Launch HN: Coinrule (YC S21) – Automated Trading Made Easy
Hi HN Community,
Today's beginner investors are stuck with zero-interest rate accounts and passive investing. That might work for some but if you are interested to explore more active investing opportunities, you will soon find yourself out-traded by funds and bots who control much of the market volume.
We are Gabriele, Zdenek and Oleg, founders of Coinrule https://coinrule.com/. We met back in 2017 when we were building our previous startups and met at Masschallenge, an accelerator program, in London. At that time all three of us were experimenting with cryptocurrencies investing and soon found that unless we used automation, we could not compete in a 24/7 market. That's when we started to think of a solution, now called Coinrule.
Coinrule helps beginner investor build automated rules for trading strategies, currently for cryptocurrencies but later also for other assets - it runs on top of cryptocurrency exchanges and uses an IFTTT-style interface. It's like Zapier for investing.
The Cryptocurrency world came along with a lot of controversies, at the same time it gave many makers a possibility to start deconstructing finance. Also for us, cryptocurrencies are a good place to try and build a more equal way of managing your savings.
We are part of this market and believe in it. Our ultimate goal is to make trading more accessible and to expand Coinrule to equities, FX and later also to DeFi to give beginner investors the opportunity to manage their funds in a market full of speculators.
When we first started investing, we approached it from two beliefs: 1) you are unlikely to grow a portfolio without a small percentage of it allocated to more active investments and 2) tools in the market today are made by traders for advanced traders. Many of our users have learned, grown and improved as traders over the past year of using Coinrule and that's what we think really matters.
Of course we understand that the HN community has a lot of cryptocurrency sceptics and we respect that. The cryptocurrency market is still full of scams and bad actors. Whether you like it or not though, it is now big enough that it is here to stay. Despite the bad reputation, there are also many genuine and hard working people trying to build technology that matters. We believe that it is worthwhile to try make cryptocurrencies an easier place to navigate for these 'normal' people. If one of our users does not have the right mindset or could be vulnerable and should not be trading, we tell them that.
Coinrule today is registered with the UK's Financial Conduct Authority, has transacted over $500m and is run by an international and diverse team.
Building a product, as you all know, is hard so we'd appreciate comments and feedback. We'd love to hear anything that helps make Coinrule better, simpler and fairer. Please try us out at https://coinrule.com! Happy to answer any questions and hear your feedback in the comments! > When we first started investing, we approached it from two beliefs: 1) you are unlikely to grow a portfolio without a small percentage of it allocated to more active investments I wish you all success, but this assumption goes against about a half-century of academic research. You might say "but it's crypto!" But the law of averages is brutal, and it is agnostic to whether we're in a crypto world or not -- if some fraction of market participants get an above-average return, mathematically, some must get a return that is below-average. Active investing is not the same as day trading. Most people do not realize that "passive investing" is basically zero sum (albeit harder to calculate because of being stretched over long periods where inflation becomes significant), just like short term trading. Value creation only comes from active investing (long term focused, but active and researched). The kind of active investing that Warren Buffett does is more similar to what VC's and private equity firms do than someone who buys and holds an index, spreading their money evenly across all big companies without any regard to which companies are deserving of investment. Passive investing isn't zero sum - it's positive sum. If you could buy a fraction of earnings from every business in the economy (i.e. both businesses that currently exist, and future businesses that are founded in the future), then you get a rate of return that is roughly the growth in GDP. Concentrated portfolios are also positive-sum, and have returns higher than passive investing if you are smart or lucky. Passive investment has been a good strategy for collecting wealth, but it adds no value to society. Instead of efficiently placing capital to generate new wealth, you are spreading just as much capital to companies that will fail or squander their current valuation as companies that will succeed and should have more capital. It's only more profitable than mutual funds because ETF's have lower fees due to special tax rules around rebalancing. Add in that the capital gains tax bracket is significantly discounted and that the Fed will rescue the stock market at all costs, and you have a solid 8% annual growth (but as a result of a misaligned economic system, not because your money is actually contributing to GDP). Putting your money in the bank is probably a better contribution to the economy (because banks have trading desks dedicated to more efficiently allocating capital), although it is a terrible personal investment strategy in today's low interest, inflationary environment. I just want people who demonize active investing to understand that their passive investment strategies contribute less or equal value to society, contrary to popular belief. That makes no sense. Trading desks at the banks are not dedicated to "efficiently allocating capital", they are there to turn a profit no matter what. What's good for a trading desk might not (and often is not) always good for the economy. You say that passive investment provides no value to society because it provides capital for failed