Arbelos Markets, a principal liquidity provider in crypto derivatives markets, announced that it had raised $28 million in a mix of seed equity and debt financing led by Dragonfly Capital to build transparency-based trading infrastructure and offer bilateral and on-exchange liquidity in options and futures products. The investment firms Room40 Ventures, Selini Capital, and Breed VC, corporate partners FalconX, Circle Ventures, Paxos, P2 Ventures (formerly Polygon Ventures), Deribit, Chorus One, StarkWare, and Immutable, and angel investors at Aevo, Cega, Talos, Amberdata, and Framework also participated in the significantly oversubscribed round. Arbelos Markets was founded in 2023 by veteran industry operators and derivative traders Joshua Lim and Shiliang Tang.
The crypto industry has been evolving from a retail-driven market to one dominated by sophisticated Wall Street firms. And these institutional investors have outgrown basic spot transactions and are demanding the types of derivative instruments, hedging programs, and structured products that are employed in more traditional financial markets. Simultaneously, a continuous stream of DeFi innovation has created a category of passive liquidity pools and yield products that inherently embed optionality and duration risk.
But the industry-wide credit crisis of the last two years has hollowed out crypto market structure and impaired many of the core players servicing derivatives liquidity. And there is a growing and unmet need for a trusted principal dealer that can properly price, manage and distribute risk across centralized and on-chain venues and amongst the wide spectrum of bilateral market participants.
In the first six months since launching, Arbelos Markets has emerged as a top-five liquidity provider globally in options block liquidity with total derivatives trading volume exceeding $25 billion notional across bilateral, on-exchange and on-chain orderbook and RFQ channels. The company plans to use the new funds to improve its quant trading infrastructure further, hire more talent, and expand its access to new markets and its range of products.
The Transparency Engine is a proprietary technology delivering real-time visibility into Arbelos Markets’ risk profile, balance sheet and counterparty exposures, providing provable trust to a marketplace that desperately needs it. Counterparties are increasingly demanding transparency and verifiability from their trading partners, largely as a response to major lapses in crypto’s previous market cycle.
Arbelos Markets is being led by a proven team with a strong network of client relationships and prior success scaling derivatives trading businesses at major crypto-native platforms like LedgerPrime, Galaxy Digital, Genesis and traditional financial services firms like Goldman Sachs, Merrill Lynch, and UBS. The team is composed of experienced traders and operators with coverage across high-touch franchise trading, electronic market making, exchange arb and quantitative risk modeling.
There is over $100 billion of institutional capital committed to crypto capital markets today. Those assets need servicing in the form of customized hedging instruments, systematic strategies, structured products, and programmatic liquidity. Arbelos Markets will continue to fulfill this market need by providing transparent, global liquidity to its partners 24/7.
KEY QUOTES:
“With crypto assuming its role as an investable asset class in macro portfolio allocations, it needs a new type of capital markets firm: a smart principal risk-taker with a strong balance sheet and a flexible product set to underwrite the fast-moving crossover risk between the underlying technology and the financial markets built on top. Arbelos is replacing the pre-FTX, reputational-trust based bilateral trading system with one based on provable trust, powered by our proprietary Transparency Engine and built by traders and quants that are equally fluent in crypto market structure and traditional financial engineering.”
“Sunlight is the best disinfectant: Arbelos’ push for greater transparency will force a higher standard of risk underwriting across the board. We hope to create new market conventions around bilateral trading and collateral management that will enable more efficient risk transfer in our asset class.”
– Arbelos Markets co-founder and CEO Joshua Lim
“Arbelos is the right team at the right time to build the next dominant crypto capital markets franchise and they are doing so with a unique focus on trust and transparency in a previously opaque market. Josh, Shiliang and their team are combining their experience building wildly successful businesses in crypto derivatives with a modern best-in-class tech stack and a client-first approach that will allow them to compete and win against the biggest incumbents in the space.”
– Rob Hadick, general partner at Dragonfly Capital
