A group of former Morgan Stanley traders has turned their cryptocurrency venture into a unicorn by bringing Wall Street strategies to the brave new world.
Amber Group, founded in 2018, raised $100 million from investors, including DCM Ventures and Tiger Global Management, ramping up its valuation tenfold to $1 billion in just 18 months.
The Series B fundraising also includes China Renaissance Group, Tiger Brokers, Gobi Partners and existing backers such as Coinbase Global and Pantera Capital, Hong Kong-based Amber said.
The start-up is one of a crop of fledging companies developing financial services – from over-the-counter trading to derivatives and structured products – for professional cryptocurrency traders and investors.
Last month, Chinese cryptocurrency lender Babel Finance raised $40m with backing from Sequoia Capital China and Tiger Global, while Matrixport, started by Bitmain’s influential founder Jihan Wu, is also seeking a new capital injection.
Amber trades digital coins like Bitcoin and Ether using both client money and its own capital. The start-up manages about $1.5bn of trading capital and expects revenue to surge tenfold to $500m this year.
Five of Amber’s founders – Michael Wu, Tiantian Kullander, Wayne Huo, Tony He and Luke Li – worked together on Morgan Stanley’s fixed-income trading floor in Hong Kong. The sixth, Thomas Zhu, was a Bloomberg LP developer working to explore machine learning for trading.
In 2015, the group – back then all in their 20s – kicked off a side project to deploy algorithmic trading in Chinese stocks and index futures and later went full-time into cryptocurrency to capture arbitrage opportunities. They’ve since expanded Amber into a team of 300 people, with hires from places like Tencent Holdings and Goldman Sachs Group.
“Both trading and financial services should be more tech driven and more automated,” Mr Wu, Amber’s chief executive, said. “The strategy we do with Amber is always quantitative.”
Amber has been profitable since its first day in cryptocurrency and now has a net margin of more than 60 per cent, chief financial officer Mr Kullander said.
That’s largely thanks to its market neutral strategy, which is to trade on volatility instead of Bitcoin’s ups or downs, he said. The firm generated about $60m in revenue for the March quarter – and about the same amount for April alone, as more users came on board.
Bitcoin has shed more than 40 per cent in value since it hit a record $64,870 in April, after Chinese officials started a renewed crackdown on trading and mining activities of the world’s largest cryptocurrency.
At the end of 2019, the start-up raised $28m from cryptocurrency investors including Dragonfly Capital and exchange giant Coinbase at a $100m valuation. The founders say they still hold a roughly 60 per cent stake in the company after the latest round.
“Even if there’s a downturn in crypto, they are in it for the long run,” Kyle Lui, a partner with DCM ventures, which started its relationship with the firm as a client, said.