Crypto Companies Offering Life Line To Companies From Which They Were Formed
Cases of companies that outperform their mother companies are common in many industries. The occurrence also happens in the world of crypto as spin off companies become more prominent than the companies from which they originally came from.
One such case in the crypto industry is the story of trueEx and trueDigital. In 2017, Sunil Hirani, a financial heavyweight, and his firm trueEx set up a crypto company called trueDigital. The original firm, trueEx is a dealer to client swap execution platform. Since its inception, trueDigital has outperformed its mother company. Over the past two years, trueDigital has risen and launched certified Bitcoin swap contracts.
Contrary to how trueDigital’s trajectory has gone, trueEx is struggling under the weight of a number of failed lawsuits. The company has tried to sue various major companies in the swaps industry for close to ten years to no avail. Last week, trueEx announced it was closing shop and it surprised very few if any.
In an offspring eats mother twist, trueDigital has stepped up to purchase trueEx’s core assets which have gone on sale. These assets include the mother company’s derivatives trading license and investors who put their money in trueEx will be hoping the deal goes through and trueDigital becomes their savior. trueDigital has even taken in some of trueEx’s former employees and it is certain that it will be aiming to benefit from other parts of the failed business.
Confirming that trueDigital is looking to acquire any part of trueEx that can be profitable, the CEO of the former, Thomas Kim said that they are looking at anything that might be of interest. He said that his company seized the opportunity to acquire trueEx’s DCM and swap execution facility (SEF) registrations which is in line with his company’s strategic plan. The acquiring of these registrations shortens trueDigital’s registration efforts by a year.
This phenomenon is not unique to trueEx and trueDigital. Another case in the crypto industry is that of ErisX, a crypto exchange that came to be after the failure of Eris Exchange. Eris Exchange offered disruptive futures products in traditional finance.
Small margins and the excruciatingly slow progress resulted in the failure of Eris Exchange. ErisX took over after it was clear that Eris Exchange couldn’t survive in the market. Although ErisX has not had enough time to prove that it can handle large volumes, it did but out an exchange that was on its knees.
Why Does This Happen In Crypto?
The sweeping up of ailing companies in the crypto industry seems to occur because there is a general consensus that the demand for disgust assets will increase in the future. Also, such processes are easier to compete in the crypto industry than they are in conventional swaps.
Explaining this, Larry Tabb, founder of Tabb Group, said that the barriers of entry are lower in the crypto industry and there are no major incumbents to compete with. Overlaps in the regulatory bodies that managed by the CFTC also assists the smooth transition and completion of these processes.
Avoiding major incumbents has assisted both trueDigital and ErisX by propelling them forward in terms of the time they’ve taken to reach their current states. The two companies also share similar ideologies because the founders of trueEx and Eris Exchange, Sunil Hirani and Don Wilson, were partners in Digital Asset.
Trading Firms Looking To Delve Into The Crypto Market
More companies in traditional finance are looking to diversify their portfolio and dip into the fast frowning crypto sector. David Mercer of LMAX Exchange, which has a crypto subsidiary called LMAX Digital, said that he sees how crypto arms could become bigger than the traditional finance sector. He added that it comes as no surprise that trading firms are looking at their options in the crypto industry as they find new areas to compete in and hedge turmoil.
His sentiments can be reflected by the difference between the two companies David Mercer is involved in. It took LMAX Digital just five months to break even while the same process was completed in 3 years by the mother company. It therefore really isn’t much of a surprise that the crypto industry looks very attractive for trading firms.