Arbelos Markets, raises $28M led by Dragonfly Capital

Arbelos Markets, a crypto liquidity provider, has successfully secured $28 million in a seed funding and debt financing round.

Dragonfly Capital spearheaded the round, with Circle Ventures, Aevo, Polygon, Deribit, Immutable, and other investors also joining in. “Arbelos is replacing the pre-FTX…trading system with one based on provable trust,” stated Joshua Lim, Co-founder and CEO of Arbelos Markets, on Wednesday.

Arbelos dares a rich entrance into the market

Joshua Lim and Shiliang Tang, two experienced individuals in the crypto industry, are working towards creating a revolutionary trading platform. Their goal is to cater to the increasing influx of institutional money in the sector, while also learning from past mistakes and ensuring a smooth journey ahead. 

Arbelos Markets, their company, offers liquidity on trades to various firms such as hedge funds and venture capital firms. They act as the counterparty for popular products like options and futures.

The fundraising involved seed equity and debt financing, with the support of crypto venture capital firm Dragonfly Capital. Several investors, including investment firms Room40 Ventures, Selini Capital, and Breed VC, as well as corporate partners FalconX, Circle Ventures, Paxos, P2 Ventures (previously Polygon Ventures), Deribit, Chorus One, StarkWare, and Immutable, along with angel investors at Aevo, Cega, Talos, Amberdata, and Framework, participated in the funding round, according to the press release.

The investment took place amidst the ongoing recovery of the digital asset industry following the crypto credit meltdown of 2022, which resulted in the downfall of several companies. Additionally, as the asset class continues to develop, it is attracting a growing number of sophisticated and established participants, resembling traditional financial markets and moving away from its initial focus on retail investors.

Prior to launching Arbelos in late 2023, Tang held the position of chief investment officer at LedgerPrime, a quantitative digital asset investment firm. Meanwhile, Lim served as the head of trading strategy at Galaxy and also held the position of head of derivatives at Genesis, a now-defunct crypto lender that unfortunately faced financial difficulties during the credit meltdown.

According to Lim, the lack of transparency played a significant role in the cryptocurrency credit crisis. Certain companies were found to be presenting financial reports that were either outdated or fabricated, concealing the actual risks from their creditors.

The company plans to address this issue by introducing a “transparency engine” that allows clients to verify Arbelos’ risk profile, balance sheet, and counterparty exposure in real time.

The implications to the market

While blockchains are known for their transparency, the crypto industry still has a lot of work to do in establishing trust, particularly in the realm of trading. Questionable management decisions and conflicts of interest led to the downfall of several major players in the crypto industry, such as the hedge fund Three Arrows Capital and Alameda Research, helmed by Sam Bankman-Fried. This triggered a chain reaction that the sector is still grappling with.

Arbelos, incorporated in the British Virgin Islands, strives to address the aftermath of the market turmoil by catering to the liquidity and hedging requirements of astute investors through the use of crypto derivatives and options.

The crypto industry started in January 2009 with the launch of Bitcoin, and early exchanges provided spot trading of this new asset. With the sector’s growth and the emergence of new cryptocurrencies, trading has become increasingly sophisticated. 

The industry now mirrors traditional markets by using more complex instruments known as derivatives. These derivatives enable the creation of financial contracts based on underlying price movements.

This position has gained significant significance due to the rising interest from institutions in crypto derivatives, which aligns with the strong recovery of the digital asset market this year. In April 2024, the total open interest for bitcoin futures and perpetual swaps hit an all-time high of $29 billion, reflecting a remarkable 160% surge compared to last year.