can only be used to trade within that single exchange; it cannot be used to buy or sell trading pairs in outside exchanges.  Thus, money at a given exchange is a “captive audience”, or can even be thought of as a “held prisoner.”   If supply overwhelms demand on a short-term basis, meaning there are more sellers than buyers by a large margin, price must descend sometimes very fast and far, to find the next bids lower in the order book on that one exchange.  This is still true, even if there exist higher-up, viable bids, in outside exchanges for the same pair.   This large surplus of sell orders is often the result of a stop-loss order being triggered due to a move down below some threshold of pain for longs.  This is especially true of market stop-loss orders, or just large market orders to sell as well.  When a market order executes, price is not specified, and price will move as far as it has to, downward hitting all the bids in the order book, until the quantity to sell is fulfilled.

A: Yes, there are also dislocations to the upside.   Cesium does not attempt to sell these upside dislocations, as it does not engage in selling short (selling to open a position), nor is it practical to hold long inventory waiting for a highly improbable event to occur in that one pair on that one exchange where held.

A: Cryptocurrency exchanges are highly independent by their nature.  They offer all three hallmarks of a trading infrastructure:  custody of customer assets, execution of trades, and clearing/settlement.  In contrast, consider the infrastructure behind the trading of equities (stocks).  Sometimes custody and execution are performed by the same entity (your broker), but the settlement process *always* involves the Depository Trust Clearing Corporation (DTCC) – which is a quasi-governmental institution that offers a network that connects all broker/clearing entities in the equities space.  This facilitates both the swapping of cash for securities among customers of two different brokers, and also the ability for a wide variety of choices for execution for any given proposed trade.  In addition to this hub-spoke model for clearing/settlement, brokers also must offer best execution from all major exchange venues (regulation NMS).    For example, if you want to buy 100 shares of Apple (AAPL), and you see NYSE offering 179.99, and NASDAQ offering 180.05, you would naturally want the lower ask price of 179.99.  Regulation NMS is designed to guarantee that an order gets filled at the best price (the national best bid or offer: NBBO).  In contrast, cryptocurrency exchanges will not route your order away if a better price exists outside of its system, because (a) they are not part of a larger regulatory framework of exchanges with that obligation as we see in equities, and (b) they don’t want to be placed in a position of trusting other exchanges, which may have technical issues, or even issues with deliverability of cash and assets upon external settlement.

A: Yes, this would solve the “silo” problem, if it could be done.  But it has not been done yet, and is unlikely to be offered as a solution anytime soon.  The problem is one of trust among exchanges.  If one exchange allows you to route an order to another exchange, the assets transacted have to flow from that outside exchange back to the native exchange; and cash must traverse in the opposite direction.  This would involve either perfect trust between two exchanges, or a universal third-party clearing house backed by a store of collateral large enough to buffer any clearing member failures.  In other asset classes, such as stocks and futures, these universal clearing houses are government owned or regulated entities with $100bn+ of collateral to guarantee settlement, even if a member clearing agent fails to deliver cash or securities.     Additionally, routing orders away from an exchange reduces that exchange’s trading fees, which are often very high in cryptocurrency trading.

A:  Arbitrage is a very attractive trading practice.  After all, who wouldn’t enjoy risk free returns.  The problem with arbitrage in cryptocurrency trading is two-fold: (1) Capital inefficiency: The arbitrageur must divide their assets among all of the exchanges they expect to see a future possible divergence occur.  Any assets parked at an exchange where no divergences occur is capital not earning a return, and thus suffers from increased opportunity cost.  Divergences tend to be short lived, and with a limited amount of size that can be transacted before reverting to equal pricing.  The ability to use leverage often solves capital inefficiency issues like these; although leverage is almost never available in most of these cryptocurrency trading exchanges – nor is the ability to sell short on margin.  (2) Capturing the divergent spread: To take advantage of divergences, as a true arbitrageur, at least one leg of the spread must cross the bid-ask spread.  During these dislocation events, the bid-ask spread is often just as wide as the depth of the crash; meaning that if you wanted to be aggressive and “lift the offer” to buy the dip, you would have to pay the pre-crash price.

