FalconX’s acquisition of 21Shares on Oct. 22 will add prime brokerage to the crypto investment management firm that oversees more than $11 billion across dozens of exchange-traded products (ETP).
The deal, which has an undisclosed sum, merges prime brokerage infrastructure with one of the largest crypto ETP issuers, creating a vertical integration that could reshape how Bitcoin and Ethereum funds trade and track their underlying assets.
The acquisition comes five weeks after the Securities and Exchange Commission (SEC) removed the final regulatory barriers to spot ETFs tied to assets beyond Bitcoin and Ethereum, opening pathways for Solana, Dogecoin, and other altcoin products.
FalconX, valued at $8 billion in a 2022 funding round, has processed over $2 trillion in trading volume and serves more than 2,000 institutional clients.
The firm plans to combine its brokerage platform with 21Shares’ product lineup to accelerate the adoption of digital asset investment vehicles across U.S. and international markets.
Russell Barlow, CEO of 21shares, stated:
Founded in 2018 by Hany Rashwan and Ophelia Snyder, 21Shares operates the ARK 21Shares Bitcoin ETF (ARKB) in partnership with ARK Invest and the 21Shares Ethereum ETF (TETH), which enabled staking in 2025.
The firm’s European, UK, and Swiss exchange-listed catalog spans single-asset ETPs for tokens such as Solana, Avalanche, Chainlink, Polkadot, and XRP, as well as multi-asset products, including the Crypto Basket 10 Core and the Bitwise Select 10 co-branded fund.
FalconX’s acquisition of 21Shares primary market mechanics
Integrated prime brokerage plus issuer control changes who touches the primary market, how fast risk flattens, and what hedging costs.
When the issuer routes creations and redemptions through a prime offering credit, securities lending, derivatives, and OTC liquidity under one roof, market makers can hedge with a lower basis, cheaper borrowing, and real-time cross-margining.
That compression in the risk premium embedded in quotes narrows secondary-market spreads and tightens NAV tracking, particularly around the open and close and during volatile sessions.
Access broadens because more firms can act as authorized participants through the prime’s infrastructure.
Centralized onboarding, intraday financing, and straight-through in-kind workflows reduce minimum practical creation sizes and the working capital dealers must commit.
Lower operational friction means arbitrage triggers occur at smaller mispricings, pulling prices back to NAV more quickly and stabilizing premiums and discounts.
Inventory and funding gain efficiency. A prime’s lending book and internal client flows can supply borrow for shorts and source underlying coins for in-kind baskets, reducing hard-to-borrow squeezes that would otherwise widen spreads.
A single risk book, netting spot, perpetuals, and options against primary-market flow, allows dealers to pre-hedge blocks and internalize more risk, thereby shrinking their footprint on public markets and limiting slippage for large orders.
Price discovery tightens across venues. With one counterparty coordinating OTC crosses, primary creations, and exchange quoting, the secondary market relies more often on primary mechanisms instead of chasing futures or offshore liquidity.
That reduces tracking error and improves depth at the top of the book across listings in Europe, the UK, and Hong Kong, and in-kind redemptions prevent discounts from persisting during periods of stress where regulations allow.
The integration carries structural guardrails. Information barriers and clear conflict policies remain essential so that the prime’s client flow does not favor the issuer’s products or designated market makers.
Jurisdictional rules still govern whether in-kind mechanics, staking, or 24/7 windows are in operation.
But tighter hedging costs, cheaper borrowing, faster funding, and broader authorized participant access represent the operational levers that vertical integration pulls to compress spreads and deepen liquidity.
Source: https://cryptoslate.com/who-sets-the-price-now-the-11b-etf-design-that-could-change-btc-trading/
