WEBVTT - The Ex-Jane Street Trader Who's Building a Multi-Billion Crypto Empire 0:00:10.840 --> 0:00:14.840 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.920 --> 0:00:19.520 I'm Joe Wisntal and I'm Tracy Alloway. Tracy, do you 0:00:19.560 --> 0:00:23.919 remember the conversation that we recently had with Doug Seafood, 0:00:23.960 --> 0:00:29.360 the Virtue CEO. Yeah, that was a great conversation. Looks funny, Yeah, no, 0:00:29.480 --> 0:00:32.040 that was that was a really fun one. Um. Obviously, 0:00:32.159 --> 0:00:35.280 that was a discussion about high frequency trading, electronic market 0:00:35.320 --> 0:00:39.000 making and listed equities and what's striking is ultimately, I mean, 0:00:39.080 --> 0:00:43.640 these are like profitable businesses, but you know they're in 0:00:43.680 --> 0:00:47.960 that business just scraping for like pennies or fractions of appennies, 0:00:48.040 --> 0:00:52.720 like these are pretty uh efficient, you know, pretty efficient markets. 0:00:52.760 --> 0:00:55.200 It's it's hard to ring more profit out of out 0:00:55.200 --> 0:00:58.560 of them. It's definitely a volume business. You're making like 0:00:58.760 --> 0:01:01.320 a penny on the trade aid, um from a tiny 0:01:01.400 --> 0:01:06.080 tiny like difficult to see spread, right, there's so many 0:01:06.120 --> 0:01:09.520 different players and as everyone's trying to get their margin, 0:01:09.640 --> 0:01:13.120 and so you know, I've said it before, if you 0:01:13.160 --> 0:01:17.320 know US listed equities in particular and probably elsewhere too, 0:01:17.440 --> 0:01:21.200 it's like they're pretty efficient markets. Yeah, I think that's right. 0:01:21.240 --> 0:01:23.720 I mean I think, um, well, we also just had 0:01:23.760 --> 0:01:26.360 an episode on the U. S. Treasury market, and I 0:01:26.440 --> 0:01:30.000 think you'd probably say stocks and maybe US treasuries are 0:01:30.160 --> 0:01:34.160 the most liquid markets out there. Um corporate bonds not 0:01:34.319 --> 0:01:37.559 so liquid. We've talked a lot about that on the show. 0:01:38.240 --> 0:01:41.160 So one thing we haven't actually talked about, I realized 0:01:41.240 --> 0:01:44.959 is we've done a few episodes about like crypto and bitcoin, 0:01:45.319 --> 0:01:49.400 but we've never really talked about like market structure in 0:01:49.440 --> 0:01:51.040 the space as far as I know, or at least 0:01:51.080 --> 0:01:54.960 not in depth. And my impression is even though the 0:01:55.080 --> 0:01:58.160 sort of like industry of this ecosystem that's been built 0:01:58.160 --> 0:02:01.960 around it several years old now, I think it's safe 0:02:02.000 --> 0:02:05.600 to say completely still on the other side of the 0:02:05.720 --> 0:02:09.560 efficiency spectrum from the space that like the for twos 0:02:09.600 --> 0:02:11.679 of the world are the citadel securities of the world 0:02:11.720 --> 0:02:14.880 are playing it. Yeah, I think that's a fair assessment. 0:02:14.919 --> 0:02:18.400 I mean, for one thing, you have just tons of 0:02:18.480 --> 0:02:22.040 platforms and the market is completely fragmented, and then you 0:02:22.080 --> 0:02:26.080 also have these big regional variations where like the price 0:02:26.160 --> 0:02:29.200 of bitcoin can be one thing in Korea and then 0:02:29.200 --> 0:02:32.239 a different thing on a platform in the States. There 0:02:32.240 --> 0:02:36.160 are a lot of arbitrage opportunities, I think, but Also, 0:02:37.040 --> 0:02:40.760 I can't imagine what it's like trading in that environment, 0:02:40.800 --> 0:02:43.359 and I think you probably have to think about costs 0:02:43.360 --> 0:02:46.680 and platform risk and other things a lot more than 0:02:46.720 --> 0:02:50.240 you would for certainly for equities. Right, So you have 0:02:50.280 --> 0:02:52.600 these sort of like massive different you know, all these 0:02:52.600 --> 0:02:57.120 different platforms, huge spreads potentially at times between what an 0:02:57.160 --> 0:03:02.639 asset trades at one place elsewhere, different regulatory regimes, different currencies, 0:03:02.760 --> 0:03:07.799 different banking systems. In theory though, those costs create big 0:03:07.840 --> 0:03:12.320 opportunities for savvy traders. Yeah, and we've heard some stories 0:03:12.360 --> 0:03:17.000 about people making millions um, possibly billions, just by arbitraging 0:03:17.080 --> 0:03:21.560 like a simple regional spread. Yeah. So today we're going 0:03:21.600 --> 0:03:25.680 to talk about crypto market structure with someone who I 0:03:25.720 --> 0:03:29.880 think is basically the perfect guest to discuss it because 0:03:29.919 --> 0:03:34.040 he previously was in the world closer to the sort 0:03:34.080 --> 0:03:37.480 of market making uh world that we've talked about with Doug. 0:03:37.880 --> 0:03:41.440 We're gonna be speaking with Sam Bankman Freed. He is 0:03:41.480 --> 0:03:44.520 the CEO and co founder of the crypto exchange f 0:03:44.560 --> 0:03:48.000 t X. He's also the CEO and co founder of 0:03:48.360 --> 0:03:52.320 the crypto hedge fund alimt Research, and previously to that, 0:03:53.120 --> 0:03:55.960 he was in the in the market making business. I 0:03:56.000 --> 0:03:59.000 think trading E t F at James Street, which is 0:03:59.080 --> 0:04:03.480 one of these trading shops that compete in that space 0:04:03.560 --> 0:04:07.600 of of you know, high tech market making for regulated 0:04:07.960 --> 0:04:13.040 listed assets. So has really seen both both ends of 0:04:13.320 --> 0:04:16.200 the spectrum, the perfect guest to talk about crypto market 0:04:16.240 --> 0:04:19.640 structure with us. Sam, thank you so much for joining us. Yeah, 0:04:19.640 --> 0:04:22.760 thanks for having me so, Sam, I've you know, read 0:04:22.760 --> 0:04:25.359 a little bit about your work. I take it you 0:04:25.520 --> 0:04:28.920 got you know, not this boom, but the last sort 0:04:28.960 --> 0:04:33.320 of like crazy cycle for cryptov I think is when 0:04:33.360 --> 0:04:37.120 you sort of made that switch over. I think you're 0:04:37.160 --> 0:04:40.320 at Jane Street at the time. Talk to us first 0:04:40.360 --> 0:04:43.599 about sort of like your background. How did you first 0:04:43.640 --> 0:04:46.440 get into finance and how did you find your way 0:04:46.600 --> 0:04:50.320 into the world of before we even get into crypto 0:04:50.400 --> 0:04:52.880 and make that John jump the world of the world 0:04:52.920 --> 0:04:56.000 of trading. Yeah, I it's interesting, you know, sorry for 0:04:56.040 --> 0:04:59.520 in retrospect, looking back on it, it seems like so 0:04:59.680 --> 0:05:02.240 weird it in contingent how some of these things happened, 0:05:02.520 --> 0:05:06.159 but also like kind of inevitable isn't quite the right word, 0:05:06.240 --> 0:05:09.359 but like you know, it worked out like kind of 0:05:09.360 --> 0:05:13.280 remarkably neatly given that, but you know, the context is, 0:05:13.320 --> 0:05:15.760 so I went to have I t is, you know, 0:05:15.800 --> 0:05:19.360 server math nerd, albeit a math nerd who was sort 0:05:19.400 --> 0:05:23.080 of coming, you know, into the middle of their college experience, 0:05:23.480 --> 0:05:26.720 having kind of reckoned finally with the fact that like 0:05:27.640 --> 0:05:30.479 I wasn't going to become a math professor. And I mean, 0:05:30.800 --> 0:05:34.680 they're probably pretty compelling arguments that that wasn't gonna be true. Um, 0:05:34.720 --> 0:05:38.279 but realizing that I really like doing academic research was 0:05:38.360 --> 0:05:40.520 maybe a little bit of a you know, a hole 0:05:40.600 --> 0:05:42.840 in the plan. So sol it's sort of like, didn't 0:05:42.880 --> 0:05:44.800 didn't really know it's gonna do with my life. The 0:05:44.800 --> 0:05:46.479 one thing that I sort of know is that I 0:05:46.520 --> 0:05:49.080 wanted to find out how I could have the most 0:05:49.080 --> 0:05:53.480 positive impact on the world. Um. I've been into utilitarianism 0:05:53.520 --> 0:05:56.400 for a very long time and and recently started getting 0:05:56.440 --> 0:05:58.839 into effective alters, which is basically this movement of like, 0:05:59.560 --> 0:06:01.320 