As top market makers enter the crypto market, what impact will Castle Securities have on the industry?

Author: KarenZ, Foresight News

The entry of top market maker Castle Securities into Bitcoin market maker 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, according to Bloomberg , Citadel Securities is seeking to become a liquidity provider for cryptocurrencies. 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 plans 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 market-making Citadel Securities are both founded by "programmed trading genius" Kenneth C. Griffin. In 1987, Ken Griffin, then 19 years old, started his trading career in the 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 at 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 DE Shaw and Millennium. (Millennium Management Company), Bridgewater Fund.

Castle Securities - the largest designated market maker on the New York

Stock Exchange

Kenneth C. Griffin launched the market maker department in 2002, and later split from 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' nominal trading volume is 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 (65% of the share).

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 in 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, born in the 1980s. He was admitted to the Department of Applied Mathematics at Peking University in 1997. Later, he went to the University of California, Berkeley to study for a Ph.D. in Statistics. Lehman Brothers serves as a summer quantitative research assistant. . 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.

After becoming CEO in 2017, Zhao Peng 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.

Castle Securities: From waiting and watching, trying the waters carefully

to entering the crypto market

Castle Securities' journey into the crypto market, from founder Kenneth C. Griffin's "Comparison of Bitcoin with Tulip Bubble" to calling it "one of the greatest stories in the financial field" to frankly admitting that he hadn't bought cryptocurrencies early ”, has gone through the transformation from doubt, waiting and watching, testing the waters to entering the game. 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 founders of Castle Securities were skeptical and wait-and-see attitude towards 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, as the crypto market develops rapidly and the interest of institutional investors heats up, Castle Securities' attitudes 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 it had received $1.15 billion in minority equity financing from Sequoia Capital and Paradigm, an investment in cryptocurrency sector. Paradigm co-founder Matt Huang said at the time: "I look forward to Castle Securities expanding its technical expertise to the crypto market."

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 in March 2022 alone, a few months before the UST crash, two test transactions were valued at just $0.13 and refuted Terraform Labs' claims.

Starting from the second half of 2022, Castle Securities has taken more substantial steps. In June, according to Bloomberg, Kelly Brennan, head of ETF 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 the institutional-level cryptocurrency exchange EDX Markets with Charles Schwab, Fidelity Digital Asset, Paradigm, Sequoia Capital and Virtu Financial, aiming to provide secure, efficient and safe, efficient and large financial institutions around the world. Compliant trading environment. 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' entry into crypto market making?

The transition from waiting to entering the market 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 hedge funds, Traditional players such as pension funds 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.