Why latency always matters if you are trading Bitcoin

While humans have not even figured out what time actually is and if it exists at all, we can say one thing for sure: the concept of “real-time” is completely flawed.

The business model of financial data providers, selling “real-time data feeds” is nothing else than illusion, it’s the same as selling a perpetual motion machine or a history book of 2023, it’s just not possible to provide these things.

You can test your latency (how old the data you get will be at minimum) by simply using e.g. the command ping bitmex.com in your terminal.

From my server in Frankfurt latency is about 29ms

It’s about 80ms from the other side of the atlantic. Here is the data from our server in NYC:

Latency is a bit higher from the U.S. than from Germany because BitMEX is hosted at an Amazon datacenter in Ireland.

From your home in the U.S. or in Europe, depending on your exact location, network speed, your firewall, if you use a VPN and other factors you will probably have a latency of about 300 ms. That’s still very low in human terms — just the time it takes to blink your eyes — but already a long time period in high frequency trading terms.

Now the bad news: You will always have latency and see an “illusionary market” that actually does not exist anymore when you execute an order. You have to live with that fact. In the most cases it’s not the fault of evil robots or order engine abuse if you are slower than most of the other traders, but your very own fault — at least when you are trading Bitcoin futures on BitMEX.

Good news: No matter how small you are, you can reduce your latency dramatically by co-locating a simple python script on an Amazon AWS instance at their EU-West datacenter in Ireland. The lowest latency i can get to connect to BitMEX is about 0.2ms. As new AWS customer you will even get your first 750 hours for free.

But in the most cases humans do not try to reduce their latency from 300ms to 0.2ms. They even add an extra layer that increases their latency to about 2,000ms.

HFT firms do indeed have unfair advantages on a lot of markets, and we saw just the tip of the iceberg. But please keep in mind that if you complain about the advantages of high frequency trading you might at least as well question the use of tools like cryptowat.ch that add 2,000ms if you rely on low latency data for your “real-time trading strategies”.

tl;dr a robot does not understand why humans prefer beautiful charts that add 2,000ms latency over free co-location with 0.2ms latency while blaming robots for having unfair advantages.