A digital-assets brokerage founded by former employees of Goldman Sachs Group Inc. and Union Square Ventures says it’s solved one of the biggest challenges for traders of cryptocurrencies: how to short quickly.
Tagomi, which launched an electronic-trading service for crypto last year, is now allowing its clients to lend or borrow Bitcoin and Ethereum to facilitate long or short trades on the digital tokens. It plans to make the process for shorting easier by offering immediate access to multiple counterparties from a single platform.
Selling crypto short, to profit from a decline in its value, is currently an arduous and labor-intensive process wrought with pitfalls, as investors have to call a host of brokers and trading desks to find the best rates for borrowing and risk the market moving against them during the time it takes to put on a trade.
That’s an unpalatable situation for the growing cohort of ex-Wall Streeters now plying their wares in the volatile world of digital assets and looking to execute sophisticated strategies.
“In other asset classes this would be done with one click, but in crypto it’s very long and tedious to try and put a short on,’’ said Kevin Johnson, Tagomi’s chief operating officer, who previously worked at Citadel’s Aptigon unit.
Tagomi was founded by Greg Tusar, former head of electronic trading at Goldman; Jennifer Campbell, who was an investment analyst at Union Square Ventures; and Marc Bhargava, who previously did business development for Airbnb Inc.
The firm has numerous agreements in place with a variety of trading counterparties to borrow or lend crypto when needed, Tusar said.
The ability to short is an invaluable tool for traders, said Dennis Chou, director of trading at Pantera Capital in San Francisco. It’s not just for those who want to bet against digital assets, but can also be useful for relative-value trades, quantitative strategies and for hedging, he said.
“The crypto space is volatile, so if you can’t short, you’re missing part of the puzzle,’’ said Chou.