Institutional Over-The-Counter (OTC) Crypto Asset Trading Platform
After several long months of careful, meticulous planning and building, we are thrilled to announce the official launch of SigOne Capital, an institutional grade, over the counter (OTC) platform for trading crypto assets. We provide investors, high net worth individuals and market makers with access to direct networks of global crypto liquidity with a seamless and safe way to transact. As the cryptoasset space continues to evolve and mature, our goal is to bridge the traditional financial markets with the crypto ecosystem. In this blog post we aim to shed some light on who we are, how we got here, some context on the current market conditions and some details about our path forward.
Who We Are
Our origin story began in 2017, when our Founder, Michael Rabkin began educating his private equity clients on connected on exactly what Bitcoin is, how it was evolving and what this meant for the broader crypto asset class. Over time the education sessions transformed into brokering the acquisition of large amounts of Bitcoin, where he began operating in the OTC space in order to help clients fulfill large buy and sell orders. At the time, Michael was an investment banking Director, with a focus on private equity deals in real estate development & technology start-ups. The combination of Michael’s technical understanding and early Bitcoin experience and his knowledge of traditional financial markets, proved to be an excellent convergence of the two disciplines necessary to help properly educate investors on this emerging asset class.
In early 2018, the operation was put on hold as Michael made the decision to join the TMX as founding team member of Shorcan Digital Currency Network, a wholly owned-subsidiary of the TMX Group (parent company of the Toronto Stock Exchange), where he spent the year building out the OTC trading desk.
As 2019 approached, it became clear that if he wanted to achieve broader goals, he would have to branch out to bring our vision to life.
Enter SigOne Capital….
Bitcoin Market Overview
At present day there are over 2100 cryptoassets currently in existence traded on several thousand exchanges and markets globally. While it’s tempting to be allured by the siren song of alt-coins (which we occasionally dip our toes into), our primary focus at SigOne Capital is Bitcoin, whose total market cap is currently $68 Billion, with a 53% dominance over the entire crypto asset market ($135 Billion). Before you are tempted to think “but hey, wasn’t Bitcoin $19,000 just a year ago? Is this thing still relevant? and are people still trading this?— Here are some statistics and facts to consider (hint: yes, it’s definitely still relevant).
- Although the price of Bitcoin has decreased more than 75% (approx.) from the beginning of 2018, the average trading volumes have only decreased marginally
- The volatility of bitcoin has fallen over time
- Since 2013, on a risk adjusted basis, Bitcoin has outperformed US stocks, US real estate, US Bonds, Gold and oil
- Bitcoin’s yearly lows (as a more accurate measurement of Bitcoin’s growth)
2012 — $4
2013 — $65
2014 — $200
2015 — $185
2016 — $365
2017 — $780
2018 — $3200
Total Bitcoin Market Cap + Exchange Traded Volume 2/18–2/19
Bitcoin Exchange Traded Volume Ranges (as of February 2019)
- Average total trading volume range over last 30 days: $5.7 billion /day (approx.)
- Average total trading volume over last 90 days: $5.5 billion /day (approx.)
- Average total trading volume over last 180 days: $4.8 billion /day (approx.)
- Average total trading volume over last 360 days: $5.3 billion /day (approx.)
None of the above mentioned numbers are inclusive of Bitcoin’s over-the-counter (OTC) volumes, which some sources estimate to be approximately 2–3x larger than the exchange-traded market. TABB Group, an international research company, has disclosed in its extensive analytical report that the over-the-counter market of bitcoin is significantly larger than the global bitcoin exchange market. While it’s difficult to pin down the actual OTC stats because they are mostly self reported, it’s easy to conclude that the OTC market already accounts for a very compelling and dramatic percentage of market share.
Participation From Traditional Financial Institutions Is On The Rise
If 2017 was the year of the ICO (Initial Coin Offering), then 2018 was marked by announcements from traditional incumbents from the financial sector proudly announcing their intentions to enter into the cryptoasset ecosystem to build infrastructure and provide various products to their existing client base. Here is a short summary of some of the major announcements to come out of 2018:
- ICE (Intercontinental Exchange) announces Bakkt, a Global Platform and Ecosystem for Digital Assets. Their first product will be a regulated, physical Bitcoin futures contract (link)
- Fidelity Investments announces the formation of a new company, to provide “enterprise-grade digital asset solutions for institutional Investors (link)
- TD Ameritrade Invests in ErisX, a new regulated cryptocurrency exchange for spot and Futures Trading (link).
- Goldman Sachs forms new division around crypto trader Justin Schmidt to lead their Digital Assets division (link)
- Citigroup to offer low-risk crypto product for institutional investors through DARs: Digital Asset Receipts (link)
- SIX Group, the parent company of Switzerland’s principal stock exchange, has revealed that it is “open” to the possibility of offering cryptocurrency trading services on its digital trading platform (link)
- JP Morgan appoints a head of “crypto strategy” (link)
- BOX Digital Markets and tZERO announce a joint venture to launch industry’s first Security Token Exchange (link)
- Japanese financial behemoth Nomura Bank announces partnership with Ledger to explore crypto custody solution For institutional investors (link)
In addition to all of these important impactful announcements, 2018 was the year that University Endowments (traditionally some of the most conservative money managers who are also in control of many dozens of billions of dollars) officially made their first investments into the crypto ecosystem. Among them were Yale, Harvard University, Stanford University, Dartmouth College, Massachusetts Institute of Technology (MIT), The University of Michigan and the University of North Carolina. These endowments all made significant investments into Andreessen Horowitz’s inaugural $300 million crypto fund as well as Paradigm, a new blockchain and cryptocurrency-focused fund started by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang.
The common thread that weaves between all of these stories and headlines from 2018 is that Bitcoin and the wider cryptoasset class are gaining wider reaching acceptance among institutional investors. An important development in the maturity of the ecosystem as it continues to grow up the curve of early adopters.
What is over-the-counter (OTC) Trading?
Now that we’ve referenced the term “OTC” dozens of times throughout this blog post, we thought it might be a good time to unpack what it means exactly for those who are unfamiliar.
OTC refers to large block trades (often starting at around notional value of $50k — $100K) that are executed through brokers and platforms that can provide access to liquidity without impacting the spot price the way it would if you were to execute a trade of that size on an exchange. For example, If you tried to execute a $40 million Bitcoin sell order on most crypto exchange (if not all), you would most likely sink the price of the asset and would probably get a poor order fill due to the slippage experienced on such a large trade. (you can read a more detailed breakdown of the mechanics of OTC trading here). Broadly speaking, OTC desks offer clients access to large pools of liquidity that they cannot find on traditional crypto exchanges, typically with a quick and efficient settlement process.
Our Value Proposition
After spending the better part of 2018 building out what would’ve been the world’s first traditional exchange backed trading desk and after having many conversations with institutional investors, we have developed a keen sense of the challenges needed to overcome to help bridge the the cryptoasset and traditional finance ecosystem. These insights are what we have built our OTC digital asset trading platform around.
- Access to Global Liquidity: Directly connected to global network of trading partners and pools of liquidity
- Institutional Grade Service: Best in class Institutional KYC/AML compliance and on-boarding
- Safe & Secure Trade Flow: Fiat is always protected
- Timely Trade Settlement: Seamless 24 hour trade settlement
For those who are interested in signing up to trade with us, please fill out the “learn more” form on our website (here).
The SigOne Capital Team