Two crypto firms have merged to form the go-to platform for the back-and-middle office needs of crypto investors.
Picks & Shovels and CoinVantage, a former unit of accounting firm MG Stover, are set to form Interchange, a firm that will provide over 100 clients with tools to support hedge funds, exchanges, and family offices. Matt Galligan, who co-founded Picks & Shovels, said he was first introduced to MG Stover's Matt Stover in February and it became clear in recent months that the firms would be stronger together. Picks & Shovels brings the portfolio management expertise, whereas CoinVantage brings the accounting and fund administration know-how.
Galligan said in an interview with The Block that institutions laid the foundation for entering the crypto market in 2018 and 2019 will be when businesses such as Fidelity's crypto brokerage unit and Bakkt's trading platform launch. That will support more investors such as hedge funds to enter the market and will increase demand for Interchange's offering. Galligan said the bear market hasn't had a negative impact on CoinVantages business. Even as hedge funds look to cut costs or raise capital to keep the lights on, Galligan says fund administration and accounting will not be areas firms will cut.
"It would balloon their costs in terms of the man hours they would have to spend to do it in-house," he said.
As for what comes next, Galligan said he expects the maturation of crypto investors capabilities to help propel the firm's future growth. Specifically, the entrance of so-called quants in the crypto market will increase the demand for supporting services which the firm can provide.
"In crypto there are not a lot of quants because the API for trade execution is horrendous. If I have a trade strategy running with 10 bots there is a lot of data to wrangle and I would have to slice and dice that to see if Bot A is outperformed by Bot C," he said.
The firm aims to capture all of this data, doing the math, and then trying to provide a source of truth in close to real-time that traders can leverage to make better trading decisions.
"We are trying to shine light on things where it is really dark," he said.
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