and successful businesses equally. But there you said it: it contributes capital to companies that will succeed. How is this "No value to society"? >It's only more profitable than mutual funds because ETF's have lower fees due to special tax rules around rebalancing. No, it's the other way around. It's because ETFs have been found to be more profitable on average than mutual funds, that it was heavily incentivized to invest in them. ETFs are profitable for structural reasons, because it's really hard to beat the market on average. > it contributes capital to companies that will succeed. How is this "No value to society"? Because pumping up the market value of a "bad" company contributes negatively (not zero) to the economy. Any benefits that a future innovative company would reap from your capital are canceled out by the same benefits that their wasteful competitors reap for talent and secondary stock offerings (which can be spent on anything, potentially bidding up prices of raw materials, real estate, etc. for the "good" companies). Is it a perfect 1:1 cancellation? Probably not, but it requires too much data for either of us to calculate it directly. But a fair assumption is that blindly investing in the entire stock market via a passive index, even if you are hugely wealthy, has negligible benefit to GDP, compared to active investing (assuming you are good at it). Thanks for the feedback. I am not sure if markets are a zero-sum game though? If the sector grows, the whole pie can become bigger, right? (I think) His point is not that investing is a zero sum activity but that active trading basically is. For me to make money day trading someone needs to loose money. The total "growth of the pie" is a slow process that you capitalize on by buying and holding. Yes, that is what I meant. Thank you for expressing it more clearly! Fair enough! We do have quite a few users also running medium and longer-term focused strategies such as accumulations on dips How does it compare to Mudrex? [0] Also congratulations on being registered with the FCA and on your recent funding round. Also: > Of course we understand that the HN community has a lot of cryptocurrency sceptics and we respect that. The cryptocurrency market is still full of scams and bad actors. Whether you like it or not though, it is now big enough that it is here to stay. Exactly. Although the cryptocurrency market is still a wild west, the direction it is going is more regulation. For the sceptics, it is going to be very hard for them to ignore and I'm sorry, cryptocurrencies are here to stay. Like it or not. > If one of our users does not have the right mindset or could be vulnerable and should not be trading, we tell them that. That also goes for trading forex or stocks and using complex instruments like CFDs. Thanks! Re Mudrex, they are more of a strategies marketplace nowadays and we want to allow people to build their own 'rules'. We're a bit more like Zapier for trading, they are a bit more of an investments marketplace. Doesn't Mudrex allow users to build their own rules as well? They do but from what I can tell it's not really their focus Hi Rvz, also one note to be extremely precise and informative: we are in FCA Temporary Crypto Asset Registration list as the framework in stil being finalises by the financial authority, and even if we don't a license to operate on the market we are anyway in the process of getting a full license to be able to expand the product offering in the future. I stumbled upon a security issue with your site. I was reading this LP trying to understand what this product does and saw this quote > Military-grade encryption and security Then I checked your site’s CSP policy on Mozilla Observatory: https://observatory.mozilla.org/analyze/coinrule.com coinrule.com scored 0/100 (F), because your site does not have the Content Security header implemented. I’d expect a software product focusing on security to have a strong CSP. Thanks for letting us know, I will look into it! Feature request: Allow to connect TradingView alarms to this. TV alarms allows for webhooks to be called. If you guys allow that to be a trigger for the rules, then you don't have to worry about adding indicators. TV has by far the best collection of indicators, strategies, etc, so why not just supporting the alerts? Alternatively, maybe somehow support TV indicators? Not sure if "pine" (I think is the name of the language) is open source. Great point! We are working on this integration this sprint and will have it on staging by end of day tomorrow. Hoping to deploy next week! :) Cool stuff! I started building something similar back in 2018 or so, we ran a crypto quant fund. We actually found some very good arbitrage opportunities using derivatives, that didn't even need automation, so we used that. But I figured it would be cool with a tool for people to make their own strategies. Thanks! :) Why did you guys stop? In the beginning we were making 8-12% a month, just arbitraging derivatives so very low risk (except platform risk etc). But after a few months it started shrinking, and shrank down to 2-3%. Still very good for a traditional fund when annualised, but we only managed a few million from friends and family so it didn't really make sense for us financially any more. I would never trust a service like this, but at the same time, I'm curious on how to setup the opposite of their motto: "compete with professional algorithmic traders and hedge funds. coding required!". Does Fidelity offer an API of some sort so that I can login with my normal credentials and buy/sell? I'm assuming the strategies being used here, like "Ride the Trend", are basically the same ones available here: https://github.com/enzoampil/fastquant So, given that the previous statements are true, do I just need some Yahoo! Finance API + FastQuant and then MyBank API to autotrade for myself? What else would be involved? Hi Jake - some of the traditional finance platforms (like IG) have APIs but not sure how high quality they are. You could probably hack