Proprietary Transparency Engine to Deliver Provable Trust, Uncompromising Transparency and Risk Insights to Counterparties
NEW YORK, May 8, 2024 — Arbelos Markets, a principal liquidity provider in crypto derivatives markets, announced today that it has raised $28 million in a mix of seed equity and debt financing led by Dragonfly Capital to build transparency-based trading infrastructure and offer bilateral and on-exchange liquidity in options and futures products. Investment firms Room40 Ventures, Selini Capital and Breed VC, corporate partners FalconX, Circle Ventures, Paxos, P2 Ventures (formerly Polygon Ventures), Deribit, Chorus One, StarkWare and Immutable, and angel investors at Aevo, Cega, Talos, Amberdata, and Framework also participated in the significantly oversubscribed round. Arbelos Markets was founded in 2023 by veteran industry operators and derivative traders Joshua Lim and Shiliang Tang.
The Crypto Derivatives Liquidity Crunch
The crypto industry has evolved from a retail-driven market to one dominated by sophisticated Wall Street firms. These institutional investors have outgrown basic spot transactions and are demanding the types of derivative instruments, hedging programs, and structured products that are employed in more traditional financial markets. At the same time, a continuous stream of DeFi innovation has created a category of passive liquidity pools and yield products that inherently embed optionality and duration risk.
However, the industry-wide credit crisis of the last two years has hollowed out crypto market structure and impaired many of the core players servicing derivatives liquidity. There is a growing and unmet need for a trusted principal dealer that can properly price, manage and distribute risk across centralized and on-chain venues and amongst the wide spectrum of bilateral market participants.
“With crypto assuming its role as an investable asset class in macro portfolio allocations, it needs a new type of capital markets firm: a smart principal risk-taker with a strong balance sheet and a flexible product set to underwrite the fast-moving crossover risk between the underlying technology and the financial markets built on top,” said Arbelos Markets co-founder and CEO, Joshua Lim. “Arbelos is replacing the pre-FTX, reputational-trust based bilateral trading system with one based on provable trust, powered by our proprietary Transparency Engine and built by traders and quants that are equally fluent in crypto market structure and traditional financial engineering.”
In its first six months since launch, Arbelos Markets has emerged as a top-five liquidity provider globally in options block liquidity with total derivatives trading volume exceeding $25 billion notional across bilateral, on-exchange and on-chain orderbook and RFQ channels. The company plans to use the new funds to further improve its quant trading infrastructure, hire top talent, and expand its access to new markets and its range of products. In April 2024, Bitcoin futures and perpetual swap aggregate open interest hit a record high of $29 billion, growing by over 160% from prior year (source: The Block).
Provable Trust
The Transparency Engine is a proprietary technology that delivers real-time visibility into Arbelos Markets’ risk profile, balance sheet and counterparty exposures, providing provable trust to a marketplace that desperately needs it. Counterparties are increasingly demanding transparency and verifiability from their trading partners, largely as a response to major lapses in crypto‘s previous market cycle. “Sunlight is the best disinfectant: Arbelos’ push for greater transparency will force a higher standard of risk underwriting across the board. We hope to create new market conventions around bilateral trading and collateral management that will enable more efficient risk transfer in our asset class,” added Lim.
Arbelos Markets is led by a proven team with a strong network of client relationships and prior success scaling derivatives trading businesses at major crypto-native platforms like LedgerPrime, Galaxy Digital, Genesis and traditional financial services firms like Goldman Sachs, Merrill Lynch, and UBS. The team is composed of experienced traders and operators with coverage across high-touch franchise trading, electronic market making, exchange arb and quantitative risk modeling.
There is over $100 billion of institutional capital committed to crypto capital markets today. Those assets need servicing in the form of customized hedging instruments, systematic strategies, structured products, and programmatic liquidity. Arbelos Markets will continue to fulfill this market need by providing transparent, global liquidity to its partners 24/7.
“Arbelos is the right team at the right time to build the next dominant crypto capital markets franchise and they are doing so with a unique focus on trust and transparency in a previously opaque market,” said Rob Hadick, general partner at Dragonfly Capital. “Josh, Shiliang and their team are combining their experience building wildly successful businesses in crypto derivatives with a modern best-in-class tech stack and a client-first approach that will allow them to compete and win against the biggest incumbents in the space.”
About Arbelos Markets
Arbelos Markets is a principal liquidity provider in crypto derivatives markets. The company’s mission is to rebuild crypto capital markets based on provable trust and transparency. Its proprietary Transparency Engine enables real-time visibility and verifiability across its portfolio of risk. The firm provides liquidity 24/7 across centralized markets, on-chain protocols, and more bespoke hedging and yield generation solutions. The team has experience across high-touch franchise trading, financial engineering, and electronic market-making. For more information, visit https://arbelos.xyz/.
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SOURCE Arbelos Markets
