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VeradiVerdict - Why Tagomi Will Bring Confidence & Investment Into Crypto - Issue #28

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Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional
 
March 11 · Issue #28 · View online
VeradiVerdict
Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing into blockchain companies and cryptocurrencies. I focus on early stage investments and want to share my thoughts and what’s going on in the industry in this weekly newsletter.
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Editorials
Last week, Pantera announced an investment into Tagomi, and I believe that the company is solving a problem for institutions, family offices, and retail to get exposure to crypto at best prices with convenience. I wanted to shed a bit more detail below on Tagomi product and why it’s compelling.
TL;DR

  • Tagomi is an electronic trading platform that delivers, hands down, the best spreads for anyone trading in size. There is no minimum, but trades 25k + get the most benefit.

  • Tagomi’s fiduciary-like model is a big deal to sophisticated investors. Why? Because Tagomi is obligated to provide best priced trades and confidentiality, unlike an OTC or principal trading desk that is actually allowed use a client’s information to trade against them, and often is a key part of their business model.

  • Tagomi aggregates global liquidity and combines smart routing, trade management, and custody in one integrated account so clients can avoid the hassles of setting up and transferring between multiple accounts and also having to separately manage all their counterparty relationships.

  • Most crypto investors don’t understand how much their trades really cost them, and their unfamiliarity is often exploited. Yes, most platforms clearly state their transaction fee, but what is conveniently left out are the markups and other hidden costs. Since most brokers are not required to disclose these markups, there is little to prevent abuses if you are not informed. Tagomi is set up in such a way that it is required to give clients transparency and show them exactly how their trades were executed, and how they got to the price they got.

  • Tagomi comes at a time when the macro crypto market structure i­s shifting from a dealer-oriented market to one dominated by highly advanced market makers tech-enabled electronic trading firms like Tagomi, which are driving down spreads and creating more efficient and stable markets worldwide.

  • Tagomi is run by an incredible team that brings the best of both trading and crypto experience from Two Sigma, Virtu, and Citadel, Union Square Ventures, and including the former Global head of electronic trading at Goldman Sachs.

What exactly is Tagomi?
If you’re looking to invest more than a few thousand dollars into cryptocurrencies, Tagomi will dramatically lower your trading costs by routing your trade across global liquidity pools while employing algorithmically-powered strategies trained off of market data reduce market impact and continually find you the best price. While that may sound intimidating, these cutting edge tools are wrapped in an incredibly well-designed platform that any user would find intuitive and easy to use, so you can be a beginner and still reap the benefits. For more advanced traders, and active trader platform that gives the user much more control is available as well.
Beautiful user interface
Familiar Trading Interface
Tagomi is very transparent about how your trade was executed, the trading decisions its algorithms made, and how you arrived at the price you got
What does Tagomi offer that other exchanges or individual trading doesn’t?
Cryptocurrency is a notoriously fragmented market structure, with users holding accounts in multiple exchanges and platforms to manage different assets and currencies. This creates a huge management headache for the user, and also incurs costs from improper asset management and exchange fees. Tagomi automates trading across multiple liquidity platforms. In doing so, Tagomi sets up settlement solutions at major cryptocurrency exchanges like Coinbase, Gemini, Bittrex, and Bitstamp. Users can use one platform to trade their own funds across multiple accounts, to maximize returns.
Tagomi also enables much larger trades. The daily trading volume of cryptocurrency approximates to less than 19 billion USD without accounting for inflation (for reference, the NASDAQ trades daily 100 billion USD). Already a smaller market with a higher amount of fragmentation, Tagomi enables larger trades by aggregating liquidity and given the client full market access by linking all of a user’s funds to their Tagomi account, which allows them to use their funds in aggregate to make trades.
Tagomi also offers algorithmic trading strategies to maximize returns and minimize losses incurred from inefficiencies. OTC trading and traditional crypto exchanges charge a high markup on placing trades, whereas Tagomi prioritizes best execution via smart routing and the use of algos. Tagomi’s premium models have been trained on huge amounts of past market data by some of the best quantitative trading algorithm designers in the world.