something together if you are good enough with it though - keep in mind you still have to keep adjusting parameters, testing strategies on an ongoing basis etc etc. It's plenty work Some brokerage accounts do come with API access. People have used Interactive Brokers to build trading bots for a long time now and there is also https://alpaca.markets/ which is developer-focused. We are big fans of Alpaca, it's great! Will probably use it when we expand to stocks as well. I was intrigued by the "Test Rule Performance on Historical Data" feature on the home page. I thought signing up would let me play with the performance of your sample rules but I can't seem to figure that out. Is that possible? Also, that home page block could be more informative. It shows me a dollar value but not what asset it was actually applied to. Thanks for the feedback - yes we need to improve that! We currently test rules manually and post results here: https://help.coinrule.com/en/collections/2700051-template-ru... and also in our community on telegram. The automated backtesting is coming later this year What is the point of opening this up to individual speculators? Wouldn’t it be better to launch a fund like an etf that ran the best or set of really good (historically backtested) ones and we lay people can just buy and sell shares of it? You can create your own 'bundles' of coins and rebalance them using Coinrule. Some of our template strategies have been backtested (see here for a few of them: https://help.coinrule.com/en/collections/2700051-template-ru...). That said, we are also going to add other asset classes in the future and this will allow users to get in and out of ETFs easily. I think they benefit by 'crowdsourcing' algo development. all coinrule has to do is follow the most profitable strategy from its customer base. Hi Everyone, I am Gabriele, CEO and cofounder of Coinrule. Happy to answer any of your questions. Hi! This is very interesting - I had a question but more so on the business side. I don't know much about finance, but what made you decide on a fixed fee pricing model than a take rate model like a hedge fund. Good question - I'll jump in for Gab as its his mum's birthday today :) With fixed fee pricing we are seen by regulators as a Software provider rather than a trading platform. The other point is that user funds sit on the exchanges and we have no withdrawal rights for greater account safety, so it's easier for us to just charge a fixed fee. > With fixed fee pricing we are seen by regulators as a Software provider rather than a trading platform Is this a well established rule? I had a few startup ideas related to fintech, and this would be a very interesting change in the value proposition. Hm not sure how well established as a rule this is - we got this advice from a fintech-proficient lawyer though Is there a mechanism for back-testing strategies? If so, do you/how do you correct for slippage? We currently test rules manually and post results here: https://help.coinrule.com/en/collections/2700051-template-ru... and also in our community on telegram. The automated backtesting is coming later this year - correctly capturing for slippage is tough; we will be using historical order book data provided by Kaiko to make this as realistic as possible though Do you need to be a genius to do your taxes as an individual after using this tool? Hah good point! I think something like https://tokentax.co/ can still help you do it quite easily because you can export all the transactions from the exchange. People!! Stay away from this!!! I am unsure about the sincerity of the authors of this software but in the general case the purpose of these systems is to bring dumb money into markets. Efficient markets are impossible to make money (risk adjusted positive returns) out of by active investing by definition. Dumb money is not efficient and lets the smart money (people who dedicate their lives to this) make money. Do not be the dumb money!! If you want to make money work on your skills and get a job. All of this is of course patently false. Be aware worik and others will try to keep you from joining markets under dubious pretenses like protecting you or caring about your individual financial sanity. Don't listen to anh of them. Don't gamble more than you can afford to lose and you shall be fine. Stay out of those markets. Here is a thought: What paid for all those shiny towers in Wall Street? Transaction costs from people "...joining markets". Have you heard the joke about the customer's yacht? Lots of those shiny towers were built by wide bid/ask spreads.. now a days liquid (good markets trade) proportional to stock price to basically pennies. I do agree I wouldn't join an automated trading platform without a high level math degree and market understanding though. This is the best NIMBY take I've read yet! "New construction is bad because it's all financed by fraud and theft from the proletariat!" > If you want to make money work on your skills and get a job. OK, fine. During the pandemic, I picked up and studied trading, and made more money doing that than my actual job (assistant teacher at a university). I know the next step I'm going to take. Everyone in the market made money last year. Did you at least outperform the S&P? S&P gained 16.26% in 2020, roughly 3x average annual gains. Everyone makes money in a rising market. Difference is, I play both sides, while retail only knows "buy buy buy" when the prices were rising. I would argue that the efficient market hypothesis is problematic at best and I also disagree with the characterization of our users as 'dumb money'. We are in fact quite lucky to have some very smart users with us. There are many ways you can use Coinrule, not all of them must be entirely short-term oriented! That said, it's absolutely your good right to disagree with our value proposition. "I would argue that the efficient market hypothesis is problematic " It is well established by research. It is has a good theoretical foundation. It is problematic for this business, true.