Apple Inc (NASDAQ: NASDAQ:AAPL) stock trades the same price no matter what platform is being used to get exposure to a market.
The same cannot be said for cryptocurrencies. Their rise has coincided with the development of hundreds of new exchanges. Liquidity is can be fragmented and this has bred inefficiencies.
In removing inefficiencies, participants may extract a premium for their liquidity provision. That’s difficult to do if one does not have the proper infrastructure to conduct trades quickly.
Apifiny Group Inc, which is set to go public through a merger with Abri SPAC I Inc (NASDAQ: ASPA), a special purpose acquisition company, has a solution that solves the aforementioned.
Benzinga chatted with Haohan Xu, the founder and CEO at Apifiny to learn more.
Context: Prior to founding Apifiny, Haohan was at Columbia University studying engineering. While at school, he had been active in the cryptocurrency markets, buying and selling between exchanges in an attempt to extract premiums to spot.
“I realized that the price was so different between Coinbase (NASDAQ:COIN) Global Inc (NASDAQ: COIN) and Binance, at any given time, that you could actually arbitrage,” he said. “Having to open like 30-plus accounts on different exchanges, [though] … is a barrier for institutions.”
During this endeavor, he realized that funds built around similar strategies have a massive challenge. Mainly, crypto markets are incredibly fragmented and it can be difficult to scale strategies if there are too many moving components like trading on different exchanges.
“I realized that I had to build this tool for myself,” Haohan explained to Benzinga.
“I soon hired a few engineers when I realized it was much more complicated and you needed individuals that have worked at the likes of Intercontinental Exchange (NYSE: ICE (NYSE:ICE))-owned NYSE and Nasdaq Inc (NASDAQ: NDAQ).”
After developing a proof of concept, Haohan knew this was something that others would want access to and so he founded Apifiny.
The Value: Unlike some of its competitors, Haohan says Apifiny provides more transparency.
“We have a more direct approach since we partner with and build connections with different exchanges across the landscape,” he said in a discussion about building tech alongside Chief Technology Officer Jason Jiang, a BlackRock, Inc. (NYSE: NYSE:BLK) and Goldman Sachs Group Inc (NYSE: NYSE:GS) veteran.
“We directly mirror order books with no markups and modifications. We provide access to all these exchanges through one-time account opening. We translate all the exchange APIs into a single set of Apifiny APIs. We even offer fee discounts.”
Market Growth: The 2020-2021 boom in institutional interest validates the need for Apifiny.
Haohan says that just years prior, many sophisticated market players would not touch crypto. Now, players such as Citadel no longer dismiss it as its CEO Kenneth C. Griffin explains his initial view was wrong.
“I still have my skepticism, but there are hundreds and millions of people in this world today who disagree with that,” Griffin said.
“To the extent that we’re trying to help institutions and investors solve their portfolio allocation problems, we have to give serious consideration to being a market maker in crypto.”
Innovation Outlook: When asked about where markets are heading and how Apifiny will address the changes, Haohan said the following.
“One is the rise of derivatives,” for speculation and hedging, as well as “NFTs and this whole concept of the metaverse,” that increases ownership and engagement dynamics in crypto.
Since Apifiny is more so focused on institutional participation, the markets for derivatives is where Haohan is looking to research and develop, as well as put funds raised through the SPAC.
“What we want to do is build a global crypto trading network and we’ll do this by providing institutions — whale traders — the most seamless access into the entire crypto market, as they’re the main contributors of liquidity in this space.”
With this liquidity, the crypto markets can grow “more efficient and healthy.”
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