FalconX faces a stress test after crypto crash

FalconX wants to be the prime brokerage of Web 3.0, the preserve of cryptocurrencies. And it was well on its way to getting there. Between 2018 and November 2021, the total cryptocurrency market cap zoomed from $100 billion to within touching distance of $3 trillion, in what was a very wild and volatile ride, carrying FalconX along.

At the peak of the cryptocurrency markets in 2021, it raised $50 million in a Series B round led by Tiger Global. Less than six months later, it raised another $210 million from Altimeter Capital and Sapphire Ventures, at a valuation of $3.75 billion. Things were looking good.

But the past month has been a reality check for FalconX and other prime brokerages of digital assets, particularly after the events of May 9. On that day, the TerraUSD (UST) stablecoin, which is pegged to the US dollar (1 UST is supposed to equal $1), went into free fall, and caused the bitcoin and crypto markets to crash, reducing the US Federal Reserve’s biggest interest rate hike in 22 years to a sideshow.