Institutional trading, unlike retail trading, requires a higher level of competence, owing to the high level of risk involved. And, unlike retail traders who trade as individuals with a high-risk appetite, institutional traders trade for corporate entities and are therefore more cautious and risk-averse.
With this in mind, it’s easy to see why institutional traders are arguably dragging their feet in the face of mass crypto adoption, fearing that trading the digital asset carries a greater risk than other asset portfolios. However, this narrative is about to change completely with FalconX entering the picture.
Co-founded in 2018, by Raghu Yarlagadda and Prabhakar Reddy acting as CEO, and COO respectively, FalconX is positioned as the most advanced digital asset trading platform in the world.
The California-based company is focused on providing institutional traders with advanced trading solutions such as access to deep global crypto liquidity, tight quoting logic, and real-time trading APIs.
During an interview with DailyCoin, Austin Reid, the chief of staff at FalconX, discussed the company’s approach to helping institutional traders navigate the crypto market.
To begin with, Reid went on to describe the startup as “a one-stop-shop for institutions in the cryptocurrency market,” adding that they specifically “help them with trading, and credit” as well as help them “access those markets in the most efficient manner possible.”
As previously established, institutional traders have a low appetite for risk, and as a result, they only leverage possibilities that can ensure a certain degree of efficiency, which is where FalconX’s main purpose lies.
According to Reid, FalconX is “specifically designed for institutional investors,” suggesting that they are built not only for efficiency but also with consideration for their risk appetite. Reid noted while describing FalconX’ product and services,
“We work with some of the world’s largest hedge funds, investment applications, and payment providers in the traditional space. We also work with Crypto native institutions like Crypto-native hedge funds, venture capital funds, miners, etc. For these institutions, we provide them great pricing, on-spot Cryptocurrency liquidity along with reliable and scalable infrastructure. Also, we work with them to basically provide short-term fixed-rate financing around those trades to increase the efficiency of the strategies that they’re running.“
While the crypto space is relatively complicated given the rise of various crypto initiatives, not to mention the constantly evolving regulatory policies across the world, FalconX aims to provide its partners with simplified solutions.
“Our product offerings greatly decrease the complexity of getting up and running in the cryptocurrency market, especially for institutions that are looking to get active in the space and continue to build allocations or run strategies,”
Crypto and Legacy Institutional Market
According to FalconX, there is a significant difference between the crypto market and the traditional institutional market. Although the major difference between the two lies in the complexity of the crypto market, bridging the gap would mean offering an easy-to-access solution.
One of FalconX’s approaches to simplifying the crypto market for institutional traders is by providing a reliable and scalable infrastructure with non-stop crypto liquidity. This, according to Reid, “naturally decreases complexity for institutions to get into the crypto market.”
However, to achieve this, FalconX is providing partners a series of application programming interfaces (APIs) that promises no hidden fees nor slippage, alongside a full-service trade desk.
Specifically, by integrating FalconX APIs, institutional traders are made to trade against a single counterparty rather than against the thousands of crypto assets out there.
“What is difficult in the crypto market (specifically) is that a lot of the spot market operates on a fully-funded basis, which is different from other asset classes. This further suggests that for you to purchase cryptocurrency on a lot of different spot venues; you basically need to deposit the equivalent amount of dollars or whatever stablecoin or fiat currency into that account to be able to access or perhaps, to build purchasing power on that venue,”
According to him, this trading model, if compared to the traditional institutional market, is completely different, given that institutions typically settle on a post-trade settlement basis.
He further explained that if you are an institution and you’re used to settling on a post-trade settlement basis, it’s tremendously inefficient to start spreading your inventory across these different venues as in the case of the crypto market.
The reason for this, according to Reid, is because the crypto market is highly volatile, and “you don’t know which one is going to have good pricing at a specific time.”
Hence, having the inventory needed on that specific venue for you to execute the trade or do whatever strategy you’re looking to execute, according to Reid, is ultimate.
While FalconX helps institutional traders solve the complexity involved in inventory management, it ultimately provides them with a “one-stop-shop for crypto trading.”
On The Flipside
- Solving all of the complexities inherent in the crypto market for institutional traders may take a while, and navigating them through the space may be impossible unless there is an initial adoption.
Why You Should Care?
There is a major shift or diversification from traditional asset classes to cryptocurrency, and while most institutional traders are still hesitant to adopt the digital currency, they risk missing out on what might be a game-changing breakthrough for the future of finance.
Watch the entire interview here: