1 00:00:10,640 --> 00:00:15,000 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:15,120 --> 00:00:18,840 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, do you 3 00:00:18,880 --> 00:00:22,880 Speaker 1: remember the recent episode that we did with Aaron Lammer 4 00:00:23,000 --> 00:00:27,800 Speaker 1: about Defy trading in the crypto space? How could I forgot, Joe, 5 00:00:28,240 --> 00:00:31,720 Speaker 1: we are all defy all the time. It feels like, Well, 6 00:00:31,760 --> 00:00:35,320 Speaker 1: I made a joke at the beginning of that episode. 7 00:00:35,440 --> 00:00:37,559 Speaker 1: I was like, oh, by the time, like we're covering 8 00:00:37,880 --> 00:00:40,919 Speaker 1: something that's probably the top and we're you know, there's 9 00:00:40,960 --> 00:00:43,159 Speaker 1: probably gonna be a crash right afterwards. And then like 10 00:00:43,280 --> 00:00:46,920 Speaker 1: I think literally two days or a day after that 11 00:00:46,920 --> 00:00:49,360 Speaker 1: that episode came out, we actually did get one of 12 00:00:49,360 --> 00:00:52,800 Speaker 1: the biggest true crashes in the crypto space in a 13 00:00:52,800 --> 00:00:57,800 Speaker 1: long time. I mean, it's that classic UM magazine cover indicator, 14 00:00:57,840 --> 00:01:00,360 Speaker 1: isn't it. Like by the time the mainstream media is 15 00:01:00,400 --> 00:01:05,120 Speaker 1: talking about something, it's probably reaching its zenith in terms 16 00:01:05,160 --> 00:01:07,959 Speaker 1: of popularity. That kind of makes sense. I gotta say 17 00:01:08,000 --> 00:01:12,080 Speaker 1: I was really disappointed, I um I missed the crypto crash. 18 00:01:12,160 --> 00:01:15,920 Speaker 1: So I took a few days off that week, and uh, 19 00:01:15,959 --> 00:01:17,560 Speaker 1: I was out in the country and I wasn't really 20 00:01:17,560 --> 00:01:20,440 Speaker 1: paying attention to either the news or social media, trying 21 00:01:20,440 --> 00:01:22,640 Speaker 1: to take a break, and then I started getting all 22 00:01:22,640 --> 00:01:25,800 Speaker 1: these messages from people going, look at crypto, look at bitcoin. 23 00:01:26,000 --> 00:01:30,360 Speaker 1: It's at thirty dollars. So it seems like it was 24 00:01:30,400 --> 00:01:33,399 Speaker 1: a very dramatic week. But I'm still trying to wrap 25 00:01:33,440 --> 00:01:37,600 Speaker 1: my head around exactly what happened. Yeah, it was. It 26 00:01:37,640 --> 00:01:40,039 Speaker 1: was a really dramatic week. There was already like a 27 00:01:40,080 --> 00:01:43,080 Speaker 1: bunch of like negative stuff. There was the Elon stuff 28 00:01:43,120 --> 00:01:45,479 Speaker 1: and other things going on that we already talked about. 29 00:01:46,080 --> 00:01:50,000 Speaker 1: And then that Sunday, our episode with Aaron Lammer came 30 00:01:50,000 --> 00:01:53,400 Speaker 1: out on a Thursday. That's Sunday, which was just I 31 00:01:53,400 --> 00:01:57,200 Speaker 1: guess three days ago. So we're recording this Wednesday made 32 00:01:57,240 --> 00:02:00,400 Speaker 1: twenty six, so let me I guess that was Sunday, 33 00:02:00,480 --> 00:02:03,960 Speaker 1: the twenty three. We got this like really intense crash 34 00:02:04,040 --> 00:02:07,960 Speaker 1: and bitcoin touch like thirty thousand and ether fill below 35 00:02:09,240 --> 00:02:11,240 Speaker 1: and so forth, really