DigitalX Ltd, an ASX-listed blockchain software and initial coin offering corporate advisory firm, is dipping its toes into cryptocurrency exchanges.
The Perth-based company has more than $18 million in liquid assets, including $5 million in cash, more than $10 million in bitcoin and about $2 million in ether, power ledger (POWR) and etherparty (FUEL).
The Board of DigitalX has initially approved the use of up to $1 million for the provision of market making services, offering both a buy and a sell price.
At the close, DigitalX shares were up 4.3% to $0.24. Earlier they had been up by as much as a third.
The company has begun a risk of cryptocurrency exchanges, with a focus on the Australian marketplace.
DigitalX will also utilise arbitrage trading to take advantage of mispricing across approved exchanges.
Market making will involve providing liquidity to both sides of the cryptocurrency market while maintaining a small open position in the asset being traded.
DigitalX will maintain bid and ask limit orders below and above the spot price. These orders are regularly cancelled and updated as the spot price changes.
The company says this strategy is expected to produce the best results when price volatility is high.
DigitalX says it doesn’t require an Australian Financial Services License to buy and sell the company’s digital currency on digital currency exchanges under the current regime.
“DigitalX has a strong track record dating back to 2014 as one of the leading liquidity providers in the Bitcoin marketplace, supplying wholesale Bitcoin liquidity to exchanges, commercial operators and institutions,” says DigitalX CEO Leigh Travers.
“We wound down our trading desk last year due to a lack of funding. However, our strong financial position, together with the appreciation in the value of Bitcoin, has allowed us to reignite this service.”
The company in June announced a $4.35 million investment from Blockchain Global Limited.
DigitalX decided to take $2 million of the investment in bitcoins rather than Australian Dollars.
At last report, the company held 453 Bitcoins. At today’s price of $US16,838, DigitalX’s holding would be worth $USD7.63 million.