High-Frequency Trading Firm Tower Research Capital Bets Big on Bitcoin

With institutional investors rekindling their interest in cryptos following US President Donald Trump's endorsement of the sector, a lesser-known division within the high-speed trading giant Tower Research Capital is discreetly ramping up its investments in digital assets.

One of Tower's own quant trading divisions, Limestone Trading, has reportedly increased its funding for its crypto trading activities. Bloomberg indicates that the US company has enhanced its infrastructure to facilitate transactions on global crypto exchanges more significantly.

The unit has become Tower's main approach for facilitating transactions in digital assets, owing to its strong reputation for employing machine learning techniques across various asset classes. Limestone employs over fifty individuals across its Gurgaon, Singapore, London, and New York offices.

Competition, including firms like Citadel Securities, is expanding its footprint in the industry. The asset class is expected to undergo a sustained recovery, bolstered by more favorable US regulations and renewed political backing.

In the wake of the FTX and Alameda Research collapse in 2022 and Binance's substantial $4.3 billion settlement with US regulators, Tower scaled back its engagement in the cryptocurrency sector over the subsequent two years.

In 2023, Bloomberg highlighted Tower as one of three undisclosed "VIP" clients entangled in a case initiated against Binance by the Commodity Futures Trading Commission (CFTC).

The situation has shifted positively due to the emergence of Bitcoin-backed exchange-traded funds (ETFs) in the US and President Trump's vocal endorsement.

Kaiko's research indicates that the depth of the cryptocurrency market, which refers to its ability to accommodate large orders with minimal impact on prices, has reverted to levels seen before the FTX crisis.

The decentralized structure of Tower, characterized by semi-autonomous teams, allows desks such as Limestone the freedom to operate independently. Reports indicate that Limestone's cryptocurrency operations primarily focus on spread trading across major exchanges, engaging in arbitrage, and facilitating market creation.

However, Limestone's proposal to increase personnel and reallocate funds for proprietary trading was declined.

The involvement of major Wall Street entities is intensifying the competitive landscape. Earlier this year, several major financial institutions on Wall Street emerged from the sidelines and strategized ways to expand their involvement in the cryptocurrency sector.

The expectation is that President Trump's backing for the industry will catalyze a surge in initial public offerings (IPOs), share sales, and convertible bonds.

Previously less engaged, Morgan Stanley is now actively seeking to generate interest in IPOs. Senior executives at Bank of America are currently deliberating a potential strategy to facilitate acquisitions for firms in the digital asset sector. Following its inaugural cryptocurrency transaction at the close of last year, Royal Bank of Canada is keen to broaden its operations.

Earlier this year, Bloomberg reported that Citadel Securities sought to establish itself as a key player on multiple exchanges. The exchanges in question encompass Binance Holdings, Crypto.com, and Coinbase Global.

In 2017, the prominent exchange-traded fund and corporate bond dealer Jane Street Group entered the cryptocurrency trading space.

Aiming to establish itself as a prominent player in the digital asset space, Jump Trading has launched a dedicated unit focused on cryptocurrency.

With the expectation of relaxed regulations under Trump's administration—the individual who has dubbed himself the "crypto president"—financial institutions strategically foster stronger connections with crypto companies.

Bullish, an operator of crypto asset exchanges backed by billionaire Peter Thiel, and Gemini, a cryptocurrency startup endorsed by the Winklevoss twins, are among the latest to consider an IPO this year.

For an extended period, achieving a public offering has been a target for both Circle Internet Financial and Kraken, a cryptocurrency exchange.

Citadel Securities, led by Ken Griffin, is gearing up to venture into the cryptocurrency liquidity sector. It anticipates that President Trump's backing for the industry will trigger significant growth for this asset class. This marks a significant shift from the company's previously conservative stance on engaging in cryptocurrency market-making.

In light of the lack of regulatory frameworks in the US, Citadel Securities has strategically avoided crypto exchanges popular among retail investors, thereby constraining its presence in the crypto trading arena.

With high-frequency trading firm jumping on the bandwagon, the narrative takes an interesting course, suggesting more interest in crypto as the digital asset sector navigates an extremely tense period for global markets.

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