big crash, and I think are 36 00:02:11,240 --> 00:02:13,679 Speaker 1: a bunch of people that were like ready to say, oh, 37 00:02:13,760 --> 00:02:16,639 Speaker 1: this cycle is over, the see you see you all 38 00:02:16,680 --> 00:02:18,799 Speaker 1: of four years when we do the next one. It's 39 00:02:18,800 --> 00:02:20,799 Speaker 1: actually like, I mean, it hasn't come back all the 40 00:02:20,840 --> 00:02:24,840 Speaker 1: way by any stretch, but pretty resilient actually the last 41 00:02:25,160 --> 00:02:28,920 Speaker 1: few days post that crash. I do think it highlights 42 00:02:28,960 --> 00:02:31,840 Speaker 1: something pretty important for the crypto market, though, which is 43 00:02:32,360 --> 00:02:35,359 Speaker 1: this idea that I think there's a tendency to look 44 00:02:35,400 --> 00:02:38,320 Speaker 1: at it and think that it's just a bunch of 45 00:02:38,320 --> 00:02:42,240 Speaker 1: people who are buying crypto on their computers, you know, 46 00:02:42,320 --> 00:02:45,400 Speaker 1: with their own wallets, when in fact, the market has 47 00:02:45,480 --> 00:02:49,680 Speaker 1: changed enormously and there's a whole ecosystem built around it. 48 00:02:49,760 --> 00:02:53,480 Speaker 1: You have the big exchanges, you have people providing financial 49 00:02:53,520 --> 00:02:57,680 Speaker 1: services that are tied to bitcoin. You have derivatives contracts 50 00:02:57,760 --> 00:03:00,639 Speaker 1: in the form of a futures mark it, which seems 51 00:03:00,639 --> 00:03:02,880 Speaker 1: to be playing a huge role. And I don't think 52 00:03:02,919 --> 00:03:08,080 Speaker 1: people have like appreciated enough the change that has overcome 53 00:03:08,160 --> 00:03:13,280 Speaker 1: crypto and how it actually impacts the underlying price absolutely. So, 54 00:03:13,360 --> 00:03:15,800 Speaker 1: you know, I think there's this sort of like crypto 55 00:03:15,919 --> 00:03:20,079 Speaker 1: conversation and then there's the crypto market structure conversation, and 56 00:03:20,360 --> 00:03:22,440 Speaker 1: we're both super interested in that. So today we're gonna 57 00:03:22,440 --> 00:03:25,359 Speaker 1: talk a little bit bit more about market structure. I'm 58 00:03:25,440 --> 00:03:27,520 Speaker 1: very excited about our guest. We're gonna be speaking to 59 00:03:27,639 --> 00:03:33,040 Speaker 1: Roshan Patel. He has the VP of Institutional Lending at Genesis, 60 00:03:33,360 --> 00:03:37,200 Speaker 1: which can be described as basically a crypto prime brokerage. 61 00:03:37,200 --> 00:03:38,760 Speaker 1: And so I think if we want to think about 62 00:03:38,760 --> 00:03:41,800 Speaker 1: the role institutions are playing in the volatility, the role 63 00:03:41,800 --> 00:03:45,880 Speaker 1: of hedge funds, how they're trading this, what caused the liquidations, 64 00:03:45,920 --> 00:03:47,840 Speaker 1: where the money is coming in to buy the dip 65 00:03:48,320 --> 00:03:51,800 Speaker 1: is a great, a great perspective on all this. So Roshan, 66 00:03:51,960 --> 00:03:55,120 Speaker 1: thank you so much for joining us. Hey, Joe Um 67 00:03:55,200 --> 00:03:56,800 Speaker 1: and Tracy, thank you guys so much for having me. 68 00:03:56,840 --> 00:03:59,480 Speaker 1: It's great to be here. So why don't you actually 69 00:03:59,480 --> 00:04:01,280 Speaker 1: just start off before we even get to the crash 70 00:04:01,400 --> 00:04:03,640 Speaker 1: or get to anything like that, why don't you sort 71 00:04:03,680 --> 00:04:09,040 Speaker 1: of talk to us about where Genesis sits within the 72 00:04:09,120 --> 00:04:13,200 Speaker 1: crypto ecosystem and sort of what your role is there 73 00:04:13,200 --> 00:04:16,280 Speaker 1: and how you got to occupy that seat to just speak. 