Trading Places: Tron soils Poloniex, Coinbase looks to embrace Wall Street again, and other exchange musings

How the mighty fall. 

Poloniex, the exchange formerly owned by Circle, continues to embarrass its storied brand, most recently going head-to-head on Twitter with the founder of cryptocurrency project DigiByte. The scene was classic crypto. 

Jared Tate, the founder of DigiByte, shared his lamentations over Poloniex being "in the hands of this Circus," referring to Tron founder Justin Sun's new financial stake in the exchange. 

"Poloniex has turned into a $TRX shill factory after making off with US customers sensitive data," he said. Indeed, Poloniex just a few days ago tweeted from its main account, "Let's Buy Tron." In response to Tate's criticisms, Poloniex clapped back.

"BTW, after careful review, we decided #DigiByte is not qualified for our listing standard. We will delist DGB soon."

(To be sure, US customer data is being held by Circle, not Poloniex.)

Circle tried

From the perspective of traditional markets, this type of back-and-forth is an utter embarrassment. Imagine the president of New York Stock Exchange engaging with one of the firm's listed companies in such a manner over social. It's an unfortunate fall from grace for Poloniex, which once commanded 60% of the market. 

I don't know why, but it reminds me of the fall of Louis Winthrope III, who in the totemic trading film Trading Places goes from being a wealthy, respected commodities broker to a Santa-suit clad, homeless drunkard. 

Sure, in 2017 Poloniex wasn't a pillar of American capitalism, but it was certainly a force in the nascent market — the Binance before Binance, if you will. To be sure, its fall started long before its spin-out from Circle to Sun. Still, Circle, in my opinion, worked hard to build an honest exchange. 

Was it a perfectly run business? No (Remember the Clam liquidity debacle?). But at least Jeremy and co. didn't resort to shilling Tron (or any specific tokens for that matter) to build market share. It wasn't too long ago that Circle tried to carve out a corporate account structure aimed at institutions, but it didn't move the needle on liquidity, according to sources. There was also an attempt to establish a liquidity incentive program. In a Hail Mary attempt to lure in more market participants from oversea, Circle moved some operations to Bermuda to serve non-U.S.-clients. None of it worked. 

The tie-up with Tron doesn't appear to be helping the situation. Despite Sun's shilling, and offering zero-fees, Poloniex's market share is beginning to trend downward. Most former Circle employees working there are looking for the door, one industry insider said. The person who used to manage their social media channels also quit in November. That might be contributing to the change in tone.

Times they are a changing

The tides of change aren't just sweeping Poloniex. At Coinbase, the San Francisco exchange is still licking the wounds from the crumbling of its institutional business. 

The Block has well-documented the exodus of talent from the firm's institutional business lines. Since 2018, scores of institutional teammates have left and the exchange abandoned two projects that could have made itself more attractive to Wall Street traders. Its ambitions to build a full-scale prime broker, led by former Instinet CEO Jonathan Kellner, were scrapped at the beginning of 2019 (as was Kellner's contract). And then in April, Coinbase announced it was closing its Chicago office, laying off the team that had been building out a new, Wall Street-grade matching engine. Sources say the team was months away from completing the project. Many of the employees who left Coinbase's institutional businesses described it as being directionless. 

Infighting between executive leadership contributed to that, sources have said. However it appears the firm is turning a new leaf.

Coinbase is looking for a new leader to batten down the hatches of its institutional business. 

In recent weeks, the firm has been looking to hire a head of coverage to develop a long-term strategy for the institutional business, according to a source. 

The person would "advocate for the interests of Coinbase’s institutional customers to optimize the experience, providing data to push prioritization of product feature requests" and work closely with the trading and custody product leads, according to a job ad. 

Gemini

Meanwhile, New York-based Gemini is seeking greener, more liquid pastures in Europe. 

The cryptocurrency exchange and custodian announced the hire of Julian Sawyer from Starling Bank as Managing Director overseeing the company’s operations in the United Kingdom and Europe.  

Sawyer is the co-founder and former chief operating officer of one of the UK’s largest mobile banks Starling Bank. According to Gemini’s press release, Sawyer played a crucial role in building out the bank’s payment systems, card operations, and customer service, among other business operations. During his time there, the bank doubled its customer growth in eight months, the press release says, and Gemini hopes to utilize his expertise in traditional finance.

A source familiar with the situation says Gemini is applying for the necessary licenses to operate across Europe. It's a move that could help its paltry volumes, which despite a very expensive marketing campaign, have barely budged over the last year, where they stand at sub-1%.