PrimeXLabs Investment Thesis

Links: PrimeXLabs, CoinFund Portfolio

Investment Thesis Summary

• Major opportunity as margin trading moves on-chain: On-chain interaction has overtaken that of centralized exchanges such as Binance and FTX. Margin trading for cryptocurrency has been primarily offered on-chain via perpetual futures contracts, rather than spot margin trading that leverages existing liquidity in AMMs.
• Novel mechanisms for assessing risk and credit: Using automated risk assessment models allows for leverage to be adjusted based on the risk profile of different assets.
• Cross-chain compatibility by default: By leveraging existing bridging solutions PrimeX unifies previously disjointed liquidity, improving the trading experience for users.

CoinFund is proud to have co-led PrimeXLab’s recent fundraise and we are specifically excited to see their novel technologies bring the leveraged on-chain trading experience to feature parity with that of centralized venues. Margin trading has been a major cornerstone of the cryptocurrency market for several years. However, margin trading volume has largely been confined to centralized exchanges such as Bitmex, Binance and FTX. These centralized venues have suffered a range of issues including poor compatibility for various ecosystems, less-than-perfect uptime among other issues. As DeFi has continued its rise in popularity since Summer 2020, it is a natural evolution to see margin trading move on-chain.

PrimeX, the exchange product being built by PrimeXLabs, is the next major innovation in on-chain margin trading. By settling trades directly on decentralized exchanges (DEXes), PrimeX can benefit from liquidity that is already present in Ethereum Virtual Machine-compatible blockchain ecosystems, while also enabling cross-margin trading, cross-DEX settlement, and cross-chain settlement.

Since mid-2020, the volume mix of cryptocurrency trading activity has steadily shifted from taking place mostly on centralized exchanges to occurring via decentralized applications powered by smart contracts. The trading volumes across decentralized exchanges and lending platforms have grown steadily, eventually overtaking most centralized counterparts. Margin trading, however, has only recently begun to see large adoption on-chain. As with any trading platform, a critical factor in user experience is the overall liquidity. Because of the difficulty in attracting liquidity to margin trading platforms, most have been restricted to using perpetual futures contracts rather than offering margin on spot trading. PrimeX is solving the liquidity problem by integrating directly with decentralized exchanges, and making use of the existing pools of deep liquidity present on these exchanges to settle trades. By integrating multiple DEXes at the same time, PrimeX can also find the best available options for a trade based on market conditions, in much the same way that DEX aggregators function for non-leveraged spot trading. Making use of existing liquidity limits the need for tokenomics-based bribes to incentivize liquidity to move to the platform.

In addition to connecting multiple DEXes in one environment, PrimeX will also pull together liquidity across the various blockchains themselves. Using pre-existing bridging solutions, traders will be able to seamlessly execute trades across chains that are compatible with the Ethereum Virtual Machine (including Ethereum, Moonbeam, Avalanche C-chain, etc.) in order to optimize their trades by composing liquidity from multiple ecosystems. Settling trades across multiple chains and multiple DEXes, PrimeX enables users trading on margin to gain access to the best prices and liquidity from a single interface.

PrimeX is also advancing margin trading technology by weaving together existing technologies and liquidity with novel mechanisms for assessing the risk of assets and using this information to determine the amount of leverage that should be possible to the trader while keeping the system safe. In addition the feature-set available to traders will be at parity with what is available on centralized exchanges, including limit orders, stop-loss and take-profit order types. PrimeX is also facilitating the growth of the exchange’s userbase by working closely with the teams of various layer 1’s, such as Moonbeam, that are planned to be integrated. he PrimeX team is made up of 25 professionals who are able to execute quickly and manage a large portfolio of integration partners, including layer 1’s and decentralized exchanges.

Over time on-chain activity is claiming a continually greater share of all cryptocurrency related activity and margin trading is not an exception. At CoinFund we’re excited to see PrimeX bringing spot margin trading fully on-chain by leveraging the already rich liquidity within decentralized exchanges and improve upon the current perpetual futures-based margin trading experience!

About CoinFund

CoinFund is a diverse, leading blockchain-focused investment firm founded in 2015, based in the U.S. Collectively, we have an extensive track record and experience in cryptocurrency, traditional equity, credit, private equity, and venture investing. The CoinFund strategies span both liquid and venture markets and benefit from our multidisciplinary approach that synchronizes technical cryptonative aptitude with traditional finance experience. With a “founders first” approach, CoinFund partners closely with its portfolio companies to drive innovation across the digital asset space.

Disclaimer

The content provided on this site is for informational and discussion purposes only and should not be relied upon in connection with a particular investment decision or be construed as an offer, recommendation or solicitation regarding any investment. The author is not endorsing any company, project, or token discussed in this article. All information is presented here “as is,” without warranty of any kind, whether express or implied, and any forward-looking statements may turn out to be wrong. CoinFund Management LLC and its affiliates may have long or short positions in the tokens or projects discussed in this article.

PrimeXLabs Investment Thesis was originally published in The CoinFund Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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• Source: https://blog.coinfund.io/primexlabs-investment-thesis-56ea7d7f085d?source=rss—-f5f136d48fc3—4