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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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.
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.
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.
Bitcoin’s (BTC) repeated failure to beat resistance at $3,900 is a slight cause of concern for the bulls.
Blockchain — which has already disrupted the financial services industry and become a bedrock of the cryptocurrency movement – has its sights set on electronic gaming.
In the Tweets
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
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
StarkPay, a payment scalability engine based on STARK technology, addresses many of the drawbacks of Lightning, the Layer-2 payment solution.
For Bitcoin and Litecoin, the Lightning Network is considered to be the “holy grail” of scaling and instant payments right now. While it remains to be seen if that will effectively be the case, it appears things are progressing smoothly. Litecoin still has a lot of catching up to do, but that is entirely to be expected.
Bitcoin transactions and active addresses have seen a steep fall this Saturday as Venezuela.
Voatz, the blockchain-based voting app, gets another vote of confidence as Denver agrees to try it – TechCrunch
A controversial blockchain-based mobile voting app called Voatz is getting put to the test again.
The exchange can now connect any of its financial framework microservices to its permissoned blockchain, according to a recent interview.
The German Ministry of Finance has recommended that the country recognize blockchain-based securities as a legitimate form of financial instrument and regulate them as such.
A blockchain-friendly member of the U.S. Securities Exchange Commission (SEC) sounded a note of caution in response to an industry lobbyist’s call for a national strategy for the technology.
New Products and Hot Deals
Yale-backed Paradigm and Pantera Capital are getting behind crypto broker Tagomi as part of a $12 million fundraise, the company announced Monday.
Deloitte’s Randy Wilson looks at the challenges for blockchain consortia, and offers advice on how to overcome them.
Chinese e-commerce giant conglomerate Alibaba Group is considering blockchain tech application for cross-border supply chains.
Fidelity Digital Assets, a new company created by the investing giant last year, is working with wealthy families and hedge funds on cryptocurrency
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