FalconX API Solution to Link Institutional Traders to a Global Cryptocurrency Liquidity By DailyCoin
One of the key worries of institutional traders about crypto adoption is the availability of liquidity, more specifically, one that is easy to access with little or no complications at all.
Many institutions do have sufficient funds, but are still waiting to be able to trade in cryptocurrency.
The availability of cryptocurrency liquidity is also a key factor in institutional adoption.
FalconX, the largest player in crypto trading has attempted to improve this situation.
FalconX is a great example of a platform that connects institutional traders with the cryptocurrency market. However, it doesn’t provide them with an infrastructure capable of providing crypto liquidity 24/7.
Speaking during an interview with Daily Coin, Austin Reid, the chief of staff at FalconX, spoke about how the company has grown into what he described as the “largest institutional-focused liquidity in the space,” in its only four years of establishment.
“Thankfully, we’ve just closed $210 million in Series-C funding round, valuing the company at almost 4 billion dollars. Similarly, we’ve been very fortunate to partner with a number of leading providers and continue to scale what we think is the early innings of institutional cryptocurrency adoption,”
Although connecting institutional traders to crypto does address some of the remaining concerns, it doesn’t eliminate all the existing ones. They still need deep liquidity.
According to Reid, FalconX provides partners with
“access to a robust combination of lit liquidity and proprietary dark pools.”
“We provide these institutions with great pricing, on-spot Cryptocurrency liquidity along with reliable and scalable infrastructure. We also work with them to basically provide short term fixed-rate financing around those trades in an attempt to increase the efficiency of the strategies that they’re running,”
Reid explained that the platform is able to assist these institutions in reducing the difficulty of setting up in cryptocurrency markets. This includes helping institutions who are interested in becoming active and continuing to develop allocations and run strategies.
Reid said that the platform has an industry-leading pricing engine, eliminating any slippage for partners. That includes crypto-native entities such as venture capital funds, hedge funds, miners and exchanges.
Reid also stated that FalconX provides one account to allow institutions to trade global cryptocurrency liquidity. In other cases, the platform connects these institutions to major spot exchanges, proprietary trading firms, market makers, and OTC desks, all of which are aggregated into a single account dubbed “FalconX,” against which clients can simply trade.
“They get the benefit to the broader market’s liquidity on a post-trade settlement basis by only onboarding onto a single counterparty. In addition, we offer short-term fixed-rate financing around those trades,”
He said that institutions can trade cryptocurrency using credit as a way to show their position. In other words, they can extend credit for a matter of hours, days, etc., and you’re only paying for it when your strategies are actually running and working.
“This further suggests that you’re not left eating that interest cost in a scenario where your assets are distributed across exchanges and your strategy may not be working,”
Institutional Adoption of Cryptocurrency
According to Reid, the reasons for crypto adoption by institutional traders are the main driving forces for mass adoption.
Reid supported the popular belief that Cryptocurrency adoption increased due to the COVID-19 Pandemic. He went on to say that “the corresponding central bank activities around Covid, as well as the increasing money supply across western countries and other geographies, had a key role in the path.”
Reid further emphasized that more institutions were looking for ways to protect their funds against inflation, prompting the allocation of and other cryptocurrencies as “the inflation hedge.”
Most institutions, according to Reid, were startled by how much money was being printed throughout the world, and chose to invest in cryptocurrencies as a means to avoid inflation.
“What we saw first, was basically institutions, specifically, more traditional hedge funds like Paul Tudor Jones, Stanley Druckenmiller etc. Bitcoin is being used as an inflation hedge. To the extent the world is printing money, it seems like Bitcoin could be a good place to store a percentage of your assets to protect your portfolio against that inflation,”
A key reason for using cryptocurrencies is also yield generation. This means that institutional traders have to hold a particular amount of cryptocurrency so they can farm profit over time.
Reid says this is a good alternative to keeping capital at risk in banks that don’t guarantee interest.
“There is a huge opportunity for folks to get yield in the cryptocurrency ecosystem, and we’ve partnered with a number of different institutions to help facilitate that on their behalf, and give them the opportunity to earn the yield on their investments. We consider this to be a continued use case and trend in the market going forward,”
The endless opportunities offered by the DeFi/NFT space are what attract institutional traders like many crypto enthusiasts. With so many activities taking place in the cryptoverse, it’s almost impossible to ignore, or at least, it can’t be for long.
On The Flipside
- The DeFi ecosystem, which appears to be a point of attraction for institutional investors, is growing in popularity, although it is still largely unregulated. With regulatory clarity, investors may be able to actively participate in the DeFi ecosystem over time.
- It is still difficult to adopt cryptocurrency projects despite efforts to make it more accessible with new upgrades.
What is the reason you should care?
What You Need to Care About Cryptocurrency
Watch the entire interview here:
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