Crypto market maker CyberX raises $15 million led by Foresight Ventures

Crypto investment firm Foresight Ventures led a $15 million Series A round into digital asset market maker CyberX. 

The deal for the company, which saw its valuation lift to the “few hundred million dollar range” per an interview with founder Zack Fan, saw no other investors participate in the round.

He said that despite interest from other investors, the firm ultimately decided on a single investor as it shared a belief in building for the long-term in crypto.

“In general, we were pretty selective as to who we want to be an investor,” he said. 

CyberX’s raise follows several other market makers procuring capital in recent months. In November, Brussels-based Keyrock raised a $72 million Series B led by crypto payments company Ripple and decentralized market-making protocol Arrakis Finance announced a $4 million round last month. 

The core business model of crypto market making relies on offering a buy-and-sell price for an asset to platforms like exchanges. Typically, market makers earn revenue by charging higher selling prices than what they buy the asset for, pocketing the difference between the two — known as the spread.  

For CyberX, Fan said that it secured the capital primarily to improve its proprietary risk management framework which monitors on-chain and off-chain data in real-time. 

“This year there’s a lot of market turmoil and if you monitor that realtime, you can even tell if a centralized exchange is stressed or not by looking at on-chain data,” he said. 

Troubled market 

Market makers in crypto are currently operating under a time of significant pressure following the fall of crypto exchange FTX. Last year, leading firms such as GSR and Wintermute came under the microscope for possible exposure to the failed exchange, although they ultimately said their exposure was manageable.

Some market-making firms were hit particularly hard by FTX’s collapse. In one case, The Block reported in December that with the majority of funds tied up on the beleaguered exchange, market maker Auros filed for bankruptcy. 

With the fall of trading firm Alameda Research, which was closely aligned with FTX, there’s also talk of a so-called “Alameda Gap” in liquidity in the market. 

Fan said that the company did not have any exposure to FTX but did say that he noticed a change in the market post-Alameda. 

“After Alameda going down, there’s more of a need for a professional market maker,” Fan said. “And now especially on some of the smaller coins, the spread is actually bigger because there are less market makers in general.” 

With the funding from Foresight, the CyberX co-founder said that along with building out its risk management framework, a portion of the capital would go towards procuring regulatory licenses and further research and development into its trading capabilities. 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

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