Billionaire Peter Thiel-backed Venture Fund Invests in Bitcoin Broker For Institutional Investors
Billionaire Peter Thiel’s Founders Fund is set to invest in Tagomi Systems Inc., a new bitcoin trading firm. This news was revealed by a couple of unnamed sources with insider information regarding the investment.
Tagomi is a bitcoin trading platform with lofty ambitions. The startup wants to be the leading bitcoin broker-dealer for the institutional bitcoin investment class. The company is co-founded by Greg Tusar who is a former Goldman Sachs executive. No official word has been given as to the size of fund’s investment in the startup company, but Tagomi has reportedly raised over $15 million in funding.
Tagomi: Making Large-scale Bitcoin Trades Less Tedious
Tagomi is looking to address the difficulty experienced in executing large-scale bitcoin trades which is often a tedious process. The cryptocurrency market is heavily fragmented across numerous exchange platforms all over the world. These cryptocurrency exchange platforms are not all connected to any central clearing architecture, so there is no way to utilize all of them from a single hub. Also, there are strict restrictions placed on trading volumes as well as withdrawal and deposit limits. Thus, most large crypto orders adopt on OTC trading decks like the ones offered by Circle and Gemini.
Another significant problem is the issue of crypto price volatility. With large orders taking time to execute over online platforms there is the possibility of slippage which can cause traders to incur significant losses. Tagomi’s approach to solving this issue is to adapt a technology that has already been applied in the mainstream market. Traders in traditional financial markets use an automated bulk trading protocol called smart order routing.
There are software programs called smart order routers (SOR) that simplify the process of executing large order trades. A SOR works by sending the orders to different trading venues and simultaneously executing the orders at the best possible prices. Broker-dealers often have to write specialty algorithms and routing rules to control the functions of these SORs. Tagomi is looking to create a similar tool but for large order crypto trades that are favored by institutional investors such as hedge funds.
Peter Thiel is Seriously into Blockchain and Bitcoin
There appears to be no stopping Peter Thiel in the bitcoin and blockchain market. Through his VC firm, Founders Fund, he has invested massively in bitcoin and blockchain enterprises. In 2017, the fund purchased between $15 million – $20 million in bitcoin, making Thiel a significant player in the market when bitcoin prices skyrocketed in late 2017. Founders Fund has an asset management portfolio that is reportedly worth $3 billion. The company recently led a $28 million funding round for Harbor, a blockchain startup.
Thiel is a noted libertarian and bitcoin enthusiast who believes bitcoin is like gold. He has also declared that while bitcoin might be a bubble, it is also a viable asset that can shield investors from uncertainties in the market.