you know, if you're trying to figure out how to 0:06:01.360 --> 0:06:04.760 impact the world, like try and quantify things, trying try 0:06:04.800 --> 0:06:07.520 and figure out what the most efficient way of doing 0:06:07.520 --> 0:06:10.200 that is, you know, what the ways that you know 0:06:10.240 --> 0:06:12.880 gives you the most bank for the book, and was 0:06:12.960 --> 0:06:15.600 kind of playing around with a lot of possible careers 0:06:15.640 --> 0:06:18.120 that were kind of all over the place. I had 0:06:18.120 --> 0:06:20.280 some conversations to people, and basically, so, you know, you 0:06:20.360 --> 0:06:23.040 go to work for for one of these charities or 0:06:23.480 --> 0:06:25.559 organizations that that you think are good or you could 0:06:25.640 --> 0:06:28.559 kind of donate to them, and you know, frankly, given 0:06:28.600 --> 0:06:31.720 like your strengths and weaknesses, you know, maybe maybe you're 0:06:31.760 --> 0:06:33.360 gonna be able to donate more to them than you'd 0:06:33.360 --> 0:06:36.760 be able to contribute working directly for them. Um and 0:06:37.240 --> 0:06:38.880 certain I thought about that. It seems like a pretty 0:06:38.880 --> 0:06:42.800 plausible argument, and so I sort of started looking into 0:06:42.960 --> 0:06:46.120 for the first time, well, okay, like if that's my goal, 0:06:46.120 --> 0:06:48.679 if my goal to figure out or at least maybe 0:06:48.720 --> 0:06:50.320 kind of like short term goal, how how can I 0:06:50.360 --> 0:06:53.920 make as much money and donate it as possible? Like 0:06:54.080 --> 0:06:55.680 where would that lead me? And sort of one of 0:06:55.760 --> 0:06:58.640 the obvious, you know, obvious things to look at was, well, 0:06:58.680 --> 0:07:00.640 how about finance. You know, I kind of heard that's 0:07:00.680 --> 0:07:02.920 what happens there. I didn't really know a whole lot 0:07:03.000 --> 0:07:06.920 else about it, but like, frankly, really was just like 0:07:07.600 --> 0:07:09.600 I know, it's sort of like in my junior didn't 0:07:09.600 --> 0:07:11.680 know what to do, and like just like applied for 0:07:11.720 --> 0:07:13.920 some internships. You know, I don't know, some friends headered 0:07:13.920 --> 0:07:16.280 in into James Street. They said, like, you know a 0:07:16.280 --> 0:07:18.080 lot of really good things. So it's just like, you know, 0:07:18.120 --> 0:07:21.280 sent in her resume, you know, really low conviction, and 0:07:21.320 --> 0:07:24.160 then she's like interview there and really liked the interviews 0:07:24.240 --> 0:07:27.240 and she found them really engaging, and then sort of 0:07:27.240 --> 0:07:30.800 one thing led to another. Interned at James Street Capital, 0:07:30.840 --> 0:07:34.560 you know after my junior year, really liked it and 0:07:34.560 --> 0:07:38.920 and then went back full time when I graduated. So 0:07:39.160 --> 0:07:43.560 what were you doing at Jane Street exactly? And I guess, um, 0:07:43.720 --> 0:07:47.760 what was the opportunity that you spotted in crypto because 0:07:48.160 --> 0:07:50.000 you know, it took a while for a lot of 0:07:50.040 --> 0:07:54.160 financed people to jump into that market, but um, you did, 0:07:54.600 --> 0:07:57.160 did it fairly early on. So what did you see 0:07:57.200 --> 0:08:00.240 and how did your Jane Street experience, um in form 0:08:00.280 --> 0:08:03.400 that decision? Yeah, I mean I think a Jeans Street 0:08:03.440 --> 0:08:07.320 really the goal was buying low and selling high. I know, um, 0:08:07.680 --> 0:08:10.040 but but but you know, I think that there is 0:08:10.080 --> 0:08:12.600 sort of like something there of like people think of 0:08:12.640 --> 0:08:15.400 like to use these you know, quant prompt firms on 0:08:15.440 --> 0:08:18.800 Wall Street and either they think through this old style 0:08:19.000 --> 0:08:23.160 you know, gigantic men in suits talking really loud, being 0:08:23.200 --> 0:08:26.040 grabbing shairs of stock from each other on you know, 0:08:26.120 --> 0:08:28.560 the stock exchange floor, or they think of sort of 0:08:28.560 --> 0:08:31.440 a bunch of nerds with like, you know, equations you 0:08:31.480 --> 0:08:34.400 could not fathom, you know, I mean, Jeezu is much 0:08:34.400 --> 0:08:36.640 more on the second end than the first end. You know, 0:08:36.720 --> 0:08:39.160 we were a bunch of a bunch of nerds basically 0:08:39.160 --> 0:08:42.280 trading trading stocks. But you know the truth is that 0:08:42.360 --> 0:08:45.160 like a lot of it is not sort of like 0:08:45.200 --> 0:08:48.280 this incomprehensible girbledy book. A lot of it is like 0:08:48.400 --> 0:08:54.920 really straightforward simple trade ideas, just don really carefully with 0:08:54.960 --> 0:08:59.120 a lot of supporting you know, evidence and ringing everything 0:08:59.160 --> 0:09:01.559 you can out of the trade, optimizing it as much 0:09:01.600 --> 0:09:04.320 as you can, thinking hard about it. You know. So 0:09:04.360 --> 0:09:08.720 I was treading internationally ETFs there um, which are you know, 0:09:08.760 --> 0:09:12.760 ETFs are funds which contain other other equities um, and 0:09:12.840 --> 0:09:15.520 the funds themselves trade on exchanges, and there's this classic 0:09:15.559 --> 0:09:17.679 arbitrage of well, you can sort of price the e 0:09:17.760 --> 0:09:19.880 t F based on you know, the sum of all 0:09:19.920 --> 0:09:22.080 the stocks that it don't you know, and and you 0:09:22.080 --> 0:09:24.080 can sort of you know, great and rogeem back and 0:09:24.120 --> 0:09:26.480 forth between them. And you know, if the e t 0:09:26.600 --> 0:09:29.360 F is trading below the stocks, you can buy the 0:09:29.400 --> 0:09:31.520 et F and sell the stocks. And I was training 0:09:31.559 --> 0:09:34.120 both the stock team buy the stocks, you know, merge 0:09:34.160 --> 0:09:35.439 them into the e t F and sell the e 0:09:35.520 --> 0:09:37.960 t F and do an arbitrage. So I was trying 0:09:38.000 --> 0:09:41.600 internationally ts, which are those types of products, but where 0:09:41.600 --> 0:09:44.880 the stocks don't trade on you know, on on NISY 0:09:44.880 --> 0:09:47.719 where they trade on foreign stock exchanges on you know 0:09:48.120 --> 0:09:51.280 Green or or you know Indian or or you know 0:09:51.320 --> 0:09:55.560 the UK stock exchanges. And it's basically the same thing, 0:09:55.600 --> 0:10:00.360 except incredibly messy and complicated and intricate because get all 0:10:00.360 --> 0:10:02.760 these nice properties that fall out when you're training U 0:10:02.800 --> 0:10:05.520 S ETFs that you don't with foreign ones and just 0:10:05.559 --> 0:10:08.920 want to start. Is the et F itself is trading 0:10:09.320 --> 0:10:12.960 you know what PM New York time five days a week. 0:10:13.320 --> 0:10:18.240 You know, you take a n e TF on Korean stocks, right, 0:10:18.280 --> 0:10:21.040 and there's Korean stocks are trading, you know, I don't 0:10:21.040 --> 0:10:22.719 know whatever it is, like a A M two the 0:10:22.800 --> 0:10:25.680 three PM or whatever Korean time five days a weeken, 0:10:25.720 --> 0:10:29.839 those don't really even overlap. So whenever you're training d TF, right, 0:10:30.120 --> 0:10:32.560 it's it's it's this fund of stocks that haven't traded 0:10:32.559 --> 0:10:35.960 for twelve hours, and you can't just say, well, through 0:10:36.000 --> 0:10:39.240 the arbitrage stocks aren't trading, no price for them, And 0:10:39.360 --> 0:10:42.080 so that sort of opens this gigantic set you know, 0:10:42.160 --> 0:10:45.000 can of worms of like how do you think about 0:10:45.040 --> 0:10:48.400 these e t s? How to price them? And how 0:10:48.400 --> 0:10:51.240 do you understand exactly what they hold? Uh? And how 0:10:51.240 --> 0:10:54.880 do you understand the liquidity of the underlying stocks, how 0:10:54.880 --> 0:10:57.600 do you understand the fund itself the mechanisms behind it, 0:10:58.080 --> 0:11:00.560 and basically just be Hans is sort of like you know, 0:11:00.600 --> 0:11:05.480 somewhat intricate modeling problem and and I and that does 0:11:05.520 --> 0:11:07.480 sort of you know, what what we did was basically 0:11:08.160 --> 