A: Cesium attempts to discern dislocations from regular crashes, by looking at the same trading pair on many exchanges to isolate significant and simultaneous price dislocations.  These significant price dislocations are not a perfect method for identifying a dislocation vs a regular crash, but tend to be quite good, statistically.

A: You can set up a Trade Plan, designed to instruct Cesium to manage orders (send, modify, cancel) when certain conditions occur.  A Trade Plan is easy to set up, and consists of only several parameters: (1) which exchange, (2) which quote currency, (3) which, if any, blacklisted pairs, (4) maximum risk exposure, (5) target statistical frequency of dislocation event.  You must have an available balance of quote currency on the exchange chosen for a trade plan.  For instance, my might want to create a trade plan targeting Binance, using BTC (bitcoin) as the target quote currency.  You would then blacklist any pairs you don’t want to be included.  You must then set the maximum risk exposure – indicating the funds lost if the dislocation pair goes to and stays at zero.  Finally, you specify how rare of a dislocation you are hunting for.  The shorter the statistical period specified, the less rare, and thus shallower dislocations will trigger your trade plan.  The longer the statistical period chosen, the rarer, and thus deeper a dislocation will need to be, to trigger your trade plan.  There are many trading pairs within a single trade plan, and only one can trigger a trade plan.  If multiple dislocations on various pairs in a single trade plan occur in short order, only the first pair to dislocation will trigger that trade plan.

A: You must set maximum risk exposure as a parameter of each and every trade plan you create.  Although this is the maximum you can lose for that Cesium trade plan, you are very unlikely to experience that worst loss; and only will do so if the trading pair goes to zero.  No margin is permitted in any of the actions the Cesium tool effectuates. There is also no short-selling (selling to open a position).  Cesium cannot control what you do in submitting trade orders outside of the Cesium system, but it is strongly suggested that you do not manually trade in the same account during an active Cesium trade plan.  Trade plans can always be quickly canceled if you wish to trade manually again.  Manually trading, or canceling Cesium created orders, can result in losses that exceed the maximum risk exposure specified in the Cesium trade plan; and Cesium cannot be held responsible for any manual order interventions.  Cesium does not make a recommendation for the level of risk exposure for each trade plan; that is something you must decide entirely upon your own.  There is also the risk of loss or theft of assets that could happen on the exchange – which of course, Cesium has no ability to control or forecast.   Cryptocurrency trading is speculative by its nature, so you must evaluate on your own, the level of risk you are taking by trading on any given exchange.

A: This frequency is unknowable in advance, but you can set the relative targeted frequency (based upon prior data sampling) according to your tastes.  Targeting higher frequency will cause Cesium to tend to respond to shallower dislocations.   Targeting lower frequency (longer between events) will tend to bypass shallower dislocations and only respond to deeper events.

A: All trading always involves two assets; the asset you want to acquire, and the asset you are giving up to do so.  Even stock trading involves these two assets, although the quote currency for US stocks trading is always USD – and thus we tend not to think of USD in a special way for stocks.   Foreign exchange trading (FOREX) is usually where people make note of quote currencies, as trades always involve two currencies, and one of those is foreign to your natural jurisdiction and common currency. You can think of a trading pair as a numerator (base currency) and a denominator (quote currency).  For example, in FOREX, you can buy the EUR_USD pair if you have USD (quote currency), and you want to swap that for EUR (base currency).   If you have a zero balance of USD (and there is no margin lending), you cannot buy the EUR_USD pair.   The opposite is true if you sell EUR_USD (which is the same as buying USD_EUR):  you must have EUR available – which will then be swapped for USD once filled.  There are three quote currencies currently supported on Cesium:  USD (fiat US Dollars), USDT (Tether), and BTC (Bitcoin).  There are hundreds of base currencies supported.

A: The creators of Cesium understand this concern – it makes sense to want to see live verification that a tool works before putting on more exposure.   This is why Cesium has a “Live Proof Test” feature, where you can expose less than $100, and see what Cesium does with this minimally sized trade plan as far as triggering, order placement, order cancelation, etc.  The amount of exposure for this Live Proof Test is always the minimum; but this minimum depends upon the exchange you want to run the test on.  The test may take from a few hours to a few days; as Cesium will still wait for an actual setup – but this setup will be statistically more likely than a regular trade plan – thus minimizing the amount of time for you to see results.  Once the test is complete, you will be notified.  You can then review side by side, the order activity audit trails within Cesium, against the that of your native exchange on the exchange’s website.  The timestamps, actions, and prices will all match.  This test is certainly not mandatory; but it is offered for those curious to see for themselves whether Cesium does what it says it will do, before committing more than the bare minimum capital.

