BREAKINGVIEWS-Citadel crypto deal lucratively tames the frontier

By Pranav Kiran

TORONTO, Nov 21 (Reuters Breakingviews) - Ken Griffin is trying to tame cryptocurrency’s frontier. The founder of market-making giant Citadel Securities, alongside Jane Street and others, is investing $800 million in Kraken at a $20 billion valuation as it heads toward a public listing. Pairing with Griffin’s other big bet on providing liquidity for crypto trades could help to smooth out a still-clunky market. If digital speculation steps closer to traditional finance’s reliability, orders coursing through the system could also prove lucrative.

Cryptocurrency markets differ from old-world securities. In equities, brokerages and exchanges are typically separate. In crypto, they’re often under the same roof, with an exchange controlling both trading venue and order flow.

The market has remained fragmented between firms trying to grab the whole pie, since it’s still early days. This impacts trading efficiency. Just look at the spread, or the difference between bid and ask prices, on various coins. Even on widely-traded bitcoin, it stands at about double the spread of a liquid stock like Apple, according to S&P Global.

Kraken and peers like Binance and Coinbase COIN.O won’t be shoved aside, having strengthened their grip after capturing early retail demand. Citadel’s other investment, EDX Markets, helps to explain why it’s instead interested in getting involved. The firm doesn’t operate a brokerage or serve amateur traders. Instead, it aggregates liquidity from multiple market makers and offers it up to execute trades from elsewhere. If it can keep growing, perhaps by plugging into Kraken, scale might help to improve pricing, narrow spreads, and lead to more activity from big institutions leery of the status quo.

Of course, Kraken’s retail speculators could also be lucrative. Citadel has been a big winner from the rise of amateur stock traders, whose orders are typically more profitable to execute. It pays to access some of that flow; such payments show just how much more valuable uncoordinated daytrading in crypto could be. Research by finance professors Thomas Boulton and Thomas Shohfi indicates that market-makers are compensating brokerage Robinhood Markets 4.5 times more for crypto orders compared with options.

Backing Kraken could give Citadel a bigger presence at the next rising retail venue. The exchange is growing quickly: its revenue net of trading costs for 2025’s third quarter more than doubled to $648 million year over year. Granted, a sharp crypto sell-off, which has seen bitcoin fall 31% from its peak, could dent enthusiasm. If markets stabilize, though, other recent IPOs like Gemini Space Station GEMI.O and Bullish BLSH.N point to an encouraging path for Griffin’s next foray into the unruly digital world.

CONTEXT NEWS

Cryptocurrency exchange Kraken said on November 19 that it has confidentially filed for an initial public offering in the United States.

The company said on November 18 that it had raised $800 million at a $20 billion valuation, up 33% in under two months.

Investors including Jane Street, DRW Venture Capital and HSG led the primary tranche. Citadel Securities agreed to invest a subsequent $200 million at a $20 billion valuation.