0:11:12.520 provided liquidity in those international ETF and and particularly kind 0:11:12.520 --> 0:11:16.480 of specialized in providing liquidity when it wasn't trivial, you know, 0:11:16.880 --> 0:11:19.960 not doing the single easiest trade because anyone can do 0:11:20.000 --> 0:11:22.880 that and that's super crowded, but trying to do even 0:11:22.920 --> 0:11:25.600 just the second easiest trade through the hardest trade, but 0:11:25.760 --> 0:11:27.920 being you know, trying to be out there twenty you know, 0:11:27.960 --> 0:11:30.680 not going for something. But whenever US markets broken, have 0:11:30.720 --> 0:11:34.240 as much liquidity as we could in those products given 0:11:34.280 --> 0:11:38.920 the constraints and the uncertainty of you know, what they represented, 0:11:39.400 --> 0:11:41.720 And yeah, that's that's sort of like what that desk 0:11:41.920 --> 0:11:43.720 and you know, which is the death stares on, you know, 0:11:43.760 --> 0:11:47.079 specialized in. So when you say that like the second 0:11:47.200 --> 0:11:49.760 easiest trade, what do you what exactly do you mean 0:11:49.760 --> 0:11:52.000 by that? And I'm glad you know it's funny. I've 0:11:52.040 --> 0:11:54.960 actually wondered about this exact question before, Like, Okay, a 0:11:55.040 --> 0:11:58.439 Korean ETF is trading during American hours when the underlying 0:11:58.480 --> 0:12:02.960 shares have stopped trading, So like what is this based on, 0:12:03.960 --> 0:12:06.760 you know, price relationships? Like you know, there's probably like 0:12:06.800 --> 0:12:10.800 some historical correlation between what the SMP does and what 0:12:11.600 --> 0:12:14.120 the COSPY does the following day, and sort of like 0:12:14.240 --> 0:12:17.920 imputing what those stocks would theoretically be doing during that 0:12:18.000 --> 0:12:21.120 time based on what the trading of other equities are happening. 0:12:21.120 --> 0:12:24.520 Like talk about that a little bit more. Yeah, totally. 0:12:24.559 --> 0:12:26.680 And I think that you're you're you're you're talking about 0:12:26.720 --> 0:12:28.959 really good things there. And I think that's sort of 0:12:29.000 --> 0:12:32.400 another takeaway there is like how do you start It's 0:12:32.440 --> 0:12:35.840 not by you know, waving magic wand and using native words. 0:12:36.080 --> 0:12:38.640 You start with literally the most sort of like intuitive, 0:12:38.679 --> 0:12:40.679 straightforward things you can think of. You know, it's like 0:12:41.080 --> 0:12:42.680 if you kind of think hard about this and have 0:12:42.720 --> 0:12:44.720 a lot of context, and then she like, I don't know, 0:12:44.760 --> 0:12:46.839 maybe I tried it this way you want. Honestly, that's 0:12:46.880 --> 0:12:48.959 probably a good start. You know, you're probably gonna do 0:12:48.960 --> 0:12:50.600 a lot better than someone who doesn't do that thing. 0:12:50.600 --> 0:12:53.040 It doesn't do anything at all, But you know whatever, 0:12:53.160 --> 0:12:55.839 twenty people can do that who have the setup and 0:12:55.880 --> 0:12:59.679 the liquidity and the capital and everything like that, and 0:12:59.720 --> 0:13:01.680 so and you have to do better. You know, that's okay, 0:13:01.800 --> 0:13:04.480 you know you've you've done better than than just no 0:13:04.480 --> 0:13:07.840 no modeling. But but there's there's enormous amounts of extensions 0:13:07.880 --> 0:13:10.199 that you can build on that. And it's all about 0:13:10.720 --> 0:13:13.560 acknowledging you're never going to be perfect, but trying to 0:13:13.600 --> 0:13:16.360 get you know, as good as you can. So, can 0:13:16.400 --> 0:13:20.400 you talk a little bit more about the crypto transition, 0:13:20.640 --> 0:13:23.480 Like what was the opportunity that you spotted just to 0:13:23.520 --> 0:13:27.240 circle back and what was um, I guess the shared 0:13:27.400 --> 0:13:30.320 skill set that you thought could be applied to the 0:13:30.360 --> 0:13:33.840 crypto market. You know, I love King Street and and 0:13:33.880 --> 0:13:37.000 by the way, I really really liked