A: Cesium does not have a minimum itself, but this is instead driven by the exchange you are using.  Each exchange will have a minimum trade size, and you should investigate this to be sure.  Generally speaking, $50 at any given exchange will usually exceed any minimum trade size requirement.

A: No, Cesium is not an advisor, and does not make recommendations to buy or sell.  Instead, Cesium is simply a tool, which you pay a software license for, in order to carry out the instructions you set up through your trades plans.   Cesium is not a registered investment advisor (RIA) or any other form of advisor, and you must acknowledge that you are fully liable for any trading losses that may arise from the use of this tool and service.   Trading with Cesium can result in the loss of all capital exposed during any trade plan.   Cesium does not make recommendations to buy or sell any assets.   Any and all actions Cesium performs are the result of a trade plans you create, and are the result of market prices.   Cesium does not deal in securities: any crypto assets that are deemed securities by the United States Securities Exchange Commission (SEC) are not included for trading with this tool.

A: No.  There is always risk in trading.   Cryptocurrency trading is a largely unregulated space, and invested/exposed capital is always at risk of loss.

A: Cesium charges a fee proportional to the amount of total exposure you have in all of your active trade plans in aggregate.   Thus, you pay based upon how much you use the tool to maintain exposure.  You can cancel or suspend trade plans (and thus exposure) whenever you like, but in doing so, can miss potential trade opportunities while not exposed.  Fees are currently only payable in USD, but Cesium may offer a cryptocurrency payment option later.  Cesium is free to use while no exposure is in place.  Fees are calculated and charged daily at 12 midnight UTC, against a pre-paid balance.   If the pre-paid balance drops below zero, any active trade plans will be paused, thereby removing your exposure.  You can add to your pre-paid fee reserve at any time via credit card payment or ACH bank transfer.  You will be notified if your balance becomes low or negative.  Each per-diem daily fee is calculated by multiplying the maximum total exposure (in USD terms) over the prior 24 hours by the daily fee rate.  This maximum total exposure has a grace period of 30 minutes, thus if you mistakenly add additional exposure, and then remove within 30 minutes, you will not be charged on that new high-water mark of exposure for the day.    The daily fee rate is variable, and goes down with larger aggregate exposures (i.e. a volume discount).  Cesium does not charge a success fee; there are no charges in relation to any profits you may make while using the Cesium tool.

A: Yes, you have two options.  You can elect to manually reload your balance, or you can choose the auto-reload option.  The auto-reload option is recommended to avoid inadvertent outages in exposure due to a zero or negative balance.  Cesium will debit your balance once daily.  You will be notified when your balance becomes low if you have not elected to auto-reload.

A: Yes, you can review all your fees and how they are calculated on both the mobile app, or on the website.  The website also allows you to download this fee history in Excel or csv format for your records.

A: Yes, Cesium offers several methods to review each order/trade the system placed, as well as orders/trades that occurred in your linked accounts that Cesium did not initiate.   Cesium tracks which orders/trades it initiated in your account, and distinguishes these from orders/trades that were created outside of Cesium.  Of course, it is highly recommended to abstain from entering/modifying/canceling any orders in your linked account while Cesium is active in that account.

A: Security is extremely important to us, here at Cesium.  This is why we have taken extreme measures to ensure that API keys are encrypted, stored, and managed in a way that employs state of the art best practices.  Your API key is immediately encrypted once you enter it into the app.  From that point, no one, not even the creators of Cesium, can view or recover the unencrypted version of your API Key. Additionally, Cesium will reject any API key submitted that has transfer rights – Cesium will never transfer digital assets into or out of your exchange accounts, nor will it have the ability to.

