The battle for supremacy in cryptocurrency trading has intensified as some of Wall Street’s biggest players begin to challenge digital asset specialists who already handle billions of dollars in transactions every day.

The most active traders and market makers in the nearly $ 3 billion digital asset space include Alameda Research, B2C2, Cumberland, and Genesis Trading, none of which are well known in the financial markets. traditional.

But rapidly rising valuations this year have now attracted trading houses that already dominate traditional markets such as stocks, currencies and futures. Relatively newcomers to digital assets Jump Trading, Jane Street, Tower Research, and Hudson River Trading are now competing with native crypto companies to be the fastest and the best.

“We know the big guys are coming, but they don’t scare me. We started in 2017, so we’ve already put a lot of time into it, ”said Michael Safai, owner and managing director of London-based Dexterity Capital, which he created to become“ the biggest and the worst company. of accessories trading in the world. ”.

Dexterity, a specialist in digital assets, trades between $ 2-4 billion in cryptocurrency per day.

Wall Street banks and trading houses have until recently played a negligible role in cryptocurrency trading, which started with retail investors and grew to accommodate businesses that were happy to take the lead. other side of the bets made by individual bettors.

Retail investors trade on hundreds of exchanges where bitcoin – the most popular cryptocurrency – can be bought and sold. The price of digital assets can vary wildly on different exchanges, and traders can profit from price differences if they are quick enough and have the ability to place bets on many platforms.

This is what led Sam Bankman-Fried to create Alameda Research in 2017 – with the aim of capitalizing on the disparity between the price of bitcoin on the South Korean exchanges and those in the West. He then launched FTX, the exchange, in 2019.

Alameda has emerged as one of the major players in providing prices to cryptocurrency traders around the world. It trades $ 5 billion in coins daily, across thousands of products, the company’s co-CEO Caroline Ellison told an industry publication.

“As established traditional finance companies increasingly enter the crypto trading space, it is because they are drawn to the equally growing volume and opportunities in the space,” the FT told the FT. Sam Trabucco, co-CEO of Alameda Research.

While many companies in the crypto industry sprang up four years ago, traditional businesses have been much slower to get started. Jump Trading announced the launch of a digital unit in September of last year.

“[Their entry in to the space] changes the kind of things Alameda needs to focus on, ”said Trabucco, noting that there is more competition to be the fastest. “But so far, increased competition has not equated to less success.”

In traditional markets, inefficiencies such as the South Korean “kimchi premium” are quickly arbitrated. In crypto, this process is much less developed, but after the arrival of the high frequency trading companies on Wall Street, the opportunities for profit are easily scarce.

“Traditional HFTs are becoming more and more comfortable on crypto exchanges and [they] encroach on [opportunities that were] the bread and butter of crypto-native accessory stores, ”said Joshua Lim, head of derivatives at Genesis Trading.

This is pushing crypto-native firms to expand their businesses in areas such as lending, over-the-counter trading, and to exploit inefficiencies in new areas such as decentralized finance, where the profits are always juicy.

Rob Catalanello, co-managing director of B2C2, backed by Japanese bank SBI, said B2C2’s interest in stock exchange trading waned as more investors were willing to strike deals. bilateral. Today, 65% of its volumes are processed on platforms, down from virtually all transactions last year.

Institutional investors are interested in products such as undeliverable crypto futures, a type of derivative widely used in the forex markets. The contract owner can trade cryptocurrency without taking delivery of the physical asset when the agreement expires.

As trading on the exchanges is down, Genesis has seen tremendous growth in business from its lending office, which processed $ 35.5 billion in crypto loans in the third quarter of the year, an increase by 586% compared to the same three months in 2020.

The derivatives markets have also grown strongly. And while mainstream financial department stores focus on trading at this point, incumbent crypto leaders are broadening their aspirations and setting their sights on the big banks on Wall Street.

“We are one of the biggest, if not the biggest, crypto market makers and we want to be the premier digital investment bank,” said Max Boonen, founder of B2C2.

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