The entry of top market maker market maker Castle Securities into Bitcoin market is a symbol of the maturity of the Bitcoin market and a key step for traditional financial forces to compete for future asset pricing power. At the same time, for retail investors, it may mean the gradual weakening of their voice.

On February 25, Citadel Securities is seeking to become a liquidity provider for cryptocurrencies, according to Bloomberg. The company aims to join the list of market makers on various exchanges, including exchanges operated by Coinbase Global, Binance Holdings and Crypto.com, people familiar with the matter said. Once approved by the exchange, the company initially planned to set up a market maker team outside the United States.

This move not only marks a major strategic transformation of Castle Securities, but also indicates that the crypto market may usher in new changes.

Citadel - The King of Hedge Funds

Hedge Fund Citadel and Citadel Securities, which specializes in market making, were both founded by "programmed trading genius" Kenneth C. Griffin. In 1987, Ken Griffin, then 19 years old, started his trading career in a Harvard dormitory, and then founded his own investment group Citadel (formerly Wellington Financial Group) for $4.6 million in 1990.

Citadel's asset management scale as of the end of 2024 has reached US$66 billion. According to LCH Investments statistics, Citadel's net income has the highest since its launch to the end of 2024, reaching US$83 billion, surpassing D. E. Shaw, Millennium (Millennium Management Company), and Bridgewater Fund.

Cast Securities - the largest designated market maker on the New York Stock Exchange

Kenneth C. Griffin launched the market maker in 2002, and later split it out of Citadel and operated independently to become Citadel Securities. Today, Castle Securities has become one of the world's largest market makers, especially in the US capital market. Castle Securities' main business is to provide liquidity for traditional financial markets such as stocks, options, fixed income products, and ETFs. Through high-frequency trading technology and algorithms, it ensures that both buyers and sellers of the market can efficiently match transactions.

According to the official website, Castle Securities has a daily nominal trading volume of US$503 billion, accounting for about 35% of the share of retail stock trading in the United States, and is the largest designated market maker on the New York Stock Exchange (with a share of 65%.

The turning point in Castle Securities' fame in one battle was the GameStop short squeeze in 2021. At that time, American retail investors pushed up the stock prices of "meme stocks" such as GameStop through social media, causing institutions that shorted these stocks to suffer heavy blows. As the main market maker of the U.S. stock market, Castle Securities handles a large number of related transactions. In this incident, Castle Securities became famous by demonstrating its strong trading execution capabilities.

It is worth mentioning that Zhao Peng, CEO of Castle Securities, is a Chinese-American born in Beijing, was admitted to the Department of Applied Mathematics at Peking University in 1997, and later went to the University of California, Berkeley to study for a Ph.D. in statistics. He also worked as an assistant to summer quantitative research at Lehman Brothers. . After graduation, Zhao Peng joined Castle Securities. He started as a senior quantitative researcher and served as global market maker director and chief scientist. He was finally promoted to CEO in 2017.

Zhao Peng became CEO in 2017, promoted the company's international expansion, especially in the Asian and Chinese markets. In 2023, Castle Securities China Co., Ltd. obtained the Qualified Overseas Investor Qualification (QFII) and submitted an application to establish a securities company in China in January 2025.

Cast Securities: From waiting and trying the waters carefully to entering the crypto market

Cast Securities' journey to entering the crypto market, from the founder Kenneth C. Griffin comparing Bitcoin with the tulip bubble, to calling it "one of the greatest stories in the financial field", to frankly admitting that "repents to buying cryptocurrencies before they were early", has gone through the transformation from doubt, waiting and watching, testing to entering the market. This not only reflects its strategic adjustments to emerging markets, but also reflects the trend of traditional financial giants gradually accepting crypto assets.

Initially, the founder of Castle Securities was skeptical and wait-and-see about the crypto market. Cryptocurrencies were seen as high-risk, highly volatile asset classes in their early days, and regulatory uncertainty also discouraged many traditional financial institutions. Castle Securities is known for its solid position in the stock, options and fixed income markets, and naturally will not easily enter an immature field. Kenneth C. Griffin, as the founder, has been publicly skeptical about cryptocurrencies.