it there maybe 0:13:37.000 --> 0:13:39.640 the most notable thing about it was how much and 0:13:39.679 --> 0:13:41.160 how much I liked it, how much a lot of 0:13:41.160 --> 0:13:43.880 the people they're liked it. It was just a really 0:13:43.880 --> 0:13:46.880 good place, and it probably still is in just a 0:13:46.960 --> 0:13:49.280 number of different dimensions. And we just look at things like, 0:13:50.200 --> 0:13:54.480 you know, like employee satisfaction compared to competitors. You know, 0:13:54.520 --> 0:13:57.200 my sense is that's just off the charts. And again, 0:13:57.240 --> 0:14:00.000 you in in many cases just for kind of straightforward reason, 0:14:00.000 --> 0:14:01.960 it's you know, it's just like it does a good 0:14:02.120 --> 0:14:06.480 job of treating its employees well, giving them responsibility when 0:14:06.480 --> 0:14:09.640 it makes sense, and you know, guidance when they need it, 0:14:09.760 --> 0:14:12.320 and and you know all that. So so anyway, you know, 0:14:12.400 --> 0:14:15.480 I really liked it there, but after after about three 0:14:15.520 --> 0:14:18.600 and a half years, basically just felt like, um, like 0:14:18.640 --> 0:14:20.360 it was time to try my own thing. And I 0:14:20.400 --> 0:14:23.200 think the core of that came from just thinking about, 0:14:23.560 --> 0:14:25.240 you know, going back to to why I start in 0:14:25.280 --> 0:14:27.440 the first place, which was, how can you figure out 0:14:27.440 --> 0:14:29.920 how to have you know, as much positive impact as 0:14:29.960 --> 0:14:33.160 I can on the world, and you know, as much 0:14:33.200 --> 0:14:36.120 as more than just like a good amount. And so 0:14:36.280 --> 0:14:38.400 I really started thinking very clear about like, all right, 0:14:38.800 --> 0:14:40.520 is this the best thing I can be doing. And 0:14:40.560 --> 0:14:42.920 basically it came away feeling like I have a lot 0:14:42.960 --> 0:14:44.320 of things I want to try it with my life. 0:14:44.600 --> 0:14:46.720 I don't know what's what's going to end up being 0:14:46.760 --> 0:14:50.360 the right thing, but at least one of them might 0:14:50.440 --> 0:14:54.080 go extremely well and maybe not. There's there's a lot 0:14:54.080 --> 0:14:57.280 of risk in that, um, but so be it. And 0:14:57.360 --> 0:15:02.520 so you know, left and sort of like started trying 0:15:02.560 --> 0:15:05.080 things out. Um. And one of the first things that 0:15:05.080 --> 0:15:07.720 that that I looked at was like, you know, all right, 0:15:07.920 --> 0:15:11.640 like it's not the most imaginative thing ever, but have 0:15:11.760 --> 0:15:15.000 a crypto. And this was late It's when Crypto was 0:15:15.040 --> 0:15:19.360 really going through that that first gigantic public boom, and 0:15:19.720 --> 0:15:21.720 you know, this was the time when when I had 0:15:21.760 --> 0:15:25.200 sort of the mass retail appeal more so than ever 0:15:25.280 --> 0:15:28.080 before or or after. You know, to this point where 0:15:28.120 --> 0:15:29.800 you passed two people on the street and you see 0:15:29.800 --> 0:15:31.960 them talking with each other and you're like, they're probably 0:15:31.960 --> 0:15:36.400 talking about things. You know, She's is everywhere right, and 0:15:36.720 --> 0:15:40.520 it wasn't clear why she's completely captured the public's attention 0:15:40.720 --> 0:15:45.120 and imagination. In seventeen I mean, you know, the North 0:15:45.200 --> 0:15:47.480 Bricing Creas obviously was like a large part of that, 0:15:47.800 --> 0:15:49.960 it had a lot of the hallmarks of something that 0:15:50.040 --> 0:15:53.360 might be, you know, really an efficient system with you know, 0:15:53.600 --> 0:15:56.880 a big need for liquidity, which is basically gigantic demand 0:15:56.960 --> 0:16:00.560 all of a sudden growing really rapidly, you know, want 0:16:00.640 --> 0:16:04.640 the volume, lots of retail users, and not a lot 0:16:04.680 --> 0:16:07.040 of time to build up institutions, not a lot of 0:16:07.040 --> 0:16:09.360 time to build up liquidity, not a lot of time 0:16:09.400 --> 