It is an extension of traditional finance into the crypto field, and also a contest for asset pricing power and a weakening of retail investors' voice.
Author: KarenZ, Foresight News
The entry of top market maker Citadel Securities into the Bitcoin market-making business is a sign of the maturity of the Bitcoin market, and a key step in the traditional financial forces' fight for future asset pricing power. For retail investors, it may mean a gradual weakening of their voice.
On February 25, according to Bloomberg, Citadel Securities is seeking to become a liquidity provider for cryptocurrencies. Sources familiar with the matter said the company aims to join the market maker lists of various exchanges, including those operated by Coinbase Global, Binance Holdings and Crypto.com. Once approved by the exchanges, the company initially plans to set up a market-making team outside the US.
This move not only marks a major strategic transformation for Citadel Securities, but also portends new changes in the crypto market.
Citadel - The King of Hedge Funds
Hedge fund Citadel and its market-making focused Citadel Securities were both founded by "quantitative trading genius" Kenneth C. Griffin. In 1987, the then 19-year-old Ken Griffin launched his trading career in a Harvard dorm room, and then in 1990 founded his own investment group Citadel (formerly Wellington Financial Group) with $46 million.
Citadel's assets under management had reached $66 billion by the end of 2024, and according to LCH Investments, Citadel's net profits since inception through the end of 2024 were the highest among top hedge funds, reaching $83 billion, surpassing D. E. Shaw, Millennium, and Bridgewater.
Citadel Securities - The Largest Designated Market Maker on the NYSE
Kenneth C. Griffin launched the market-making division in 2002, which was later spun off from Citadel to operate independently as Citadel Securities. Today, Citadel Securities has also become one of the largest market makers globally, particularly occupying a pivotal position in the US capital markets. Citadel Securities' main business is to provide liquidity for stocks, options, fixed income products, ETFs and other traditional financial markets, using high-frequency trading technology and algorithms to ensure efficient trade matching between buyers and sellers.
According to the company's website, Citadel Securities has a daily notional trading volume of $503 billion and accounts for about 35% of US retail stock trading, making it the largest designated market maker on the New York Stock Exchange (with a 65% market share).
Citadel Securities' breakthrough moment was the GameStop short squeeze event in 2021. At the time, US retail investors banded together through social media to drive up the prices of "meme stocks" like GameStop, inflicting heavy losses on the institutions that were short-selling these stocks. As a major market maker in the US stock market, Citadel Securities handled a large volume of related trades. In this event, Citadel Securities gained widespread recognition through its demonstration of powerful trade execution capabilities.
It is worth mentioning that Citadel Securities CEO Peng Zhao is a post-80s Chinese-American born in Beijing. He enrolled in the Applied Mathematics Department of Peking University in 1997, and later went to the University of California, Berkeley to pursue a doctoral degree in statistics. He also served as a summer quantitative research assistant at Lehman Brothers. After graduation, Peng Zhao joined Citadel Securities, starting as a senior quantitative researcher and working his way up to global head of market making, chief scientist, and finally CEO in 2017.
Since becoming CEO in 2017, Peng Zhao has driven the company's international expansion, particularly in the Asian and Chinese markets. In 2023, Citadel Securities China was granted a Qualified Foreign Institutional Investor (QFII) license, and in January 2025 it submitted an application to establish a securities company in China.
Citadel Securities: From Observation and Cautious Exploration to Entry into the Crypto Market
Citadel Securities' journey into the crypto market has evolved from the founder Kenneth C. Griffin's comparison of "Bitcoin to the tulip bubble", to calling it "one of the greatest stories in the financial field", and then to admitting "regret for not buying cryptocurrencies earlier". This reflects not only its strategic adjustment to the emerging market, but also the trend of traditional financial giants gradually accepting crypto assets.
Initially, Citadel Securities' founder held a skeptical and cautious attitude towards the crypto market. Cryptocurrencies were seen as a high-risk, high-volatility asset class in their early days, and regulatory uncertainty also made many traditional financial institutions hesitant to venture into this immature field. Citadel Securities, known for its solid position in the stock, options and fixed income markets, naturally would not easily enter a domain that was still not fully developed. As the founder, Kenneth C. Griffin had publicly expressed skepticism about cryptocurrencies.
