Traditional cryptocurrency lovers do not like somebody to sell and purchase their digital assets for them. But their take is likely to change if they have to walk to an over-the-counter bitcoin shop with a bag full of money. Not only it would be dangerous, but it would also make the buyer and his trading strategies less anonymous before a counterparty.
At least that is what explains the need for a cryptocurrency brokerage like Tagomi Holdings Inc. Launched by a former Goldman Sachs Inc. executive, Greg Tusar, the US startup offers prime services to investors with a big appetite for digital assets. Tagomi buys bitcoin, ether, and other digital assets on behalf of these institutional investors as it protects their identity and strategies from potential onlookers.
If that’s not enough, the startup also throws in a portfolio management interface for longer-term investors, an advanced trading terminal for active traders, and an API for various types of programmatic trading.
From the way it looks, Tagomi is out to reduce that well-publicized gap between the mainstream investors and the “wild west” of cryptocurrencies. At the same time, the startup’s core business model is looking profitable to fund managers and capital investors alike.
Tagomi announced Monday that it had raised $12 million in its second round of funding led by Yale-backed Paradigm Fund. Other investors included Pantera Capital Management, a US-based digital asset firm, and other users of Tagomi’s electronic crypto brokerage, including the Bailey Family and Multicoin. The fresh round came two months after the startup’s public product launch in December and brought its total funding to $28 million.
“We are excited to partner with Tagomi as they continue to build momentum and traction. We view their best-in-class product and team as the next step in the evolution of how digital assets trades,” said Matt Huang, the founding partner at Paradigm.
Tagomi plans to allocate the raised capital to grow operations to support and scale with client demand.
Pantera Capital, which is also one of the users of Tagomi’s crypto brokerage solutions, said that it was now more accessible for funds like them to maintain secrecy.
“We view the development of an electronic agency offering as a critical step in empowering funds like Pantera to have complete control and anonymity when transacting in digital assets,” said the CEO and deputy CIO at Pantera Capital. “We believe it is a key component to carrying out our fiduciary duty in achieving best execution for our fund.”
What’s happening these days is a lot of traditional old-school financial giants such as pension funds, hedged funds, endowments, and mutual funds wanting to enter the cryptocurrency space. These institutions are the real whales if one sees at the stockpile of money they handle on a day-to-day basis. For instance, the pension fund market is worth over $40 trillion, including assets worth $6 trillion alone.
These whales have a lot of money, but they cannot jump into the pool of cryptocurrency markets unless a few things change. They include a lack of regulations, security and custodian solutions, and dark pools. The last point refers to what Tagomi is offering: a crypto trading desk with a hidden order book.
Having such a service means that a big investor can enter the crypto market with investments worth millions of dollars without alerting the small investors. Imagine the chaos that would follow when public order books start showing buying orders worth, say, $1 million. So, if whales get an alternative to trade cryptocurrencies through sophisticated dark pools, they would be less likely to cause abrupt price movements in the retail market.
Therefore, what an average bitcoin investor can expect is a more stable market, followed by gradual growth.
“It reminds me of the time when Nasdaq was transitioning from a dealer market,” Tusar told Bloomberg. “The world had transitioned to an agency model.”
Last modified: March 4, 2021 3:18 PM