CMT Digital Backs FalconX to Build the Future of Digital Asset Trading
We are excited to announce our participation in FalconX’s $17M round of financing. We are joined by notable investors including Accel, Accomplice VC, Avon Ventures, Coinbase Ventures, Fenbushi Capital, Flybridge Capital, and Lightspeed Venture Partners. FalconX is a digital asset trading platform that provides clients with fast, secure, and reliable execution using data science to eliminate slippage and hidden fees. The Company was founded by Raghu Yarlagadda and Prabhakar Reddy in 2018. Raghu, an engineer and entrepreneur by background, held several product leadership roles prior to FalconX, including at Google, where he was instrumental in scaling Chromebooks to a multi-billion dollar revenue business. Prabhakar, an investor, engineer, and a serial entrepreneur, previously drove blockchain and enterprise SaaS investments at Accel, a VC firm that provides capital and support for startups in their seed, early, and growth stages. The founding team blends Silicon Valley and Wall Street, bringing experience from Google, Citadel, Goldman Sachs, Jump Trading, PayPal, Pantera Capital, WorldQuant, Kraken, and Peak6 Investments. Having worked with FalconX for the better portion of a year, we can attest to the value-add of their platform and their phenomenal customer service. When we onboarded and began to trade on the platform, the pricing provided by FalconX was the best we had seen by a wide margin. FalconX is CMT Digital’s preferred venue for execution because of their ultra-competitive pricing and smooth settlement process. To date, FalconX has generated over $7 billion in global trading volume at a quarterly growth rate of over 600% since launch. In addition to CMT Digital, FalconX is trusted by over 170 global clients, including hedge funds, crypto miners, exchanges, and some of the largest crypto OTC desks.
We believe that the number of institutions seeking to obtain secure, reliable, and cost efficient digital asset trading services will continue to increase. However, the market has historically been underserved for a variety of reasons; the most prominent of these challenges being liquidity aggregation. FalconX bridges the inefficiencies in the crypto market by sourcing liquidity from a myriad of digital asset industry participants, including exchanges, miners, proprietary trading firms, and other liquidity providers. Through utilizing predictive analytics and acting as a principal to every trade, FalconX is able to provide industry leading best execution services.
A good analog to FalconX is Interactive Brokers, which built a brokerage firm based on the shift from floor trading to electronic trading. One of the reasons Interactive Brokers has been successful relates to their understanding of market structure; specifically, liquidity in U.S. equities is largely concentrated at the New York Stock Exchange and Nasdaq and one of the key elements in getting an equities transaction completed is speed. Stated differently, a faster broker is a better broker in the traditional equities world. Crypto, on the other hand, looks very different from a market structure standpoint because liquidity is fragmented and distributed across many different venues globally. It is very unstructured. In the traditional markets, through the FIX protocol, traders can easily access liquidity from exchanges around the world. In crypto, in order to access liquidity, traders need to deal with websocket and rest APIs, and miners may price their crypto assets through Excel spreadsheets. Accordingly, what a broker needs to be proficient at in crypto to provide best execution is fundamentally different from what a broker needs to be proficient at in traditional finance. Let us consider Google. At the advent of the Internet, there were significant quantities of websites popping up all around the world. Google solved the problem of how to structure search queries so that when looking at all of that unstructured Internet data, a useful search result could be provided to users. Similarly, FalconX looks at crypto liquidity sources around the world as unstructured datasets, filters them, and provides a price that is competitive and better than if a trader went to an exchange or another unstructured venue. On the outside, FalconX looks like Interactive Brokers, but on the inside, it looks like Google.
Historically viewed with skepticism by institutions, their appetite for crypto is now steadily growing. Recently, famed hedge fund manager Paul Tudor Jones bought bitcoin as a hedge against inflation, becoming one of the first big-name macro investors to embrace bitcoin. This is a major moment for the mainstream adoption of digital assets. With support from a powerful group of investors, we believe FalconX will quickly become and maintain its status as a key player in the institutional digital asset trading space for years to come. We are thrilled to have the opportunity to work with, and invest in, the FalconX team.
About CMT Digital
Established in 2013, CMT Digital is the digital asset / blockchain-focused subsidiary of the CMT Group, an international, proprietary trading and investments firm with more than 20 years of operating history.
CMT Digital’s edge as an investor is a product of the synergistic relationship among the crypto assets trading and technology team; the legal, regulatory, and operations team; and the investment team. Each of these teams are highly experienced in, and interact with, different aspects of the crypto assets and blockchain technology industry and have separate networks and relationships that they bring into the overall CMT Digital structure.
To date, CMT Digital’s investments have largely focused on the critical infrastructure necessary to support a digital asset / blockchain integrated society. In addition to FalconX, other portfolio companies include firms such as Bakkt, BlockFi, Coinbase, Silvergate Bank, Crusoe Energy Systems, Lightning Labs, and Dapper Labs. In addition, where we see strategic opportunity, we seek to engage in the space beyond investing capital, whether that be as a client, as a liquidity provider, through our expertise, or through our review and testing of new products.
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