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LXDX Markets bringing institutional quality to crypto space

Tony Zerucha

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Josh Greenwald shares the frustration cryptocurrency traders have with the trading experience because he’s experienced it too. He took that frustration, combined it with his business experience formed a team to create LXDX Markets. Billed as the world’s fastest crypto exchange, LXDX markets allows investors to access institutional liquidity with products unique to the cryptocurrency space.

LXDX’s founding team comes from traditional markets and the world of high frequency trading, where Mr. Greenwald co-founded a high frequency derivatives trading firm. Later, his frustration with trading cryptocurrency over the Internet gave him an idea and a reason to reunite the band.

“So many cryptocurrency exchanges are just a website and not properly engineered,” Mr. Greenwald said. “We knew our frustrations were shared by our peers at other funds.”

LXDX Markets is different from other exchanges beginning with its initial design, Mr. Greenwald said. The team looked to traditional exchanges and how they functioned and then plotted out every step of what a highly functioning derivatives exchange should look like.

“Existing platforms were built as a reaction to demand,” Mr. Greenwald explained. “As the user demanded new ways to trade these new asset classes they scrambled to get something out the door to serve that need. There was no notion of how it fits into the regulatory framework and institutions’ needs for custody.”

That neglect has kept serious players away from the crypto trading space, Mr. Greenwald added.

Josh Greenwald

LXDX launched in December with spot trading and this past week expanded their offerings to include their first derivative products. LXDX Warrants, available on top of Bitcoin, Ripple and Ethereum, let investors trade when they have high conviction and short sell volatile products during expected periods of stability. The possibility of higher returns with less capital are real. Combine derivatives with hedging ability allows institutions to run more active strategies.

Socialized losses and auto-deleveraging will not occur on LXDX, Mr. Greenwald said. That means individual investors will not have to bear the burden of collective risk, making LXDX the first exchange to offer derivative trading sans that risk.

“Socialized losses are a big problem that is keeping more capital from coming into the space,” Mr. Greenwald said. “It’s hard to trade if one user blows up everything on the exchange.”

Adding long and short side ability should serve as a hedge against restless price speculation and help tame volatility, Mr. Greenwald added. Proof of risk protocols allow orders to be routed to other venues when those prices are superior. Smart routing to eight venues was available at launch. LXDX partners with BitGo for running wallets but also hosts its own redundancy layer to guard against double-spend attacks and to improve wallet egress policies.

LXDX’s underlying technology also separates it from the pack, Mr. Greenwald said. It is built on C++  and the architecture is hosted on LXDX’s own hardware in primary market data centers like FR5.

Looking ahead Mr. Greenwald believes cryptocurrency markets will behave in similar ways to how U.S. equities performed at a similar stage of maturity where high retail participation gave way to institutional activity delivering high fragmentation and increased product diversity. If the markets follow that path we should expect custodians to emerge in the space. Exchanges will shoulder less of the load and facilitate more integrations with other solutions. Smart routers and aggregators will flourish and players with large client pools will want to provide cryptocurrency trading for their clientele and will seek partnerships with companies offering the strongest underlying technology.

In 2019 look for stablecoins to have a dramatic effect of the relative standing of exchanges, Mr. Greenwald said. There should also be some more regulatory clarity, beginning with Singapore in June and hopefully followed by the SEC. While many parts of the world have been willing to wait and follow the SEC’s lead, the delay has prompted some jurisdictions to take action on their own. Yet more important in many respects than how regulators will react is how banks approach cryptocurrencies, Mr. Greenwald said, for it is the banks that have the exposure due to KYC and AML regulations.

The relationship between security tokens and exchanges will also be interesting to watch, Mr. Greenwald said. The industry is still trying to figure out how they will blend with traditional financial markets.

Taken overall, there is a world of possibilities and some uncertainty. LXDX is doing their part to address the latter, and that will bring the former closer to fruition, Mr. Greenwald said.

“Cryptocurrency exchanges are attracting people from all over the world. The wall between the professional and the consumer is being torn down through the democratic access to platforms.”

Learn more about LXDX Markets by downloading their whitepaper here.

 

Tony Zerucha

Tony Zerucha is an alternative finance journalist with more than seven years experience in the space. The author of more than 1,000 articles, Tony was named LendIt's 2018 Journalist of the Year.

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