Lightspeed has been investing in the crypto ecosystem since 2014, when we led the first venture round in Blockchain.com. Crypto opportunities since then have largely fallen into two buckets: Crypto money (trading, speculating, remittance, store of value, medium of exchange, payments) and Crypto tech (applications of distributed ledgers). Most of the value in the ecosystem so far has been in Crypto money with the enormous promise of Crypto tech still developing.
Most marketplaces and exchanges (eg: eBay, NYSX, Etsy, Uber) show network effects that lead to a small number of marketplaces/trading venues with the most liquidity. Of course, Crypto has to be different. Because of the increased interest in DeFi (Decentralized Finance) and DEX (Decentralized Exchanges), different regulatory regimes allowing only certain activities in some countries, an explosion of trading pairs across various fiat and cryptocurrencies, low barriers to entry and a retail driven market, the opposite has happened. Over the past few years, as interest in trading crypto has grown by 100–1000x, the number of venues where people can trade crypto has also grown, with more than 300 exchanges listed on coinmarketcap alone, and they don’t track smaller and startup exchanges.
On the one hand, that’s great; more choices for consumers. On the other hand, sharing all that trading supply and demand across multiple exchanges means that not all markets are equally liquid. Spreads between buy and sell prices can get wide in some exchanges, or in the worst case scenario there may be no one on an exchange willing to take the other side of a trade.
This is where market makers come in. They literally “make a market” (it’s in the name!), ensuring that there is always demand to meet sellers and supply to meet buyers, all while keeping the buy-sell spreads tight by arbitraging across various trading venues.
Today, we’re excited to announce our investment in Wintermute, an early stage, profitable Crypto market maker (that’s also a portfolio company of Blockchain.com Ventures, the venture investment arm of Blockchain.com). Wintermute is one of a handful of companies dedicated to Crypto market making, and it’s built by people with deep domain expertise in market making in other markets. Evgeny Gaevoy, Wintermute Co-Founder and CEO, spent 10 years at Optiver, a leading HFT market maker. He built two market making businesses (ETF and OTC) to #1 market share in Europe. Harro Mantel, Wintermute Co-Founder and CTO, improved the architecture and software behind Optiver’s ETF business to achieve the lowest possible latency. And Yoann Turpin, Co-Founder and Head of Business Development, is also a former Optiver derivatives trader and entrepreneur. They’ve brought their depth of market making expertise to crypto, and it has let them quickly take share and expand their business to multiple exchanges. We are happy to support them as they bring liquidity to crypto markets around the world.
Read more about Wintermute and today’s financing news in the company’s press release here.
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