Stages of the launch of new digital currency
The recent years have shown rapid developments in the cryptocurrency space. Bitvavo aims to respond quickly to these developments, by offering a wide range of virtual assets to its users. In this article is described how the launch of a new digital currency on the Bitvavo exchange works.
The stages of listing a new digital currency
The launch of a new digital currency will go through the following three stages:
- Deposits & withdrawals enabled: Users will be able to transfer the digital currency from/to their Bitvavo account. Bitvavo usually enables deposits and withdrawals 48 hours before the market enters regular trading mode. At this time, the markets are halted.
- Auction: After deposits are enabled and before the market is in regular trading mode, the market is halted. During halted markets, users are able to enter orders that will be executed at the auction, which will take place before a market transitions into regular trading mode. The auction process is described below.
- Regular trading: After the auction, the market enters regular trading mode. This trading mode uses a limit order book with execution of limit and market orders.
Market status: Halted
When markets are halted, users are able to:
- Place new limit and market orders.
- Cancel existing limit and market orders.
These orders will not execute during a halted market. The purpose of placing these orders is in anticipation of the auction, which takes place before markets transition into regular trading mode and is designed to determine a fair opening price.
Please note: no order book updates are broadcast when markets are halted.
Market status: Auction
When markets are in auction, users are not able to place orders or cancel existing orders. This process usually takes less than one second.
The opening price is the price at which a digital currency trades upon the opening of a new market. To determine the opening price, Bitvavo takes all posted orders into account. Subsequently, the opening price will be set at the point where most units of the base asset would trade. All posted orders, which could be matched, will be matched at the same opening price. In more detail, the opening price is calculated with the following steps:
- Active limit orders are used to determine the price at which the most units of the base asset are traded. If there is no price where trades occur, all open market orders are canceled and normal trading resumes.
- If a price is obtained in the previous step, this price is used to prevent self trades according to the policy specified when the newest order was placed.
- The remaining active limit orders are used obtain a (possibly new) price at which the most units of the base asset are traded. If there is no price where trades occur, all open market orders are canceled and normal trading resumes.
- Orders are matched based on price-time priority and all orders are considered taker orders. This means that the oldest market orders will be filled first, at the price determined in the previous step. Once there are no more market orders, the limit order with the best price will be filled first, at the price determined in the previous step. When no more orders can be matched at the determined price, all remaining market orders will be canceled and normal trading resumes.
Market status: Trading
This is regular trading mode, where users can place limit and market orders that will execute immediately.