Author here. Actually, the system is mostly taking liquidity from the market so it's not even doing that :) Perhaps, "opportunity for others to create more liquidity"

Jokes aside, it's actually something I am thinking about a lot. Such systems don't create value, but they extremely intellectually interesting and I've learned a lot. You can say the same for many other projects, for example academic research in many fields. Most of it is just noise to promote the author and does not create value in the world. But it's intellectually interesting, so people work on it.

Other people write compilers for fun to learn something new without creating value. I don't think this is fundamentally different.

I think of it as like competitive sport. The value you're providing is the opportunity for others to test themselves against you.

> But it's intellectually interesting, so people work on it.

No. It's a financially sound way to use time, so people work on it. Anything can be intellectually interesting.

What kind of academic research does not create value? And if so, maybe it deserves to be criticized the same way.

> What kind of academic research does not create value? And if so, maybe it deserves to be criticized the same way.

I have friends that study social behavior of ants. Is there any way to apply that?

So you enter with market orders and exit with trailing limit orders?

I've thought a lot about this too (I used to work in HFT). Here's what I think:

- The only part I didn't like in your article was how you described creating indicators as exploitation. The limit order book is public by design so all traders can look at it. People have the free choice to trade on a centralized exchange or not. This is a trade-off between revealing information and being able to trade quickly without calling all your friends asking if they want to buy some Bitcoin.

- I'm guessing you used data from other exchanges outside the one you were trading as indicators too. That's unquestionably good since your trading helped information propagate faster or more accurately than it would have otherwise.

- Markets are only zero-sum in isolation. Most participants derive utility from things outside short-term profit and loss. Maybe they trade to manage risk, to hedge, to gamble, have a longer time horizon than you, whatever. They just want to trade and get back to their lives. They don't want to waste time squeezing the last fraction of a basis point out of their fills. It's hard to believe, but they actually enjoy getting picked off, run over, paying too much spread, whatever things make you feel bad or indifferent about the service you provide.

I used to get filled making markets on Nasdaq (which pays resting orders a rebate, and charges crossers) when BX (which pays crossers a rebate) was at the same price, and could lay off the trade for an instant profit. The people who traded with me paid for the luxury of saying "fuck it, send it to good ol' Nasdaq." I used to think it was stupid of them, and from the perspective of a prop trader, it was mind numbingly stupid, but they probably had more productive things to do than read every exchange fee schedule or hook up to every small exchange.

- Providing liquidity has nothing to do with resting limit orders vs. crossing the spread. Providing liquidity is about taking risk off the hands of people that don't want it, and moving it across time to someone else who does. If you're market neutral, trade many round trips every day, and end relatively flat, you've played that intermediary role as a liquidity provider regardless of what order types you use.

- Crossing against mispriced orders is doing the world a favor. You're not the bad guy picking them off. If anything, they're the bad guy for holding the market at an incorrect price.

So maybe think of yourself as more of a service provider. Not only will you feel better, but viewing trading through that lens tends to make you a better trader. Strategies truly built around an exploitation mindset are fundamentally unsustainable, since you run out of people to exploit. Providing a service works forever.

FWIW, the rest of what you wrote is almost exactly how the pros do things. If you built this system yourself, you could make far more than 200k at a prop firm. If you're interested, reply with a throwaway and I can refer you to a friend who's still in the business.

Depends on what the gains are used for.

Ultimately all investors from the hedge funds down to the long sucker, it is all skimming for returns. HFT just skims from other skimmers returns. Yes those investments may have created value, but ultimately people invest because they want returns.

The money made will be used for more skimming but also some for investment in other possibly beneficial projects.

Extracting financial value via investment (skimming) may allow someone to start a company, support a community or family and have valuable time to make those things better. Just as an investment in a company/idea creates value in that company, the value gained from trading where the first step really is skimming, can be used to create value in the real world or even just time which may lead to more real actual value created.

Don’t forget price discovery.

But you're not discovering anything valuable because there may not be a person on the other end of a trade. You're just learning about the chaotic boundaries of the trading algorithm.

Exactly. Regular speculators at least have the (hazy) claim that they're reducing the spread for people trading markets with actual utility. But given BTC's lack of economic meaning, that doesn't work here.

If anything, providing BTC liquidity might just be increasing net societal harm.

I feel like commercial activity finds value and removes it from the system.

To create value, you need to give someone else money. If I wanted to build a better society, I'd make sure everyone had the best possible education. Paying for this would bankrupt me, maybe even bankrupt the entire country. But with every single person in the country walking around with a deep understanding of music, art, mathematics, engineering, and science... as a society, I'm sure we'd do great things. Value would be created in the very long term, but not for me, the potential investor.

Then on the other hand, we have things like automated trading. That boils down to asking a bunch of people "will you pay $5 for this $4 bitcoin?" Anyone that says "sure!" just gave you a dollar. Do that millions of times per second, and you remove as much value from the system as possible.

The reason why you feel this way is because there is a large difference between value† as defined by markets (which I'm writing with a dagger †) and value as defined by everyone else (which I'm writing without a dagger). Value† is weighted by wealth. Value is not. Feeding a starving African village generates value, but feeding a starving African village does not generate value†, because the village has no money. Figuring out how to monopolize the telecom industry generates value†, because it benefits heavily-weighted interests while only penalizing lightly-weighted interests, but it does not generate value.

Markets promote value† creation, but they don't promote value creation, except insofar as the two concepts coincide. It is instructive to think about the circumstances under which the two concepts coincide, the extent to which those circumstances hold, and the extent to which we are moving towards or away from those circumstances.

For what it's worth, I use "makes money" for creating value†, and "creates value" for the common sense.

For those interested in the topic, I've found the Lean Manufacturing literature helpful. They're usefully obsessed with creating customer value, meaning doing or making something valuable for their customer. Which has some of the problems you mentioned, in that traditional commerce mainly serves people in proportion to the money they have. But you can pretty easily extend the Lean approach to value to non-commercial situations.