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Gemini pricing model troubles bitcoin traders
Gemini, the much awaited bitcoin exchange led by Winklevoss twins, officially launched on 8th October. It is chartered under New York State Banking Law as a limited liability trust company (LLTC), domiciled in the State of New York and regulated by the New York State Department of Financial Services (NYSDFS). As an LLTC, Gemini is allowed to service both individual and institutional customers.
While Gemini has been successful in creating the hype around it, it seems to be struggling to get hold of bitcoin’s active trading community. Cameron Winklevoss suggested the company was seeking a more elite clientele and as such no discounts will be offered to new users of the platform, CoinDesk reported earlier.
However, bitcoin traders told CoinDesk that Gemini's pricing model charges both buyers and sellers on each trade. They argue that this could potentially drive away retail traders – a segment vital for improving liquidity.
Arthur Hayes, CEO of bitcoin derivatives platform BitMEX, told CoinDesk, "Gemini's ability to convert retail traders to their platform will determine their short-term success. Gemini definitely has the star power of the Winklevoss twins, but I don't know how far that will take them in the grudge match that is to come."
The exchange is currently struggling to attract volume, though it had traded 384 BTC (about $100,000) on 14th October, a figure that was nearly double total daily trade volumes throughout its first week. Institutional traders told CoinDesk that they are waiting for Gemini’s liquidity to increase to determine if and when they would enter the market.
Tim Enneking, manager of bitcoin hedge fund Crypto Currency Fund, argued that active traders couldn't survive on Gemini's current pricing model, and added that these individuals, while contributing valuable liquidity to exchanges, rely on small price swings for profit.
"They're going to have to make their offering attractive to smaller players, and I'm not sure that they've succeeded in doing that yet”, he said.