Why does Tagomi matter now, more than ever?
Compared to securities and other traditional financial assets, cryptocurrency is an insanely premature market. Over the past few years, investors in the space have accumulated incredible funds from small ICOs and a massive bull market that came with great returns. But if the past few months have taught us anything about cryptocurrency, it’s that it’s incredibly volatile––we’re now in the biggest bear market ever with Bitcoin, which makes stomaching additional markups and hidden fees even more difficult for both the average and big-scale institutional investors.
At the same time, institutional investors are picking up on the potential of Bitcoin and becoming increasingly interested in the space––by October 2018, they were the largest buyers of cryptocurrency transactions worth over 100,000 USD. This momentum could be curbed by lost confidence in Bitcoin from its prematurity and price drops.
Tagomi brings the infrastructure of quantitative, large-scale trading to the cryptocurrency market. There’s been few other developments in this space (namely, Omniex and Sfox), but none of them offer such an easy, end-to-end platform that handles both cash and coin movement, as well is committed to trading only on a best execution basis. Tagomi’s offerings help restore investor confidence in the cryptocurrency trading market, by helping centralize asset management, providing an algorithmic basis for best priced execution, and bringing some institutional ethos and trust to the market.
With the new funds, Tagomi plans to expand its sales efforts, while also developing the infrastructure to support other financial actions like lending and shorting.

Who’s running Tagomi?
Frankly, the best of the best. Tagomi was co-founded by Jennifer Campbell, Greg Tusar, and Marc Bhargava, all of whom have incredible experience in the cryptocurrency, asset management, and electronic trading space. Previously, Campbell worked on the investment team at Union Square Ventures. Tusar previously was the Global Head of Electronic Trading at Goldman Sachs, which he found his way to through an acquisition. Bhargava previously worked investing in the blockchain space while at Brainchild and at roles in private equity and consulting. Even beyond the founders, the team is pretty incredible with folks from Two Sigma, Citadel, KCG, Virtu, Google, etc.

Final thoughts
Now more than ever, a solution like Tagomi is needed to restore investor confidence in the cryptocurrency market. Despite the long-term drop in prices, cryptocurrency offers a very promising space for investors––but it needs more maturity. Tagomi brings the market structure we’ve seen evolve in other asset classes by creating a one-stop, end-to-end platform for investors to manage their cryptoassets, make large-scale trades, and make smart, algorithmically-verified trading decisions. With tools like Tagomi deploying on the market, we can hopefully expect a lot more confidence and investment––and more returns––than ever before.
Digests
Bitcoin Struggles to Pass Price Hurdle But Bull Outlook Intact - CoinDesk
Blockchain, already disrupting the finance industry, sets its sights on electronic gaming
In the Tweets
Avichal ⚡
1/ We @ElectricCapital fingerprinted more than 20,000 code repos and 16M commits to create a Dev Report on crypto. Analyzed by @MariaShen (better known internally as "Maria Meeker"). Data powered by @jubos. Here are the highlights ⚡️
6:17 PM - 6 Mar 2019
Charlie Noyes
All layer-1 protocols that assume a base asset can socialize the cost of securing their networks are competing for a monetary premium. Credit to the Bitcoin community for recognizing it first and fighting relentlessly to hold on to theirs. https://t.co/ciBzgSeWDF
1:33 PM - 7 Mar 2019
News
When Lightning STARKs – StarkWare – Medium
Litecoin's Lightning Network Reaches the 1,000 Channel Milestone - The Merkle Hash
Bitcoin Transactions Plunge Amid Blackout in Venezuela
Voatz, the blockchain-based voting app, gets another vote of confidence as Denver agrees to try it – TechCrunch
Nasdaq's (NDAQ) Blockchain Layer Is Developing Quickly
Regulations
German Finance Ministry Calls for Regulated Blockchain Securities Market - CoinDesk
SEC's 'Crypto Mom' Sounds Note of Caution About National Action Plans - CoinDesk
New Products and Hot Deals
Pantera and Yale-backed Paradigm get behind crypto broker in new fundraising round - The Block
The Right Way to Do Blockchain Consortiums - CoinDesk
Alibaba Exec: E-Commerce Giant Considering Blockchain Use in Complex Supply Chains
Fidelity's new cryptocurrency company is up and running despite a bear market for digital coins
Meet with Me
San Diego, April 12
New York, Consensus Conference, May 9-18
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