When a quartet of big markets firms were looking at bitcoin in 2022, they saw a lot to like: record highs, regular volatility, claimed diversification benefits, and massive growth potential.
It came with a lot of weird baggage, though. The cryptocurrency market’s practice of settling trades instantly meant it was difficult to trade on credit limits, which makes back-and-forth execution more efficient in traditional financial markets; and the fragmented crypto landscape was made up of odd-looking venues that wore a variety of hats. Then, as the year was winding down, FTX evaporated into radioactive, fraudulent fog.
“Crypto exchanges aren’t really just exchanges. They’re also the retail broker, the prime broker, the custodian, the lender, and in some cases, like FTX, they’re the market-maker. That model – because of its conflicts – was just unacceptable to many established markets firms,” says Tony Acuña-Rohter, chief executive of EDX Markets, a spot crypto exchange that started trading a year later.
The new venue was backed by two big market-makers – Citadel Securities and Virtu Financial – and two trad-fi wealth and retail heavyweights, in Fidelity and Schwab. The idea was simple: keep the good bits of crypto, get rid of the bad.