Treffer: The brilliancy of the trivial many: A comprehensive analysis of retail trader’s positions on decentralized exchanges

The broader adoption of quantitative methods has deeply changed the decision-making process in financial markets as data from multiple sources is being used to extract information and produce valuable insights. This work focuses on retail traders’ position data. Although less proficient and usually not profitable, research indicates that, in the short term, the imbalance in their orders is positively correlated with market returns. Current literature attributes their difficulty in making a profit to various behavioural biases, such as over-trading and information processing, that affect their decision-making. The goal behind this work is to contribute with research to the digital assets market, through inputs about traders’ behaviour and how it differs from more mature markets while emphasizing the importance of data management in today’s financial markets. To accomplish this, a comprehensive study was performed on aspects such as position size, leverage, directional alignment, and trading frequency, using order flow and tick data from an on-chain decentralised exchange, with a specific focus on prominent traded cryptocurrencies: such as Bitcoin and Ethereum. This work concluded that the biggest share of trading volume was done by traders taking smaller positions that, on average, take less time. Trading fees take a big portion of the returns, as the cumulative returns of traders who fall into one of the distribution’s tails tend to be relatively worse. On average, these traders’ positions take 10x more time than those with performances closer to the average, while also taking positions with 28% more leverage. These inputs about traders’ behaviour were used to achieve a liquidity provision approach with good risk-adjusted returns. ; A ampla ado¸c˜ao de m´etodos quantitativos tem revolucionado o processo de tomada de decis˜oes nos mercados financeiros, na medida em que os dados de m´ultiplas fontes s˜ao utilizados para extrair informa¸c˜oes e gerar insights valiosos. Este estudo foca-se nos dados retirados das ...