0:16:13.600 to build up systems that worked seamlessly. You know, it 0:16:13.680 --> 0:16:15.920 sort of felt like the thing that was decently likely 0:16:15.960 --> 0:16:19.960 to have very large volume and price discrepancies and just 0:16:20.120 --> 0:16:22.280 like not not really an a fliquidy prior to priding 0:16:22.280 --> 0:16:25.200 to that. So like, can you give a little comparison 0:16:25.760 --> 0:16:30.280 between a seventeen what you were seeing in trading internationally 0:16:30.320 --> 0:16:33.160 t F versus the spreads that you were seeing crypto 0:16:33.240 --> 0:16:36.080 and then also like, you know how twenty seventeen spreads 0:16:36.080 --> 0:16:41.680 and crypto compared to spreads and crypto. It's obviously whatever, 0:16:41.720 --> 0:16:44.760 there's there's you know, always whatever. Different situations have different spreads, 0:16:44.760 --> 0:16:47.400 blah blah blah. But but okay, fine ball parking it. 0:16:48.240 --> 0:16:50.240 I think you look at sort of like that, the 0:16:50.360 --> 0:16:53.480 like lowest margin trades you find in finance that the 0:16:53.560 --> 0:16:56.400 really purest h f T trades and the most competitive 0:16:56.440 --> 0:16:58.960 ones what to spread on those. So I've never really 0:16:58.960 --> 0:17:01.240 done pure h f T, but my sense is that 0:17:01.360 --> 0:17:03.880 the answer to this is, you know, you're talking about 0:17:03.880 --> 0:17:05.440 like a tenth of a penny to a hundredth of 0:17:05.480 --> 0:17:07.959 a penny or maybe even a thousandth of a penny, 0:17:07.960 --> 0:17:10.040 where a penny is is like about a hundredth of 0:17:10.080 --> 0:17:13.280 a percent on on the average stock, and so you 0:17:13.280 --> 0:17:16.280 know you're talking about like something even getting to like 0:17:16.320 --> 0:17:21.280 the one one million of the price level presents it's 0:17:21.359 --> 0:17:24.199 really really slim margins, right, And it's the kind of 0:17:24.200 --> 0:17:26.200 things that like seem like how can you make any 0:17:26.200 --> 0:17:27.960 real amount of money on that? Well, if you create 0:17:28.000 --> 0:17:30.320 you know, five percent of all volume of everything in 0:17:30.359 --> 0:17:33.000 the world every day, that adds up. Then you get 0:17:33.040 --> 0:17:37.000 to sort of like scale like quant trades with you know, 0:17:37.040 --> 0:17:38.600 what I was doing sort of being you know, an 0:17:38.600 --> 0:17:41.000 example where the right unit to talk about it and 0:17:40.960 --> 0:17:43.639 it's like a basis point and uh, and that that 0:17:43.760 --> 0:17:45.840 the hundredth of a percent. That's not that everything had 0:17:45.840 --> 0:17:48.879 exactly that amount of margin, but that was that was 0:17:48.920 --> 0:17:51.320 sort of the order of magnitude that like the industry 0:17:51.359 --> 0:17:53.680 talking there, sort of talking and like, are you making 0:17:53.720 --> 0:17:57.120 like one hundredth of a percent? Are you making half 0:17:57.119 --> 0:18:00.040 a hundreds of a percentery making like three percent? And 0:18:00.800 --> 0:18:02.600 you know, and in a hundreds of percent, you can 0:18:02.600 --> 0:18:06.479 think of it approximately is something like a penny on 0:18:06.560 --> 0:18:09.000 the average stone. So okay, now that's sort of like 0:18:09.840 --> 0:18:12.240 roughly the sort of margins that you're thinking about, right, 0:18:12.840 --> 0:18:16.080 And you know, occasionally you see things a bit bigger. 0:18:16.560 --> 0:18:19.399 Occasionally you'd be trying to scrape out anything you could, 0:18:19.920 --> 0:18:22.240 but but whatever that that's sort of like the level 0:18:22.240 --> 0:18:25.520 at which things at which competition tended to get. And 0:18:25.560 --> 0:18:29.200 then you get take Crypto, and it just had things 0:18:29.240 --> 0:18:32.239 I've never seen before or after, things that were just 0:18:32.800 --> 0:18:37.679 completely bananas, and I'll give you They're all over the place. 