High Frequency Trading Firms Have 'Highest Bitcoin Affinity', Analyst Argues

Su Zhu, the co-founder of Sensus Markets, a digital asset principal trading firm, has argued that companies focused on high-frequency trading (HFT), small family investment offices, and hedge funds have the “highest Bitcoin affinity.”

Zhu, who is also the CEO of Three Arrows Capital, a foreign exchange (FX) focused hedge fund, posted (via Twitter) a “ranking of Bitcoin affinity in the traditional financial space, from highest to lowest:”

  • “HFT/prop firms”,
  • “Service providers”,
  • “Family offices”,
  • “Hedge funds”,
  • “Stock/futures exchanges”,
  • “Private banks”,
  • “Commercial banks”,
  • “Investment banks”,
  • “Academia.”

The Role Of "Incentives And Philosophy"

According to Zhu, “incentives and philosophy play a big role” in influencing the decisions and overall approach organizations take towards adopting new technologies - including Bitcoin (BTC) and other cryptocurrencies.

In response to Zhu’s comments, Gabor Gurbacs, the digital asset strategist and director at VanEck, a New York-based financial services firm, remarked (via Twitter):

Asset managers are missing from the list. I’d highlight that banks and asset managers would be higher on the list if the regulatory environment was more permissive. Today, the least regulated entities are on the top of the list and most regulated on the bottom.

According to Gurbacs: “Academia is confused which side to support. (traditional vs crypto) Eventually, they will support whoever pays more to the universities. It’s an incentive question to academia, as it has been for too long.”

Top Universities Invest Small Amounts In Crypto

On February 19th, 2019, the University of Michigan announced that it had decided to invest more in cryptoasset-related funds. Backed by leading venture capital firm, Andreessen Horowitz, University of Michigan’s initial $3 million investment in a crypto network fund called CNK Fund I L.P. has now been increased.

Although the University of Michigan may have invested a substantial amount in cryptos, the (total) value of its financial endowment fund is estimated at over $11.9 billion. Clearly, crypto investments still make a very small percentage of the University of Michigan’s total assets. Moreover, Yale University has also invested in Andreessen Horowitz’s $300 million crypto fund. However, cryptos also make up a relatively small percentage of Yale University’s $25.4 billion endowment fund.

On February 24th, Gurbacs recommended to his followers (via Twitter): 

If you are chasing the price of #bitcoin, you are in it for the wrong reason and you probably shouldn’t own any #BTC. I highlight a few attributes of #Bitcoin that are far more important than price. (especially if you have low time preference)

 

Crypto Market-Maker Altonomy Receives $7 Million in Funding from Polychain Capital

Altonomy, a New York-based cryptoasset trading, advisory, and asset management company, has completed a $7 million fundraising round from Polychain Capital, a leading hedge fund and venture capital firm.

Co-founded by Ricky Li, a former Manager of Research and Product at the CME Group, Altonomy has also received funding from 7 Blocks.

Additional Capital Will Allow Altonomy to Have More Inventory

Commenting on how the additional capital could help Altonomy’s business operations, Li said: 

As a liquidity provider for altcoins, more funding will allow us to have more inventory, taking larger exposure and managing risk more effectively.

Li added that the extra funding would allow Altonomy’s trading desk to provide better services - as the platform would not need to “put constraints” on customers at settlement.

Funds May Be Used to “Source Liquidity for Customers”

Olaf Carlson-Wee, the Founder and CEO at Polychain Capital, remarked:

As a long-time user of Altonomy’s trading services, it was an easy decision for us to invest in their business when the opportunity became available.

Carlson-Wee, a former Product Manager and Head of Risk at Coinbase, also mentioned that the additional funding would help “source liquidity for customers, regardless of token type, order size, market cap, or whether the asset trades on centralized or decentralized exchanges.”

According to Coindesk, Li had suggested to investors in January 2019 that they “liquidate enough ETH so they would have at least two years of runway.” However, Li is now anticipating that cryptocurrency prices may continue to recover - after enduring a long bear market that lasted throughout 2018.

Altonomy Introduces Cloud Service for Crypto Mining

In addition to providing crypto trading and asset management services, Altonomy introduced a new product last year, called the AltMiner. According to Li, AltMiner’s cloud service allows Altonomy’s bigger investors to mine various cryptocurrencies.

Altonomy’s management claims that the AltMiner has a “superior return profile” with the “newest generation of miners, low electricity costs and a secure hosting site.”

During an interview with CryptoGlobe in May 2019, Lee explained how Altonomy’s crypto trading services were developed and their potential benefits.

One of Altonomy’s main services, called electronic execution, allows mining firms, investment companies and crypto exchanges to “enter and exit positions as an outsourced execution desk.”

As a high-frequency market-maker, Altonomy also provides liquidity for various tokens to several crypto spot and derivatives trading platforms.