FalconX raises $17M to power its crypto trading service

by | May 19, 2020 | Banking | 1 comment

Over the last few weeks all eyes in the crypto world have been glued to the halvening, a nigh-religious moment in the blockchain realm. It slows the rate at which brand-new bitcoin is presented to the world as the cryptocurrency marches towards its 21 million coin cap

That’s to say that, while you weren’t looking, the world of digital tokens and currencies has marched along, growing to some degree as cryptocurrencies and other blockchain-based services settle into slightly more predictable trading ranges.

The companies operating in the crypto area are maturing also, developing out better, more sophisticated tooling for retail and institutional financiers alike. FalconX is one such business, and today it revealed that it has actually raised $17 million to date.

The crypto trading service– more on what it does in a moment– is backed by a legion of financiers consisting of Fidelity-affiliated Avon Ventures, corporate shop Coinbase Ventures, and a host of more traditional players including Lightspeed, Flybridge, Accel, Fenbushi, and Accomplice Normally we ‘d cut the list of investors to simply the most interesting, however in this case it felt sensible to include them all, as the sheer variety of capital shops that put up cash for FalconX information that there is still niche and mainstream venture interest in at least some crypto-focused business.

FalconX is also a company that anyone can understand, which probably helped. The business’s tech assists provide rates info for cryptocurrencies, offering what it calls the “best” price for a time period (seconds). That might sound rather simple, however it’s not; the crypto world is made up of a host of exchanges, is awash with fake trading volume and has a history of being bossed around by large accounts. To be able to provide a price, and keep it, is material.

The business is presently concentrated on institutional customers, which the business’s creators Raghu Yarlagadda and Prabhakar Reddy loosely described to TechCrunch as those with $10 million AUM (possessions under management) and up. This most likely makes KYC (understand your clients) rules easier for the startup to follow.

FalconX makes cash from trading fees, albeit in 2 methods.

Either way, FalconX’s tech has found an audience. It has actually carried out $7 billion in trading volume in the last 10 months (I inquired about the relatively odd time interval, which the company explained as its most recent, fully-audited time period; it has actually seen more overall volume throughout its life.)

That $7 billion volume outcome is most likely why FalconX was able to bring in external capital. And the reality that the startup appears to appreciate dealing with crypto seriously and not as a method to navigate standard banking guidelines.

For instance, after FalconX brought up anti-money laundering work during a conversation about guideline, TechCrunch asked the company how far it can look into its transactions to ensure that it isn’t inadvertently helping bad folks get cash. Yarlagadda reacted, stating that “t he future of guideline” in his space is “solving a few of these issues and revealing [them] to the [regulatory] agencies so that they get comfy about the space.”

How is FalconX going about that? It utilizes “internal on-chain analytics” in addition to third-parties to help get “context [into] which Bitcoin addresses, or Ethereum addresses, are related to dark web or terrorist activities” to make certain that its trades are not ending up helping the incorrect folks. This isn’t easy; the start-up needs to browse “6, 7 hops” so that it can see if any money that goes through its service is suspect.

That seems pretty good, ideal? I discovered it excellent. Much more, after Yarlagadda joked that it’s not low-cost to spend for the computing power required to manage that work, FalconX informed TechCrunch that the expense counts as COGS. Cool!

There’s a fine line when covering anything blockchain-related in between producing something that routine folks can understand, and composing something that the crypto-believing world won’t dismiss out of hand as insufficiently nuanced. Summing then, in case I swung too far towards the latter, FalconX constructed a rates engine that enables big investors to make trades with more self-confidence.

The next question for FalconX is how fast it can scale volume.

At least in crypto.

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