The big-money clients of the Tagomi cryptocurrency brokerage now have access to Binance.US's trading pairs, which the US-based exchange says will provide an immediate boost in “institutional liquidity.”
The partnership between the cryptocurrency brokerage and the fledgling exchange is aimed at giving institutional investors at Tagomi more liquidity by presenting them with an assortment of USD trading pairs. Binance.US should also benefit from increased volume as it tries to crack the top tier of US cryptocurrency exchanges.
Tagomi refers to itself as a prime broker, akin to a crypto Goldman Sachs. (In fact, one of Tagomi's founders is Goldman's former head of electronic trading, Greg Tusar.) Goldman can use all sorts of trading techniques for hedge funds beyond the standard buy and sell, including short-selling and margin lending.
Tagomi offers similar features for digital assets, as well as staking and custody. Last week, it, along with Pantera Capital and Galaxy Digital, became the first institution to use the Bakkt Warehouse to store bitcoin and other digital assets (or, technically, the keys to those assets).
The brokerage's intended customers include quant funds (investment funds that use statistics to bet the market), venture funds (which invest in startups and smaller businesses), and individual investors with cash to burn.
For brokers, access to exchanges is particularly important. Visit any two exchanges and the price of Bitcoin might differ by about $5. That represents a fraction of a percent for a digital asset worth upwards of $8,000; it may not be enough to motivate average users to get multiple exchange accounts. But it translates to real money at higher volumes, and brokers leverage those differences by having stakes in a lot of different places.
Tagomi clients tend to be power users. They keep a balance with Tagomi and get to use it across multiple exchanges without transferring it, meaning they should always be able to get the best price. By adding Binance.US to its stable of 14 partnered exchanges, Tagomi can now promise users access to another source for trading pairs and liquidity. The exchange currently has eight USD trading pairs not available on Tagomi, including Tether, Iota, and Waves, though it's not clear if Tagomi will support trading for all pairs.
The deal is a needed win for Binance.US. After an initial surge in interest following its debut in September, the exchange's numbers have dropped to below $5 million in daily trading as it encounters entrenched competitors and a turbulent market. The new partnership should increase usage of the exchange by institutional investors.
However, in a sign of growing competition in the cryptocurrency trading market, just last week cypto news site The Block published an unconfirmed report that Tagomi was in acquisition talks with the San Francisco-based Coinbase—one of Binance.US's top rivals—which would complicate the deal.
Whether or not that comes to pass, it's clear that the market for crypto investors is heating up.