A: The atomic element, Cesium (Cs), in one of its radio-isotope forms (Cs133) is used in atomic clocks for precision time keeping.  A Cesium atomic clock can keep accurate time to within 1 second of drift per 1,400,000 years.   Atomic clocks have one of their most useful applications in keeping Global Positioning System (GPS) satellites clocks all synchronous; which is required for the proper functioning of the GPS network that we now all rely upon for navigation.  In analogy to this, Cesium, this trading tool, at its heart – functions with precision synchronicity in detecting and then reacting to dislocations among same-pair clusters across multiple cryptocurrency exchanges.

A: Cesium utilizes world class network infrastructure and state of the art low-latency software, typically only found in large trading institutions like hedge funds and banks.  Cesium is democratizing access to this scale and quality of infrastructure.  The dislocation events Cesium is designed to capture often occur from start to finish within seconds, and sometimes inside of a single second.  No one is fast enough to manually trade a dislocation.  dislocation events can strike at any time, and on any day, as there are no market closures or trading breaks in cryptocurrency trading; these markets are world-wide and 365/24/7.  No one can manually watch all markets at all time.  dislocations occur at random, and without any advance warning.  Layering buy orders lower in the orderbook requires knowing ahead of time which pair will experience a dislocation – which is unknowable ahead of time.  You can only place resting orders as large as your available balance will allow, and no leverage is permitted in most crypto exchange spot markets.  Cesium brings capital efficiency by not placing any buy orders until after a dislocation is confirmed to have started.   At that point, speed is very important.  Cesium is an engineering challenge realized – to facilitate this type of low-latency trading for the low to medium capitalized cryptocurrency trader.

A: The cryptocurrency market is immense – both in variety of exchanges & trading pairs, as well as the amount of capital that can be deployed.  The use of Cesium as a tool to trade cryptocurrencies is a bigger opportunity than the funds of the creator can support.  As far as creating a hedge fund, to pool assets on behalf of investors, this is an extremely challenging prospect.  Most exchanges are outside of the US, and there are very few options for custody agents to accept/hold/transfer funds among all the exchanges – this is a responsibility very few institutions want to take on, given the pseudo-anonymity of digital asset transfers and accounting for every asset held and transfer performed.  By comparison, a hedge fund that trades in stocks, futures, or forex is quite simple with regard to tackling issues around custody.  The same goes for hiring an independent 3rd party administrator to oversee the fund and create monthly statements for all investors.  There are few options, and all that we have seen involve complicated off-shore structures.  So in short, to capture the opportunity that is bigger than our own capital, and to bypass the complexities around starting and operating a hedge fund, the creators of Cesium instead chose to democratize this technology, and offer it as a tool to even the smallest capitalized end user investor as a pay-as-you-use service.

A: No, the Cesium tool does not make any assumptions about, or depend upon, a bull or bear market in cryptocurrencies.  Dislocations occur in all market phases and environments.  There is no clear correlation between the frequency of dislocations and the phase (bull/bear/sideways) of the cryptocurrency market.    Dislocations are more about the “silo” effect (see above) than about the overall direction of the market.    However, Cesium is not a predictive tool – it is only a reactive tool.

A: No, the creators of Cesium believe that reliable and repeatable prediction of future market prices (of any asset class) is not easy; and may actually be impossible.   Instead, the Cesium tool simply reacts to a set of conditions, as they occur in real time.  There is no exposure of capital until the moment of this reaction.  Cesium allows you to keep your “powder dry” until, and only if, conditions suggest a dislocation has begun, and is underway.  Of course, there is no guarantee that any action the Cesium tool takes will be successful.  There may be Cesium actions that result in losses, and you must recognize this before using the tool.

A: Yes, Cesium wants to expand its customer base, and a great way to do this is for happy customers to tell their friends.  Cesium will credit your fee reserve account $25 for each friend you refer, who ends up opening an account and depositing at least $10 of fee reserve into their new account.  In order to track this rewards benefit, you must give your friend your unique code (found on your account page of the website, or on the account section of your mobile app).  When your friend first submits a payment, there will be an option for them to tell us how they were referred.  When they enter your code, you will immediately receive a notification, and your fee reserve balance will be increased by $25.  Your fee reserve balance is not redeemable for cash, but can only be used to pay fees for your own use of Cesium as a tool for your trading.