Many large-scale investors could not short cryptocurrencies as rapidly as they might short an equity position because the existing borrowing process for crypto is too complex, Johnson said: “It’s multiple steps, it’s a lot of work.”
Crypto brokerage Tagomi released its borrowing and lending platform to the wider public, enabling investors to short cryptocurrencies like bitcoin and ethereum.
Tagomi’s COO Kevin Johnson told CoinDesk that its new platform addresses issues that stymie institutional crypto shorts.
“First, you have to either find an exchange that’s able to lend, or talk to one of the centralized lending counterparties, negotiate rates, settle that, borrow, and then you could get to be in the process of actually selling the coin short.”
Johnson said this has been the biggest barrier for institutional investors.
Co-founder Marc Bharvaga said the service brings Tagomi closer to becoming a full-suite prime brokerage, which is how institutional investors prefer to manage their trading.
“Having a full prime brokerage functionality, which we now have through being able to do best execution, being able to custody, being able to lend, being able to short and there’s quite a few other things on the road map as we think about the crypto space”, Bharvaga said.
Tagomi completed a $12 million funding round in March, when co-founder Jennifer Campbell told CoinDesk then that it would expand its services to include lending and shorting.
Switzerland’s Famed “Crypto Valley” Seeks $103 Million Government Bailout
About 80% of 203 firms surveyed by the Swiss Blockchain Federation recently warned of imminent bankruptcy. Only half of the 50 biggest companies in crypto valley expect to last a year in business.
Switzerland’s “crypto valley” is asking the government for 100 million Swiss francs ($102.7 million) in funding, local media reported.
The once flourishing Swiss cryptocurrency industry is struggling to survive following the withdrawal of private equity investors.
Now, the industry is turning to government, requesting for a fund that is expected to draw on federal guarantees, local government and private investments, according to Zug finance director Heinz Taennler.
The celebrated blockchain hub is located in Zug and other towns of Switzerland and Liechtenstein.
Taennler noted that the 154 million francs credit facility for startups recently announced by the Swiss government will not be enough for the cryptocurrency sector’s ambitious financing needs. He wants a separate, dedicated fund for Zug companies.
While start-ups are generally threatened by the Covid-19 impact, “crypto valley”’s loss of venture capital constitutes an underlying condition.
A mid-2019 analysis of the 50 top companies valued them at $40 billion, which was two times their value at the beginning of the year. The report also listed six unicorns. As a whole, the “crypto valley” had more than 800 companies with over 4,000 employees.
However, even then, a number of companies like Tend had already started to close shop without revealing much about their disappearance. Crypto Valley Association (CVA) president Daniel Haudenschild indicates that the hub is a hardened community whose members simply take up a new venture after one fails.
According to marketing firm Relevance House co-founder German Ramirez, it is normal for 80% of startups to fail in any industry, outside the Covid-19 impact. The picture of contrasting fortunes in the 2019 survey may support his view and lend case against recent reports about the “drying up” of the Zug-centred crypto industry.
Historical funding challenges, as well as decreased risk appetite by investors have prompted the “crypto valley” to turn to government though Haudenschild maintains:
The modus operandi of the crypto scene does not include surviving on state handouts – we are not a state-sponsored industry.
Ramirez predicts long-term success for Swiss crypto startups as blockchain innovations are expected to disrupt traditional financial infrastructures after the pandemic. The CVA president says the sector is already hardened by adversity including being frozen out by banks, which then cannot be expected to issue the firms emergency loans.
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