74 00:04:16,880 --> 00:04:19,760 Speaker 1: You know, Genesis broadly speaking is kind of a basically 75 00:04:19,760 --> 00:04:22,800 Speaker 1: a cell side dusk in the crypto ecosystem, similar to 76 00:04:22,839 --> 00:04:25,599 Speaker 1: kind of a bank prime brokerage desk. We facilitate the 77 00:04:25,600 --> 00:04:28,880 Speaker 1: ability for clients of ours to trade as well as 78 00:04:28,920 --> 00:04:31,240 Speaker 1: lend to us, borrow from US, um get yield on 79 00:04:31,240 --> 00:04:35,320 Speaker 1: their holdings. And then recently, as of last year, trade 80 00:04:35,320 --> 00:04:37,839 Speaker 1: derivatives with us BI lad early over the counter, so 81 00:04:38,279 --> 00:04:41,719 Speaker 1: we kind of offer the whole janet of financial services 82 00:04:41,760 --> 00:04:46,000 Speaker 1: in cryptome markets. Genesis has its roots kind of they 83 00:04:46,040 --> 00:04:48,520 Speaker 1: go back to really that kind of mid two thousands 84 00:04:48,560 --> 00:04:51,480 Speaker 1: to a company called Second Market. Without getting too much 85 00:04:51,520 --> 00:04:55,279 Speaker 1: into the details there, that company basically facilitated buying and 86 00:04:55,320 --> 00:04:59,640 Speaker 1: selling I liquid company stock really like Facebook, Twitter, LinkedIn, 87 00:04:59,720 --> 00:05:02,800 Speaker 1: like those kind of things in the mid two thousands 88 00:05:03,360 --> 00:05:06,560 Speaker 1: between buyers and sellers when those companies weren't really public. Eventually, 89 00:05:06,560 --> 00:05:08,240 Speaker 1: I was sold to NAZAC and one of the dusts 90 00:05:08,279 --> 00:05:11,960 Speaker 1: there started trading bitcoin in like two thousand eleven, two 91 00:05:12,000 --> 00:05:16,560 Speaker 1: thousand twelve, and effectively that desk became Genesis and kept 92 00:05:16,560 --> 00:05:18,960 Speaker 1: the broker dealer license, still based out in New York here, 93 00:05:19,560 --> 00:05:22,800 Speaker 1: and we've kind of grown a lot since then. What 94 00:05:23,000 --> 00:05:26,200 Speaker 1: started as just a spot OTC trading desk added lending 95 00:05:26,240 --> 00:05:28,200 Speaker 1: in twenty eighteen, which is kind of when I joined, 96 00:05:28,760 --> 00:05:33,040 Speaker 1: and derivatives in twenty so like we've you know, added 97 00:05:33,040 --> 00:05:36,159 Speaker 1: at a SLEW services and and Genesis now you know, 98 00:05:36,240 --> 00:05:39,080 Speaker 1: facilitates billions of dollars of trades every you know, it 99 00:05:39,160 --> 00:05:40,800 Speaker 1: used to be every month, now it's like every week, 100 00:05:40,839 --> 00:05:42,760 Speaker 1: which is kind of crazy to think. You know, we 101 00:05:42,760 --> 00:05:44,520 Speaker 1: have a pretty large lending book. When I joined in, 102 00:05:45,440 --> 00:05:47,000 Speaker 1: you know, we had a hundred million dollars in active 103 00:05:47,040 --> 00:05:50,920 Speaker 1: loans outstanding. Now that's kind of