However, as the crypto market developed rapidly and institutional investor interest heated up, Citadel Securities' attitude began to soften. After the GameStop event, the retail frenzy and market volatility drew attention to the potential connections between traditional finance and emerging assets. That same year, crypto market trading volume surged, and assets like Bitcoin and Ethereum were increasingly seen as investable. In 2021, Kenneth C. Griffin also bid over $43 million to win a rare copy of the US Constitution, defeating the ConstitutionDAO (which had crowdfunded over 10,000 ETH at the time).
In a 2022 interview, Kenneth C. Griffin also stated that over the past 15 years, cryptocurrencies have been one of the greatest stories in the financial field, and admitted that Citadel would be exploring cryptocurrencies in the coming months.
In January 2022, Citadel Securities announced a $1.15 billion minority stake investment from Sequoia and Paradigm (a crypto-focused investment firm). Paradigm co-founder Matt Huang said at the time: "We look forward to Citadel Securities extending their technological expertise into the crypto markets".
It is worth mentioning that after the UST de-pegging event in 2022 and the resulting market turmoil, there were rumors that Citadel Securities and BlackRock had borrowed large amounts of Bitcoin from Gemini and sold UST, triggering the collapse. However, a Citadel representative told Bloomberg that Citadel does not trade stablecoins including UST. Later in 2023, Terraform Labs also filed a motion requesting Citadel Securities to submit trading data from May 2022. In response, Citadel Securities stated that it only conducted two test trades worth $0.13 in March 2022, several months before the UST collapse, and refuted Terraform Labs' claims.
Starting in the second half of 2022, Citadel Securities took more substantial steps. In June, according to Bloomberg, Citadel Securities' ETF head Kelly Brennan said the firm would be ready to make markets in crypto ETFs if they receive regulatory approval. Additionally, Citadel Securities has partnered with Charles Schwab, Fidelity Digital Asset, Paradigm, Sequoia Capital and Virtu Financial to launch the institutional-grade crypto exchange EDX Markets, aiming to provide a secure, efficient and compliant trading environment for crypto-native companies and global financial institutions. EDX Markets completed a funding round in June 2023, with investors including Miami International Holdings, DV Crypto, GTS, GSR Markets LTD and HRT Technology. It then completed a Series B round in January 2024, led by Pantera Capital and Sequoia Capital.
In August 2022, Citadel Securities also invested in the digital asset and foreign exchange brokerage firm Hidden Road Partners. In February 2023, Citadel Securities reported holding a 5.5% stake in the crypto-friendly bank Silvergate Capital.
After entering 2023, Citadel Securities' involvement has become more apparent, such as the expansion, integration, and internationalization of EDX Markets, and being selected as an authorized participant (AP) for BlackRock's iShares Bitcoin Trust (IBIT). At the end of last year, Kenneth C. Griffin stated that he regretted not buying cryptocurrencies a few years ago.
What impact will Citadel Securities' entry into crypto market making have?
Citadel Securities' transition from observation to participation is not accidental. The institutionalization of the crypto market, the gradual clarification of regulations, and competitive pressure have collectively driven this process.
This not only marks the further recognition of the crypto market by traditional financial giants, but may also reshape the landscape of the Bitcoin and crypto trading ecosystem. On the one hand, this symbolizes the extension of traditional financial infrastructure into the crypto field, which will further drive the transformation of Bitcoin from a marginal asset to a mainstream investment category, especially in the acceptance of institutional investors, which may attract more traditional players such as hedge funds and pension funds to enter the Bitcoin market and allocate Bitcoin.
On the other hand, Citadel 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, Citadel Securities provides liquidity to mainstream exchanges like Coinbase and Binance, which will improve the trading experience on these platforms and attract more institutional capital inflows.
Its entry may also trigger the follow-up of other financial giants (such as Jane Street), 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 due to their inability to match Citadel Securities' technological and cost advantages.
However, for retail investors, Citadel Securities' entry brings both convenience and challenges. With the influx of institutional capital and professional market makers, the Bitcoin and crypto market may shift from a "retail playground" to an "institutional arena", and the voice of retail investors may gradually diminish.
References:
https://www.bloomberg.com/billionaires/profiles/kenneth-c-griffin/
https://36kr.com/p/2400302300962948
https://archive.nytimes.com/dealbook.nytimes.com/2011/08/11/citadel-chief-gives-up-dream-for-investment-bank/
https://baike.baidu.com/item/%E8%82%AF%C2%B7%E6%A0%BC%E9%87%8C%E8%8A%AC/14092927
