The Pomp Letter
The Pomp Letter
The Exchange Wars Are Heating Up

The Exchange Wars Are Heating Up


To investors,

Robinhood announced this morning they are buying crypto exchange Bitstamp for $200 million. This consolidation in the exchange space is a continuation of what I wrote to this group last week. As a reminder, the big traditional exchanges want to get in the crypto game.

Here is an excerpt from that letter:

“Yesterday, the NYSE President stated the following at the Consensus conference in Austin, Texas:

“If there was clear regulatory guidance [in the U.S.], it would be an opportunity to look at…The fact that you've seen $58 billion or so come to the ETFs has been a strong sign that the market is looking for regulation in traditional structures. So, hopefully, the [U.S. Securities and Exchange Commission] saw the inflows and said, 'Hey, this makes a lot of sense,' considering bitcoin ETFs have been a tremendous success.”

If you don’t think the major stock exchanges want in on the action, you are severely mistaken.

Coindesk’s Krisztian Sandor pointed out:

“NYSE's U.S.-based rival, the Chicago Mercantile Exchange (CME), a giant in regulated crypto futures trading, is planning to launch spot crypto trading to clients, the Financial Times reported earlier this month.”

This is one of the last giants to slay for the crypto industry. If the legacy exchanges allow for spot trading of these assets, there will be an incredible increase in the capital that flows into the industry.”

These traditional exchanges are trying to find areas for expansion, but it doesn’t come without risk. Earlier this week the Texas Stock Exchange was announced, which wants to compete directly with the NYSE and Nasdaq. The New York Times’ Joe Rennison wrote:

“A start-up stock exchange headquartered in Dallas and backed by the financial powerhouses BlackRock and Citadel Securities is set to challenge the dominance of the New York Stock Exchange and Nasdaq in the listing and trading of companies and funds.

The Texas Stock Exchange, or TXSE, has raised roughly $120 million from more than two dozen investors, including BlackRock and Citadel Securities as well as some unnamed business leaders, according to a statement on Wednesday.”

So the legacy exchanges want to compete in the crypto sector. Startup stock exchanges want to steal market share from the traditional exchanges. The crypto exchanges, such as Coinbase, want to start stealing market share from the traditional markets. And companies like Robinhood or want a piece of the trading landscape as well, regardless of the asset class.

So why is Robinhood buying Bitstamp? According to Paige Smith at Bloomberg:

“The Bitstamp acquisition provides the Menlo Park, California-based company a greater presence outside of the US, as well as a boost to the firm’s crypto capabilities, which have bolstered Robinhood’s earnings. Bitstamp has licenses and registrations in European Union countries including Italy, Spain, the Netherlands and France, according to its website.

The EU’s first unified crypto legislation, called Markets in Crypto Assets, takes effect in January and license holders in member states will then have until July 2026 to obtain full MiCA permits. They can operate with existing licenses until then under a so-called “grandfathering clause.””

The exchange wars are upon us. We have already seen major startup players like FTX and Binance run into issues that derailed their plans. But there are still plenty of startup exchanges, both in the traditional market and the crypto market, which are gunning for their share of the ever-growing financial market.

Here are my predictions for what is going to happen:

  1. The legacy exchanges are going to rapidly add crypto assets

  2. The crypto exchanges are going to start adding traditional assets in this bull market

  3. We will call them all “exchanges” instead of traditional vs crypto

  4. The big players will start buying up the smaller players in an industry-wide consolidation / arms race

  5. The startup stock exchanges will struggle to compete with the incumbents, but there is a real chance of disruption from the current crypto exchanges — they have a differentiated product and momentum

  6. Investors won’t have loyalty to any exchange outside of where liquidity and best pricing exists

I am fascinated by what is happening in the exchange landscape. It will have significant impact on the future, especially if an exchange outside of NYSE and Nasdaq can dominate in stocks and crypto. Although Coinbase is the leader in crypto, Robinhood may have the best position given their mindshare, along with the penetration across assets.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Podcast — Anthony Pompliano

Matthew Sigel is the Head of Digital Assets Research and Portfolio Manager at VanEck.

In this conversation, we talk about bitcoin, ethereum, miners, global adoption, regulation, conversations VanEck is having with their clients, where opportunities exist, and how crypto and politics are intersecting with each other.

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VanEck’s Matthew Sigel Explains What The $100 Billion Asset Manager Is Doing In Crypto

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