Gemini, the long-awaited New York-based bitcoin exchange founded by Cameron and Tyler Winklevoss and billed as the "Nasdaq of bitcoin", finally debuted on 8th October.

Featured in articles by The Financial Times, TechCrunch and Wired, and promoted via a TV appearance on Fox News, Gemini it succeeded in grabbing the attention of the mainstream media like few industry products before it.

While a success in terms of promotion, however, Gemini is showing signs it is struggling to appeal to bitcoin's active trading community. Though representatives of the exchange stated they're seeking to attract a more institutional clientele than their competitors, avid bitcoin traders tell CoinDesk that they believe this strategy will be difficult to execute.

They argue that Gemini's pricing model, charging both buyers and sellers on each trade, while potentially attractive to infrequent institutional traders, could prove an issue that will drive away retail traders, a demographic they argue is essential for building liquidity.

Arthur Hayes, CEO of bitcoin derivatives platform BitMEX, told CoinDesk:

The top bitcoin exchanges around the globe currently post more liquidity than Gemini, effectively meaning traders on those exchanges are able to cash in and out of the market more quickly, a must, more active market participants argue, for profit-making.

According to CoinMarketCap, Bitstamp's 24-hour volume is 20,209 BTC ($5.3m), 50 times that of Gemini's daily total, while competitors Bitfinex and BTC-e saw 12,742 BTC ($3.3m) and 8,340 BTC ($2.1m) in trading volume over the last 24 hours.

Gemini is currently struggling to attract volume, though at press time it had traded 384 BTC (roughly $100,000) on 14th October, a figure that was nearly double total daily trade volumes throughout its first week.

Overall, representatives from institutional trading firms such as Crypto Currency Fund and Binary Financial said they were reviewing the exchange's performance to determine if and when they would enter the market, while others stated they were waiting for its liquidity to increase.

Of note is that some members of the bitcoin exchange ecosystem expressed overall disappointment in the strength of the Gemini offering, but were unwilling to speak publicly due to perceptions it could be viewed as negative or detrimental to the ecosystem.

One of the more frequent subjects of criticism was the exchange's plan to charge 25 basis points to the buyer and seller on each side of trades.

The founder of one major cryptocurrency derivatives trading platform, wishing to remain unnamed, called the decision "strange" due to the fact that bitcoin exchanges have been striving to make their pricing more appealing to liquidity providers in an effort to gain greater market share.

This maker-taker model, in which those who "take" liquidity are charged more, is employed by exchange such Coinbase, Coinfloor, Kraken and itBit. Business-to-business exchange Coinsetter even offers a 0.1% trading rebate, meaning liquidity providers are paid part of the exchange's earnings for their support.

Tim Enneking, manager of bitcoin hedge fund Crypto Currency Fund, agreed that the pricing went against the trend of fees declining across the industry. Active traders, he argued, "couldn't survive" on Gemini's current pricing model, noting that these individuals, while adding valuable liquidity to exchanges, rely on small price swings for profit.

Enneking said:

Features such as enhanced security, he said, were unlikely to appeal to these traders, who are already used to trading with a certain amount of risk, though he said he believes this is a "great argument" for institutions.

Rob Borden, CEO of bitcoin trading tool platform Coinigy, echoed the sentiment that the fees were comparable to those on other exchanges, with the exception of fees for market makers.

"Coinbase, for example, offers solely a taker fee, and yet other exchanges offer free trading, with a fee for withdrawals only," Borden explained. "So far, the reception has been fairly positive from what I've seen, but concerns over early liquidity and the verification process linger."

Elsewhere, other market observers sided with Borden in questioning the low levels of liquidity on the exchange, a factor they conceded was partly due to expectations created by the marketing effort around the launch.

George Samman, co-founder of bitcoin derivatives marketplace BTC.sx (now Magnr) and head of marketing at Fuzo, called Gemini's volume "anemic", a description he attributed to its "late" arrival in the US market when compared to regulated competitors Coinbase and itBit, which have been active in the US since January and May, respectively.

Coinbase has averaged 9,800 BTC (roughly $2.5m) in trades on its platform over the last five days, according to Cryptowatch, while itBit's 24-hour volume at press time was 7,924 BTC (roughly $2m).

In contrast, Gemini has seen an increase in volume since its launch last week, reaching a high of 240 BTC on 15th October, according to data from Cryptowatch. The exchange traded at a low of 14.48 BTC on 10th October, a figure that then steadily increased to 62.78 BTC, 115.4 BTC and 211.5 BTC over the next three days.

Still, Samman acknowledged Gemini's liquidity problem is one that faces the entire industry, due to weakening demand for bitcoin as an asset and what he called a "distrust" in existing exchange options. Further, he suggested that Gemini's by-the-book approach to launching in New York may have turned off avid traders, including those with libertarian or anti-government leanings.

"Regulation is having a big effect on volume as services have been stopped in certain areas and traders are leaving sites they deem to be overly regulated," he said, echoing Borden.

A less common criticism from the community was the perceived gap between bids and ask prices on the exchange, or the gap in prices at which traders were setting buy and sell prices.

Sources said this is likely to be the result of smaller traders needing to cover costs as a result of the pricing model on Gemini. For example, the derivative exchange founder, indicated charging liquidity providers less and buyers more would have "looked better" as they would offer tighter spreads.

"You could say people might prefer to trade on Coinbase because the spread is going to be tight," he said. "Gemini is never going to be tight."

Still, there was broad enthusiasm for the offering, with most respondents praising the exchange's launch as a positive for the ecosystem and noting that building the trust and patronage of the bitcoin trading community is simply something that takes time.

Most comparisons were drawn to itBit, which launched in the US in May. Since then, the exchange has been slowly building volume on the back of an effective market strategy that saw it gain an early advantage as the first bitcoin exchange to receive a banking charter.

As a result, the future of Gemini was framed in terms of regulated US exchanges like itBit, which serves all 50 states, as well as rival Coinbase, open in 36 states at press time.

"What it boils down to is how they will differentiate themselves from Coinbase and itBit," Hayes said.

Some respondents said the lackluster volume on Gemini has been, in part, a perception problem caused by the strong marketing effort around the exchange launch. Following the news of the launch, the price of bitcoin hit its highest levels since August, spurred in part by perception Gemini could bring new liquidity to the ecosystem.

"A lot of people were looking for Gemini to deliver something fantastic and new, what they were expecting were for people to go buy bitcoins because they watch Fox News," one source said.

Enneking went on to agree that Gemini would likely need to pivot its strategy to win the already active bitcoin trading community should it want to hold its own in a competitive field, and thus appeal to institutions, concluding:

Businessman on tightrope image via Shutterstock