DriveWealth, a $2.85 billion startup, is set to step into the world of crypto trading. This New Jersey-based company has helped popularize fractional trading by allowing Cash App to offer users slices of stock. DriveWealth has more than 100 partners across the world and 15 million investors.
Bob Cortright, the founder, and CEO of DriveWealth, said the company is acquiring a crypto firm that is established by Harvard-trained quants. DriveWealth will be launching two subsidiaries to handle and execute trades. In 2020, the startup surged from a valuation of $200 million to $2.85 billion in August with the support of SoftBank’s Vision Fund, Insight Partners, and Point72 Ventures.
Cortright said that through Crypto-Systems, DriveWealth will offer bitcoin and ethereum trading partners to in April or May. He explained that by owning an end-to-end crypto-trading system, the company hopes to bring greater transparency to digital-assets markets. Cortright believes it’s still the wild west in the crypto space as prices are all over the place. He said there is very little price discovery and little consistency. This needs to be changed.
Cortright pointed out that trading costs for crypto will collapse just as with retail participation in foreign exchange markets two decades ago. He believes its bound to happen as regulators get involved and competition rises. DriveWealth says it to be unsustainable as customers trading on Coinbase, across the transaction spread. Its all too much. Cortright said that as regulatory environments tighten, and customers get more focused on spreads and efficiency, one cannot continue to charge 200 basis points on transactions.
Coinbase has a complicated system, based on trade size and payment method, of charging retail customers with fees as high as 4.5% or more. The exchange also collects a spread on top of the transaction fees. Coinbase is testing a subscription model as pressure is expected to fall on the fees over the longer term. To become a commercially viable product, Cortright says these types of transaction costs are not helpful as it’s coming from the customers’ wallets.