grown to nine billion 104 00:05:50,920 --> 00:05:54,040 Speaker 1: dollars in active owns outstanding as of now. I think 105 00:05:54,080 --> 00:05:55,680 Speaker 1: prices are rallied a little bit, so maybe it's a 106 00:05:55,720 --> 00:05:59,360 Speaker 1: little bit more. That mention of second market is kind 107 00:05:59,400 --> 00:06:02,200 Speaker 1: of a from the past, and I haven't heard anyone 108 00:06:02,240 --> 00:06:05,000 Speaker 1: mentioned it for a long time. But what was what 109 00:06:05,080 --> 00:06:10,080 Speaker 1: was the sort of like overlap between dealing with UM 110 00:06:10,120 --> 00:06:13,760 Speaker 1: shares in the private market and crypto, Like is there 111 00:06:14,240 --> 00:06:18,560 Speaker 1: a resemblance between the two asset classes or why did 112 00:06:18,920 --> 00:06:22,720 Speaker 1: UM this service that you just describe spring out of 113 00:06:23,240 --> 00:06:27,760 Speaker 1: the private market area second market? What was interesting about 114 00:06:27,800 --> 00:06:30,560 Speaker 1: that is is connecting to sort of different markets, which 115 00:06:30,640 --> 00:06:33,720 Speaker 1: was like you had early investors in tech companies as 116 00:06:33,720 --> 00:06:36,760 Speaker 1: well as employees that wanted to get some liquidity on 117 00:06:36,800 --> 00:06:39,600 Speaker 1: their holdings or shares or options. And then you also 118 00:06:39,600 --> 00:06:41,719 Speaker 1: and and those guys tended to be on the sort 119 00:06:41,720 --> 00:06:45,000 Speaker 1: of West coast, and then you also had like more 120 00:06:45,120 --> 00:06:48,400 Speaker 1: investor focused hedge fun types on the East coast. New 121 00:06:48,480 --> 00:06:50,560 Speaker 1: York base that wanted to kind of get it on 122 00:06:50,600 --> 00:06:53,560 Speaker 1: that and you know, weren't necessarily physically or you know, 123 00:06:53,920 --> 00:06:58,040 Speaker 1: financially close to Silicon Valley. That kind of uh, you know, 124 00:06:58,279 --> 00:07:02,240 Speaker 1: marrying of two differ markets. I think it's it's sort 125 00:07:02,279 --> 00:07:05,880 Speaker 1: of ties into kind of bitcoin and crypto trading generally, 126 00:07:05,960 --> 00:07:07,920 Speaker 1: just because you know that the people on the West 127 00:07:07,960 --> 00:07:09,600 Speaker 1: coast there that were early on tech tended to be 128 00:07:09,640 --> 00:07:12,040 Speaker 1: the ones that were also early in the crypto space. 129 00:07:12,080 --> 00:07:15,080 Speaker 1: And it led Genesis and ultimately our parent company, Digital 130 00:07:15,080 --> 00:07:17,240 Speaker 1: Currency Group, to establish a lot of these good relationships 131 00:07:17,240 --> 00:07:19,720 Speaker 1: with early holders which are now you know, kind of 132 00:07:20,120 --> 00:07:22,840 Speaker 1: larger clients, no showing, so that we have like a 133 00:07:22,840 --> 00:07:25,920 Speaker 1: good asset base and a good client base and as 134 00:07:25,920 --> 00:07:28,200 Speaker 1: well as investor based to kind of lead on to 135 00:07:28,200 --> 00:07:31,200 Speaker 1: to help build our business into into the future. Let's 136 00:07:31,200 --> 00:07:33,960 Speaker 1: talk about that what that base looks like. And one 137 00:07:34,000 --> 00:07:36,480 Speaker 1: thing that's really exhortinary, I mean, the sort of like 138 00:07:36,720 --> 00:07:41,320 Speaker 1: the flora and fauna of crypto holders really diversified a lot. 139 00:07:41,400 --> 00:07:43,720 Speaker 1: So you know, maybe before it's hobbyists on their phones 140 00:07:43,880 --> 00:07:47,000 Speaker 1: or like weirdos, and now you have pension funds and 141 00:07:47,520 --> 00:07:49,760 Speaker 1: your clients, like how many of them are sort of 142 00:07:49,840 --> 00:07:55,240 Speaker 1: like funds that have some allocation to crypto sub strategic 143 00:07:55,240 --> 00:07:57,640 Speaker 1: allocation or how many of them are sort of like 144 00:07:58,040 --> 00:08:01,960 Speaker 1: very crypto focused. That's really the sort of like their 145 00:08:01,960 --> 00:08:05,480 Speaker 1: main energy. Yes, you know, that's really evolved. I would 146 00:08:05,480 --> 00:08:08,559 Speaker 1: say over time, if you ask me, it was pretty 147 00:08:08,600 --> 00:08:12,160 Speaker 1: much the vast majority of our clients were extremely crypto focused, 148 00:08:12,320 --> 00:08:14,760 Speaker 1: a crypto native, and to to this day, I would 149 00:08:14,760 --> 00:08:17,600 Speaker 1: say like a good portion of them still are as 150 00:08:17,600 --> 00:08:19,400 Speaker 1: of late. It's it's evolved a bit where we do 151 00:08:19,480 --> 00:08:23,800 Speaker 1: have more clients that are not necessarily crypto is their 152 00:08:23,840 --> 00:08:25,760 Speaker 1: main thing, but it's sort of an adject thing that 153 00:08:25,800 --> 00:08:28,960 Speaker 1: they've added recently. I would say, are our cliente based 154 00:08:29,000 --> 00:08:31,040 Speaker 1: now is probably like if I had to put like 155 00:08:31,120 --> 00:08:35,760 Speaker 1: percentages on it, like seventy crypto focus, let's say, and 156 00:08:35,800 --> 00:08:38,880 Speaker 1: the rest like more diverse and has uh as like 157 00:08:38,920 --> 00:08:43,120 Speaker 1: a primary businesses outside of crypto. These funds, and I 158 00:08:43,160 --> 00:08:45,600 Speaker 1: guess maybe sort of the crypto focused ones and the 159 00:08:45,640 --> 00:08:48,800 Speaker 1: non crypto focused ones, but I guess the non crypto 160 00:08:48,800 --> 00:08:51,800 Speaker 1: focused ones, how many of them come into it because 161 00:08:52,320 --> 00:08:55,120 Speaker 1: they say, Okay, we want to have some allocation to 162 00:08:55,240 --> 00:08:58,439 Speaker 1: this space because it seems to be diversified or it's 163 00:08:58,480 --> 00:09:00,320 Speaker 1: going up a lot. We want to have some exposure. 164 00:09:00,800 --> 00:09:03,520 Speaker 1: And how many you see come into the space because 165 00:09:03,960 --> 00:09:07,280 Speaker 1: they see a nascent, inefficient market with lots of trading 166 00:09:07,280 --> 00:09:11,720 Speaker 1: opportunities and lots of essentially arabs so to speak, to 167 00:09:11,880 --> 00:09:16,280 Speaker 1: exploit because the space is still, broadly speaking, pretty immature. 