Just as the prime brokerage business in crypto was starting to see some traction, the rug was pulled out from under it.
Why it matters: For the crypto market to go from a trillion to "trillions," it needs prime brokerage — the business that facilitates sophisticated trading and draws the Big Money crowd, like hedge funds.
The big picture: There is no crypto equivalent of the power prime brokers in traditional finance, Goldman Sachs and Morgan Stanley. None match their size, or offer a bundle of services as comprehensive.
Zoom out: The origin story for crypto prime brokerage is that it emerged, at first, to solve the market inefficiency of digital assets' price discrepancies across crypto exchanges.
Be smart: Lending enables leveraged trading — trading with borrowed money and using it to soup up potential returns.
The latest: But then Terra happened and Three Arrows Capital collapsed.
State of play: Crypto prime brokerage is now just order routing, without lending activity.
What to watch: With the third quarter in the rearview mirror, some institutions are plotting for an "all clear signal," according to Matt Hougan, chief investment officer at Bitwise Asset Management.
The bottom line: Prime brokerage will be key for crypto for when lending does return.
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