Something remarkable happened in Virtu Financial's Q1 2024 earnings call. While everyone focused on the record performance in ETF Block market making, a silent revolution was unfolding. Virtu, a firm once hesitant about the volatile world of crypto, has quietly become a dominant force in the burgeoning Bitcoin ETF market. And this shift, largely overlooked by analysts, points to a potentially massive, long-term revenue driver for the company.

For years, Virtu's narrative centered on market making in traditional assets, leveraging its technological prowess and operational efficiency to capture minuscule profits across millions of trades. Crypto, with its inherent volatility and regulatory uncertainty, was approached with caution. But the launch of spot Bitcoin ETFs in the US fundamentally changed the game.

Doug Cifu, Virtu's CEO, acknowledged this transformation, describing crypto as a "new asset class within our non-customer market making business." This isn't just lip service. The numbers tell a compelling story. While Cifu wouldn't disclose precise figures, he confirmed that crypto contributed a "couple of hundred thousand dollars a day" to Adjusted Net Trading Income (ANTI), a figure comparable to the record-breaking ETF Block performance. This positions crypto as a significant and consistent contributor, not just an episodic windfall.

What's even more intriguing is Cifu's emphasis on the integrated nature of Virtu's crypto strategy. He sees market making in Bitcoin ETFs, futures, and the spot market as interconnected, much like their approach to gold. This holistic strategy allows Virtu to exploit arbitrage opportunities, creating a virtuous cycle of tighter spreads, increased liquidity, and, ultimately, greater profitability.

"The introduction of spot crypto ETF has transformed Virtu's role in the crypto ecosystem. The introduction of the ETF has played to Virtu's strength and enabled us to leverage our scale capabilities to service clients and the markets. - Doug Cifu, CEO of Virtu Financial"

Here's where the hypothesis gets interesting. Consider the scale of inflows into spot Bitcoin ETFs since their launch – over $14 billion net and $56 billion gross. These figures suggest substantial and sustained interest from a diverse range of investors, including high-net-worth individuals and RIAs, not just crypto enthusiasts. As Cifu astutely pointed out, " $14 billion of inflows didn't just come from retail investors interested in trading in and out of Bitcoin."

Hypothetical Projected Annual EBITDA from Crypto

The following chart presents a hypothetical projection of Virtu Financial's annual EBITDA from crypto, assuming a consistent daily contribution to ANTI.

Now, let's do some back-of-the-envelope calculations. If Virtu's crypto contribution of "a couple of hundred thousand dollars a day" persists, we're looking at an annualized revenue stream of roughly $73 million. Assuming a conservative 50% EBITDA margin, this translates to $36.5 million in annual EBITDA from crypto alone.

This is just the beginning. The market anticipates a flood of new crypto products: Ethereum ETFs, leveraged products, options, and futures, both domestically and internationally. Virtu, positioned at the heart of this ecosystem, is primed to capitalize on this expansion.

Think about it – Virtu, a company valued at roughly $3.6 billion, is poised to generate potentially tens of millions in annual EBITDA from a business segment it barely touched just a few years ago. This "silent revolution" in crypto could dramatically impact Virtu's long-term earnings power, potentially pushing the company towards its ambitious pro forma EPS target of $3.50 to $4 per share.

While analysts are understandably focused on the headline-grabbing ETF block performance, Virtu's quiet crypto dominance is a story worth paying attention to. It's a testament to the firm's ability to adapt, innovate, and capitalize on emerging opportunities. And as the crypto market continues its evolution, Virtu, once a hesitant observer, is now positioned to reap the rewards of this burgeoning asset class. Remember, a rising tide lifts all boats, and Virtu, firmly anchored in the crypto harbor, is ready to ride the Bitcoin wave.

"Fun Fact: Did you know that Virtu processes over 20% of all US equity trading volume every day? It's a silent giant, operating behind the scenes to ensure the smooth functioning of the financial markets."