As crypto’s potential becomes more apparent there is a need for trading products and services that can keep up with the pace, complexity and volatility of crypto markets.
There has been an explosion of new assets and trading venues as crypto has democratized the trading market structure by making it possible for anyone to not only issue new assets but set up their own decentralized trading venues. This new open market structure means we are going to see a lot more asset pairs trading on a lot more venues, and the resulting increase in trading pairs is far larger, as some multiple of the two. In order to function, all these new trading pairs need someone to provide liquidity for efficient price discovery and for market participants to see their orders matched.
Traditionally, this is done by market makers who continuously trade to ensure orders get matched, or others like liquidity providers who contribute assets to a pool, as with decentralized automated market makers like Uniswap.
But there is a disconnect between how we historically get liquidity in traditional financial markets via large market-making funds and the structure of crypto markets. The long tail of crypto assets and venues means that it is not worth the while for large market makers to participate on the majority of trading pairs, and so those will go without liquidity.
This was a problem the team at Hummingbot discovered when they were operating a hedge fund built on the blockchain. I had heard about Hummingbot for a long time, had looked at the open source project, followed their writing about liquidity mining and knew the team had spent many years trading and structuring financial products for the traditional finance world on Wall Street. Now they’re solving the liquidity problem directly with solutions native to the crypto ecosystems – and they are particularly well suited with history in both the traditional finance and crypto camps.
They’ve built an open-source, crypto trading bot platform and marketplace so that anyone can create automated, algorithmic trading bots that make markets on both centralized and decentralized crypto exchanges. They’ve introduced thousands of users to automated trading for crypto, giving smaller traders access to Wall Street expertise and capabilities usually reserved for the most sophisticated funds.
They understand how traders from traditional finance operate and they also deeply understand the crypto ecosystem and its sprawling complexity. They brought these experiences together to create a multipart product informed not just by the hard requirements of performance trading and market-making, but also by embracing the community nurturing aspects of crypto, open-source, and shared decentralized value.
We’re excited about what Hummingbot is building and I’m extremely happy to announce we led their Series A. We are thrilled to be joined by a great group of investors including Slow Ventures, Arrington XRP Capital, Borderless Capital, Three Arrows Capital, Terraform Labs (Luna), AscendEX (BitMax), Ava Labs, NEM Trading, and Altonomy.
I’ll also be joining their board and I am looking forward to the chance to work with this team and see where they take their liquidity ecosystem next. The growth in volume since we met alone has been tremendous. If you need a bot to trade crypto or have a token that needs liquidity make sure to look into Hummingbot.