'They see it the same way they see the VIX and gold:' the 25-year-old cofounder of a crypto trading platform explains why billion-dollar hedge funds are getting interested in the market
- Seed CX, a crypto trading platform aimed at institutions, says hedge funds are knocking on the door to use its services to dive into crypto.
- The firm, which has brought on a number of Wall Street heavy weights, announced Wednesday it raised $15 million.
Seed CX, a crypto trading firm in Chicago, has hedge funds knocking on the door to use its platform, according to cofounder Edward Woodford.
The firm, which announced Wednesday a $15 million series B fundraising round, is currently in the process of onboarding clients to trade on its spot and derivative trading platform. Woodford, 25, who co-founded the firm in 2015, told Business Insider that most of the cash will be used to double its staff to 40 people. The funding round was led by Bain Capital and OKCoin.
Already Seed CX has brought on a number of heavy weights from the Chicago trading world, including Sam Tegal, former head of liquidity strategy at Jump Trading, and most recently John Hart, a former managing director at CME Group.
Woodford said part of the firm's growth has been buoyed by new found interest from hedge funds. He said funds are just starting to get comfortable with the nascent $200 billion market, which is known for its wild price-swings.
"They now see it in the same way the see the VIX and gold," Woodford said. "One fund manager told me he wants it as a part of his macro strategy as a hedge against the broader portfolio."
Institutional interest appears to be growing in crypto. Coinbase recently onboarded a $20 billion hedge fund and Grayscale, the crypto asset manager, said the first half of 2018 witnessed its largest institutional inflows ever.
The reason for the shift, according to Woodford, is the trading technology is starting to catch up with what large firms expect.
"They need stability," he said. "A lot of these crypto platforms are not stable."In the finance world 99.99% uptime seems pretty horrendous, but in retail that's not such a big deal. And these platforms were born in a retail world."
Woodford said out of the number of firms interested in using the platform, a double digit percentage have never traded crypto before.
Still, uncertainty hands over the market. One crypto hedge funder told Business Insider that large institutions might be weary about the regulatory uncertainty in crypto. While the SEC earlier this year said that ether trading didn't interfere with securities law, that doesn't mean the agency couldn't go after the founders of the crypto and early sellers for promoting an unregistered security, the executive said.
The agency could also retroactively go after other cryptos and initial coin offerings, the executive added.