However, with the rapid development of the crypto market and the rising interest of institutional investors, Castle Securities' attitude began to loosen. After the GameStop incident, retail craze and market volatility have brought attention to the potential link between traditional finance and emerging assets. In the same year, trading volumes in the crypto market surged, and assets such as Bitcoin and Ethereum were gradually considered investable categories. In the same year, Kenneth C. Griffin also bought a rare copy of the US Constitution in 2021, beating the DAO organization ConstitutionDAO (ConstitutionDAO crowdfunded more than 10,000 ETH at that time).

Kenneth C. Griffin also said in an interview in 2022 that cryptocurrencies have been one of the greatest stories in the financial field in the past 15 years, and admitted that Citadel will be exposed to cryptocurrencies in the coming months.

In January 2022, Castle Securities announced that it had received $1.15 billion in minority equity financing from Sequoia Capital and Paradigm, an investment institution focusing on the cryptocurrency sector. "I look forward to Castle Securities expanding its technical expertise to the crypto market," Paradigm co-founder Matt Huang said at the time.

It is worth mentioning that after the UST decoupling incident in 2022 caused severe market fluctuations, rumors on the Internet alleged that Castle Securities and BlackRock borrowed a large amount of Bitcoin from Gemini and sold UST, causing a crash. In response, a representative of Citadel told Bloomberg that Citadel does not trade stablecoins including UST. Later in 2023, Terraform Labs also filed a motion to request Castle Securities to submit relevant transaction data for May 2022. In response, Castle Securities responded that it conducted two test transactions in March 2022 only, months before the UST crash, with a transaction value of only $0.13 and refuted Terraform Labs’ claims.

Starting the second half of 2022, Castle Securities has taken more substantial steps. In June, according to Bloomberg, Kelly Brennan, head of ETFs at Castle Securities, said that if crypto ETFs are subject to regulatory approval, they will be ready to make markets for these products. In addition, Castle Securities has launched institutional-level cryptocurrency exchange EDX Markets with Charles Schwab, Fidelity Digital Asset, Paradigm, Sequoia Capital and Virtu Financial, aiming to provide a safe, efficient and compliant trading environment for crypto-native companies and large financial institutions around the world. EDX Markets completed a financing in June 2023, when investors included Miami International Holdings, DV Crypto, GTS, GSR Markets LTD and HRT Technology. Then in January 2024, EDX Markets completed another Series B financing, led by Pantera Capital and Sequoia Capital.

In August 2022, Castle Securities also invested in Hidden Road Partners, a digital asset and forex brokerage firm. In February 2023, Castle Securities reported holding a 5.5% stake in crypto-friendly bank Silvergate Capital.

After entering 2023, signs of entry of Castle Securities are more obvious, such as the expansion, integration and internationalization of EDX Markets, and was selected by BlackRock as an authorized participant (AP) of iShares Bitcoin Trust (IBIT). Late last year, Kenneth C. Griffin said he regretted not buying cryptocurrencies a few years ago.

What is the impact of Castle Securities entering the market for crypto market making?

Castle Securities' transition from waiting to entering is not accidental. The institutionalization of the crypto market, the gradual clarity of regulation, and competitive pressure have jointly promoted this process.

This not only marks the further recognition of the crypto market by traditional financial giants, but also may reshape the pattern of the Bitcoin and crypto trading ecosystem. On the one hand, this symbolizes the extension of traditional financial infrastructure to the crypto field, which will further promote the transformation of Bitcoin from marginal assets to mainstream investment categories, especially among institutional investors, and may attract more traditional players such as hedge funds and pension funds to enter the Bitcoin market and allocate Bitcoin.

On the other hand, Castle Securities' market making may significantly increase the order depth and trading volume of the Bitcoin market, bringing higher transparency and stability to the crypto market. At the same time, Castle Securities provides liquidity for mainstream exchanges such as Coinbase and Binance, which will improve the trading experience of these platforms and attract more institutional funds to flow in.

Its entry may also trigger follow-up from other financial giants (such as Jane Street, etc.), intensifying competition in the crypto market making field. Of course, this will also squeeze the market share of existing crypto market makers. Small and medium-sized market makers may be marginalized because they cannot match Castle Securities' technical and cost advantages.

However, for retail investors, the entry of Castle Securities not only brings convenience but also hidden challenges. With the influx of institutional funds and professional market makers, the Bitcoin and crypto markets may shift from a "retail hot land" to the institutional home court, and the voice of retail investors may gradually shrink.

The above is the detailed content of As top market makers enter the crypto market, what impact will Castle Securities have on the industry?. For more information, please follow other related articles on the PHP Chinese website!