Cryptocurrency markets in Asia are booming-today it is home to at least 80% of cryptocurrency transactions worldwide. Now, top U.S. cryptocurrency investors including Pantera Capital, Paradigm, Polychain, Coinbase, and Dragonfly are providing opportunities for a part of this market. They are investing $ 28 million in Hong Kong-based cryptocurrency trading company Amber at a $ 100 million valuation.
Amber was founded in 2015 when a team of five Hong Kong people in their 20s, four of them Morgan Stanley traders, formed a company called Amber AI. They initially used artificial intelligence algorithms to trade Chinese stocks and other securities, but they switched to cryptocurrencies in the summer of 2017, when there were huge arbitrage opportunities. For example, they can buy bitcoin in one transaction for $ 7,300, and then immediately sell bitcoin on another exchange for $ 7,700 for a 5% return.
"I remember we couldn't believe this was true after our first attempt," said Tiantian Kullander, 28, Amber's chief financial officer. "We come from the fixed income (bond trading) space, and you have to fight for every basis point." (One basis point equals 0.01%.) Kullander said that between October 2017 and December 2017, Amber received 100% every month To 200%, despite its total assets being only single digit millions of dollars.
The company makes a profit by trading its own funds and funds from cryptocurrency startups. Many new crypto companies have raised tens of millions of dollars through initial coin offerings (ICOs), and they turned to Amber to get returns on digital assets they had never used to finance their business. Kullander said that 2018 was a year in which Bitcoin dropped 70% to $ 3,800, with Amber trading volume of $ 50 billion and an average return of 40%. In addition to arbitrage, they also focus on market making-buying and selling cryptocurrencies quickly and earning a small “spread” or profit on each transaction.
Over the past 18 months, Amber has pursued a larger vision than running a lucrative trading company: becoming a technology company. Because cryptocurrency is an emerging industry, the sophisticated tools required by traders who want to pursue complex strategies have not been established.
Amber writes software to support its own trading, and like New Jersey startup Tagomi, Amber is trying to create a platform to serve large professional investors who need high technology. One way they do this is to link to dozens of exchanges so that they can route their customers' trading orders to markets that offer the best prices. Amber has also begun to provide more financial services, such as lending, so that investors can use borrowed funds for transactions, and it is possible to expand returns, options or financial securities, thereby giving investors greater leverage and pre-determined prices. Right to buy and sell assets. Last year, Amber dropped the name "AI" because it originally planned not to use artificial intelligence in its core business.
Kullander said that in 2019, Amber's revenue will be between $ 10 million and $ 20 million, with a net profit margin of more than 50%. His goal is to double revenue by 2020.
For a cryptocurrency startup with 105 employees, having a Hong Kong presence has two main benefits. First, being geographically closer to the world's largest exchanges-including Binance, Huobi, OKEx, and the Hong Kong Derivative Exchange Bitmex-has made it easier for Amber to establish relationships with trading venues and integrate its technology.
Second, the regulatory environment in Hong Kong is more friendly than the regulatory environment in the United States, as the uncertainty over whether the SEC considers certain cryptocurrencies as unregistered securities is putting heavy pressure on entrepreneurs. In 2018, the Hong Kong Securities and Futures Commission announced that cryptocurrencies are not securities, giving investors more peace of mind when buying digital tokens. Today, Amber and its customers, 80% of whom are in Asia, can trade more than 700 coins on up to 30 exchanges. Investors can trade slightly less than 30 digital assets on Coinbase, the most popular exchange in the United States.
Compared to what you have heard from American entrepreneurs and investors, Kullander's regulatory philosophy is more relaxed. An executive at cryptocurrency startup Origin X Capital once (in a leaked recording) claimed that Amber was engaged in a laundering transaction, in which one party, acting as both parties to the transaction (acting as buyer and seller), forged others to consider a given digital asset to be popular And trading is active. Kullander said Amber has never done a dishwashing deal. At the same time, "I'm not in the camp of those who think the dishwashing trade is very evil," he said. "In traditional finance, it is illegal to conduct a flush transaction. In crypto, it has attracted people's attention."
"We are not anti-regulatory, we may not be pro-regulatory. The most important thing is that regulation follows public trust. If you do the right thing, I don't think there is anything to worry about. So far, this strategy is not only for Amber It works, and it works for companies like Binance. "
The obstacle currently facing Asia is of course the coronavirus. All Amber employees in Hong Kong work from home. "The biggest obstacle is not being able to visit customers," Kullander said. Although this reduces communication efficiency, he believes that this will not affect the company's revenue. "This is the beauty of cryptocurrencies. You can enter these markets 24/7. We even see business pick up, maybe because everyone is sitting at home."