Why CMT Digital Invested in Fractal Protocol: Revolutionizing On-Chain Capital Efficiency and Prime Brokerage for Crypto Trading

The Problem

At CMT Digital, our foray into the blockchain space began with trading crypto assets before we began investing in blockchain infrastructure companies on a venture basis. A primary motivation for us to begin venture investing was the lack of robust capital markets infrastructure, which resulted in a subpar experience for trading firms. In 2017, we started investing in financial services products that would enhance our trading desk’s capabilities and experience in the crypto space. Infrastructure for the crypto financial services industry has come a long way since 2017, but to fully realize a self-sovereign financial future, we believe that the core plumbing of traditional financial markets needs to be migrated on-chain. This is where Fractal Protocol (“Fractal”) comes in.

Fractal aims to revolutionize on-chain capital efficiency by enabling financial assets to interact with and be collateralized against each other via universal margin accounts. The protocol is designed to cater to the needs of large, active traders with support of existing crypto assets, and to attract those still on the sidelines with future inclusion of a diverse set of real-world assets.

Why Fractal?

Exceptional Founders with Invaluable Industry Insight:

Aya Kantorovich, who led institutional coverage at FalconX, has a strong background in understanding the needs of both active institutions in the blockchain space and those still on the sidelines. We have had the pleasure of working with Aya since early 2019. We believe her experience is invaluable to the development of Fractal.

Alexandre Elkrief brings technical blockchain expertise as well as a strong working knowledge of derivatives trading and risk management from his time at Ledger Prime, Deutsche Bank, and Goldman Sachs. We believe Alex has an optimal skillset to successfully tackle the formidable task of building Fractal.

Aya and Alexandre’s combined skills and vision make them the ideal team to lead Fractal’s mission, and their longstanding networks should enable them to cultivate a top-tier team. We have been consistently impressed with the team’s ability to promptly deliver on their roadmap. With less than six months of development, the product is already live and audited. More information can be found here: https://docs.fractalprotocol.org/.

Revolutionizing Capital Efficiency in a Crypto-Native Way:

Fractal seeks to enhance on-chain capital efficiency by enabling margin without assets ever leaving the proprietary Fractal risk-monitoring ecosystem. This innovative approach expands the universe of recognizable collateral and the range of assets that trading firms can access while keeping trading firms within their customized, specific risk limits. By addressing this issue directly, Fractal can unlock immense value for traders in the form of under-utilized assets, and enhance liquidity in the broader crypto ecosystem, which is desperately needed in a post-FTX, capital constrained environment.

Unleashing Latent Capital through Enhanced Transparency:

We believe Fractal can unlock significant latent capital to enter the blockchain space by providing more granularity for lenders on where their assets are being utilized and allowing for enhanced borrower surveillance. This increased transparency, which is uniquely enabled by blockchain technology, may allow Fractal to attract additional participants to the crypto trading ecosystem.

The credit crisis that hit crypto markets in 2022 proved that more transparency of positions and collateral and rigorous risk management must be core tenets of the industry going forward to gain broader adoption. The improved transparency inherent in most blockchains represents an objective improvement over what exists in traditional finance. We believe this transparency unleashed by Fractal, along with the ability to codify risk limits into the trading process, can lead to more informed decision-making, reduced counterparty risk, and a healthier financial ecosystem overall.

CMT Digital is thrilled to support Fractal in its pursuit of revolutionizing on-chain capital efficiency and prime brokerage for crypto trading. With a groundbreaking solution, extraordinary founders, and the potential to unleash untapped capital, we look forward to Fractal’s transformative and enduring contribution to the industry.