Why we invested in OpenTrade

By Jay Wilson, Partner

Fintech

Posted
November 25 2024

We back visionary founders who can go all the way, aspiring for global leadership from day one. Those founders are innovating in markets that have the potential to define industries and build enduring companies to do so. With that in mind, we are absolutely delighted to announce our lead investment in OpenTrade’s $4m seed extension funding round.

OpenTrade is at the forefront of the digital money supply, enabling safe, compliant yield on stablecoins. It provides a white-label solution for customers globally such as exchanges, digital wallets, neobanks, remittance providers and other fintechs to offer their customers yield on USDC.

Crypto’s most exciting use case

Stablecoins as a category have exploded. While over a decade since the first stablecoin, takeoff of this new money supply started a little over 4 years ago.

Source: Artemis

Stablecoins are emerging as one of the most exciting use cases of digital assets. As a near frictionless medium of exchange with zero price volatility, they solve many of the technical problems of mainstream crypto currencies. A new global financial system is being built around this digital money, making U.S. dollars and instant payments accessible around the world, and simplifying the movement of money by reducing costs and the number of intermediaries involved.

Source: a16zcrypto

At c. $170bn, stablecoin market cap exceeds that of more than the GDP of 120 countries, stablecoins hold more U.S. Treasuries than German, and Q2 2024 stablecoin transaction volumes were 2x Visa’s and c. 20x Paypal’s. This market opportunity is hard to ignore.

Stablecoin usage is increasingly underpinned by real world use cases surpassing the use cases of “securities” like crypto currencies. For example Mercado Libre (the biggest ecommerce marketplace in LAtAm) offering customers access to digital dollars, Airtm (a digital dollar provider) working in Venezuela with the US government to create a humanitarian aid pipeline bypassing the controls imposed by the Maduro regime, and Lemon (an Argentinian fintech) enabling two million customers to spend USDC via the Visa network and send digital dollars to friends and family without fees.

Risk-adjusted return

Until now the market infrastructure to offer safe, compliant yield to holders of stablecoins has not existed. Our hypothesis is that it must, and will, become a key feature of the stablecoin ecosystem, as this is analogous to being able to earn a risk-adjusted return on dollars in the fiat world.

Source: OpenTrade

OpenTrade is the first platform to power safe, compliant yield products for Web2 and Web3 fintechs and their users. Transactions settle in seconds, interest can be earned immediately, funds can be withdrawn the same day, users earn predictable risk adjusted returns, and assets are fully secured in bankruptcy remote accounts with Tier 1 FIs – “it’s just a great product” as one customer put it.

Products are conceptually intuitive, allowing customers to earn 3.2% – 6.2% on stablecoins, the most competitive risk adjusted return.

Source: OpenTrade

A unique team to lead the charge

Any early stage investment is underpinned by the calibre of the early team. Dave and team are bringing a unique combination of skills that make them some of the few people in the world that can build a business of this complexity in this domain. They bring a strong track record of building, shipping, and scaling products in the digital asset and fiat world. Dave Sutter, founder and CEO, spent 6 years at Marco Polo, serving as the Chief Product Officer and Chief Strategy Officer and most laterly was Head of Network at Centre (JV between Coinbase and Circle). Jeff Handler, co-founder and CCO brings decades of commercial experience across the start-up world as well as being a blockchain assurance leader at PwC. Tom Nierman, co-founder and CTO based on the West Coast, has held leadership roles across companies like Google, Meta, Omniscience Corporation, and TradeIx. Max de Guillebon recently joined the C-suite as COO, has spent over 20 years in financial services, and was the founder and CEO of Zodia Custody. He then held senior roles at BNY Mellon and Ripple before joining OpenTrade.

“The job David and his team have done to successfully take their core product to market and secure high-profile partnerships is hugely impressive, especially given the business has only been operational for a short period of time.

“Stablecoin yield products are in high demand right now, but many businesses don’t know where to start in terms of building their own offering. That’s the gap in the market filled by OpenTrade who are building a core piece of infrastructure, offering a seamless and safe solution for partners to build and operate their own leading stablecoin yield products. I’m excited to work closely with David and the team on the next stage of their journey.”

Speed as the new competitive advantage

The funding enables OpenTrade to continue its incredible momentum, with only 2 quarters in full production it has processed >$100m in transaction volumes, launched 3 new yield products, added support for Avalanche, and achieved T0 (same day) withdrawals with no outside liquidity. AuM on OpenTrade’s platform is at an all time high as the early customers scale up and a wave of new partnerships are soon to be announced.

OpenTrade has real potential to own the category for providing safe compliant yield on stablecoins and become a core piece of market infrastructure. We look forward to working with the company and returning co-investors including a16z, CMCC, Circle, and Draper Dragon, in this next phase of growth.

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