0:18:37.800 --> 0:18:41.080 It was sort of like a whole industry filled with 0:18:41.200 --> 0:18:45.040 implausibly big spreads. But to give you the biggest that 0:18:45.119 --> 0:18:48.359 I that I've ever seen, basically and biggest in terms 0:18:48.359 --> 0:18:50.840 of obviously, you know, you can make ten percent on 0:18:50.840 --> 0:18:53.680 a trade if you don't mind the total size available 0:18:54.000 --> 0:18:56.840 being seven dollars ever, right, and that's like sort of 0:18:56.880 --> 0:18:59.920 not interesting, right, like bias stick of gum and sell 0:19:00.000 --> 0:19:01.960 if someone kind of wants to stick a gum right now. 0:19:02.359 --> 0:19:05.760 But the real thing is finding traits are really good 0:19:05.800 --> 0:19:10.359 and really scalable. And so from that perspective for late 0:19:11.440 --> 0:19:15.199 early there's this really highly publicized thread called it and 0:19:15.240 --> 0:19:17.960 it's often called the Kimsey premium um And what was 0:19:18.000 --> 0:19:22.240 it was the price of bitcoins on creating scanatings. And 0:19:22.440 --> 0:19:25.040 at its heart there is huge man for crypto all 0:19:25.080 --> 0:19:28.200 over the world, but it wasn't equal everywhere, and there's 0:19:28.280 --> 0:19:32.520 even huger demand in a number of countries including Korea, 0:19:32.840 --> 0:19:35.640 then in in in many others to such a massive 0:19:35.760 --> 0:19:39.720 net bling of crypto from Koream users. And the koream 0:19:39.720 --> 0:19:42.679 one is also restricted currency. It means you can't just 0:19:42.760 --> 0:19:45.600 freely sell it. You can't freely get it out of 0:19:45.600 --> 0:19:48.440 the country, trade it for USD. You and all these 0:19:48.480 --> 0:19:51.480 Crean citizens trying to sell their Korean wand for bitcoins, 0:19:51.920 --> 0:19:54.359 and um, no one who could do much with the 0:19:54.440 --> 0:19:56.600 cream one. You know, it's not like other people just 0:19:56.680 --> 0:19:59.080 like selling bitcoins and deal with the current, get stuck 0:19:59.119 --> 0:20:02.720 with it. That spread got up to like at the peak, 0:20:03.040 --> 0:20:05.560 which say that pre and big wins started trading at 0:20:05.880 --> 0:20:09.119 you know, fifteen dollars, while every else in the world 0:20:09.119 --> 0:20:12.880 it was ten dollars. So that is a completely insane spread. 0:20:13.440 --> 0:20:15.360 But and this was the big catch. You get back 0:20:15.400 --> 0:20:18.800 to this restricting currency thing where sure you could turn 0:20:18.960 --> 0:20:22.240 you know, ten U S dollars into fifteen dollars worth 0:20:22.280 --> 0:20:26.480 of grand wand doing this, but then it's it's stuck. 0:20:26.520 --> 0:20:29.439 You're not regular clearly allowed to just really turn that 0:20:29.560 --> 0:20:32.720 grand wand back into US dollars. And so you know, 0:20:32.840 --> 0:20:34.640 if you really wanted to buy a lot of consumer 0:20:34.680 --> 0:20:37.359 goods in Korea, you could do it, but you can't 0:20:37.359 --> 0:20:40.639 sort of easily loop that arbitrage through. You get stuck 0:20:40.680 --> 0:20:43.000 at one end. And a lot of people tried to 0:20:43.000 --> 0:20:44.679 do this trade. Many found a way to do it 0:20:44.680 --> 0:20:47.280 for small size, very very hard to do it for 0:20:47.320 --> 0:20:49.320 big size, even though there are billions of dollars a 0:20:49.400 --> 0:20:52.880 day volume trading in it, because you couldn't all float 0:20:52.920 --> 0:20:57.080 the grand wand easily um for for non crypto and 0:20:57.080 --> 0:20:59.680 and so does serve a complication to it. And no 0:20:59.720 --> 0:21:02.919 one is known to practice for massive size. You know, 0:21:02.960 --> 0:21:04.560 there are a lot of people who are known to 0:21:04.560 --> 0:21:07.040 have practiced for small size. No one is known to 0:21:07.040 --> 0:21:09.680 have really been able to maximize the hell out of 0:21:09.760 --> 0:21:12.959 that one because of the regulatory concerns. And and this 0:21:13.080 --> 0:21:15.480 was sort of like the interesting thing down the road. 0:21:15.800 --> 0:21:19.879 There are worth these Japanese exchanges, and on the Japanese exchanges, 0:21:19.920 --> 0:21:23.000