168 00:09:17,480 --> 00:09:20,079 Speaker 1: Both are both are pretty relevant in terms of the 169 00:09:20,120 --> 00:09:23,199 Speaker 1: inflow that we see. Just kind of given the services 170 00:09:23,280 --> 00:09:27,040 Speaker 1: that we provide, our clients are more focused on the 171 00:09:27,400 --> 00:09:32,240 Speaker 1: trading ur and extracting yields and you know, sort of 172 00:09:32,320 --> 00:09:33,760 Speaker 1: value out of the market side of things. So I 173 00:09:33,760 --> 00:09:35,679 Speaker 1: would say it's a little bit skewed towards that side. 174 00:09:36,640 --> 00:09:39,040 Speaker 1: So since you're talking about the services you provide, when 175 00:09:39,120 --> 00:09:43,440 Speaker 1: I hear prime brokerage, I usually think about investment banks 176 00:09:43,559 --> 00:09:48,800 Speaker 1: UM servicing hedge fund clients specifically by providing money, so 177 00:09:48,960 --> 00:09:52,000 Speaker 1: you know, lending the money to trade. Is that something 178 00:09:52,000 --> 00:09:55,120 Speaker 1: that you do as well? Yeah, definitely. So you know, 179 00:09:55,400 --> 00:09:58,920 Speaker 1: we started our core business really by lending out crypto, 180 00:09:59,640 --> 00:10:02,440 Speaker 1: particular bitcoin for cash collateral in terms of the lending 181 00:10:02,480 --> 00:10:05,599 Speaker 1: side of things, and that trade was you know more 182 00:10:05,720 --> 00:10:08,480 Speaker 1: or that real service was more you know, suited towards 183 00:10:09,160 --> 00:10:12,240 Speaker 1: crypto trading firms that had a reason for borrowing bitcoin 184 00:10:12,280 --> 00:10:15,240 Speaker 1: in the first place. Now, um, you know kind of 185 00:10:15,280 --> 00:10:18,920 Speaker 1: in I would say, like around November of eighteen, stable 186 00:10:18,960 --> 00:10:22,640 Speaker 1: coins started becoming a much more popular and real thing, 187 00:10:23,240 --> 00:10:26,160 Speaker 1: and you know, since we were more crypto native and focus, 188 00:10:26,200 --> 00:10:28,000 Speaker 1: we were thinking, like, you know, why don't we consider 189 00:10:28,080 --> 00:10:31,200 Speaker 1: lending out stable coins against bitcoin as collateral kind of 190 00:10:31,200 --> 00:10:33,960 Speaker 1: doing the inverse of what we were doing prior, And 191 00:10:34,160 --> 00:10:37,760 Speaker 1: that business has ballooned quite a bit where now about 192 00:10:37,920 --> 00:10:41,280 Speaker 1: you know, it's about of our active loan book is 193 00:10:41,280 --> 00:10:44,600 Speaker 1: is actually stable coins right now, So you know, it's 194 00:10:44,960 --> 00:10:48,480 Speaker 1: or cash equivalents like like tether dollar circle dollar packs 195 00:10:48,520 --> 00:10:50,640 Speaker 1: as those kinds of things, as well as USD So 196 00:10:51,040 --> 00:10:52,839 Speaker 1: you know, we do land cash against crypto and and 197 00:10:52,880 --> 00:10:54,960 Speaker 1: a lot of the firms that do borrow that cash, 198 00:10:55,080 --> 00:10:58,160 Speaker 1: you know, are probably clients of prime workers at banks 199 00:10:58,160 --> 00:11:01,240 Speaker 1: as well. So I want to get into, you know, 200 00:11:01,280 --> 00:11:03,760 Speaker 1: the recent volatility, but I actually think this is pretty 201 00:11:03,760 --> 00:11:06,520 Speaker 1: important to just draw this point out a little bit 202 00:11:06,520 --> 00:11:10,040 Speaker 1: more lending stable coins. I mean, you know, we had 203 00:11:10,120 --> 00:11:13,960 Speaker 1: um Sam Bankman freed on several weeks ago. He's the 204 00:11:13,960 --> 00:11:16,560 Speaker 1: founder of f t X and Alimator, research is huge 205 00:11:16,559 --> 00:11:19,720 Speaker 1: in the space. And you know, we talked about various 206 00:11:19,840 --> 00:11:24,040 Speaker 1: arbitrage opportunities. How much is the sort of stable coin 207 00:11:24,920 --> 00:11:30,040 Speaker 1: world essentially about the ability to move money quickly across 208 00:11:30,280 --> 00:11:33,360 Speaker 1: different exchanges in a short period of time to either 209 00:11:33,440 --> 00:11:37,400 Speaker 1: take a take advantage of price differences in spot or 210 00:11:37,480 --> 00:11:42,440 Speaker 1: futures markets and essentially attempt to close various arbitrages. Like 211 00:11:42,480 --> 00:11:46,840 Speaker 1: how closely those two concepts are related. I think, probably speaking, 212 00:11:46,840 --> 00:11:49,360 Speaker 1: this distable coin market, a huge aspect of it is 213 00:11:49,640 --> 00:11:52,800 Speaker 1: sort of efficient settlement and timing on moving assets from 214 00:11:52,840 --> 00:11:55,599 Speaker 1: point A to point B, whether that's for exchanges or 215 00:11:55,640 --> 00:11:58,800 Speaker 1: even just more like settling OTC trades and dealing with dusks. 216 00:11:59,160 --> 00:12:01,080 Speaker 1: I think it's it's all relevant. You know. A good 217 00:12:01,080 --> 00:12:03,880 Speaker 1: example to point to is really the most innovative and 218 00:12:03,920 --> 00:12:06,800 Speaker 1: forward thinking banks I think out there are you know, 219 00:12:06,880 --> 00:12:10,720 Speaker 1: kind of building these seven settlement networks UM, some are 220 00:12:10,720 --> 00:12:14,800 Speaker 1: which are really mirrored on kind of Ethereum itself and 221 00:12:14,800 --> 00:12:17,439 Speaker 1: and kind of like private Ethereum networks. So yeah, table 222 00:12:17,480 --> 00:12:19,840 Speaker 1: coins are really just just frankly just easier to use 223 00:12:19,880 --> 00:12:24,120 Speaker 1: than wire is simply put right, So you've laid out 224 00:12:24,160 --> 00:12:26,920 Speaker 1: what you do UM really well and it feels like 225 00:12:26,960 --> 00:12:30,720 Speaker 1: you're in the perfect position maybe to describe um what 226 00:12:30,880 --> 00:12:34,880 Speaker 1: exactly happened during the big crypto sell off. So there 227 00:12:34,960 --> 00:12:37,880 Speaker 1: was a lot of talk about positions being liquidated. I 228 00:12:37,880 --> 00:12:41,280 Speaker 1: think I saw one number that was like outstanding futures 229 00:12:41,320 --> 00:12:44,080 Speaker 1: contracts fell from I think it was as much as 230 00:12:44,240 --> 00:12:48,560 Speaker 1: twenty eight billion in April to something like billion in 231 00:12:48,600 --> 00:12:50,640 Speaker 1: a matter of days. And then there were all the 232 00:12:50,679 --> 00:12:55,680 Speaker 1: disruptions at the individual exchanges like coin base and cracking 233 00:12:55,760 --> 00:13:00,280 Speaker 1: and things like that. So from your perspective, what actually 234 00:13:00,520 --> 00:13:04,679 Speaker 1: happened and what did you observe into the crypto market. 235 00:13:04,720 --> 00:13:07,000 Speaker 1: You know, over the years, you've seen some some pretty 236 00:13:07,200 --> 00:13:10,480 Speaker 1: wicked crashes to the downside, similar to last week, although 237 00:13:10,520 --> 00:13:13,720 Speaker 1: I will say last week was probably the most brutal 238 00:13:13,760 --> 00:13:17,400 Speaker 1: I've ever seen in the last five years, but even 239 00:13:17,440 --> 00:13:19,200 Speaker 1: even crazier than March. I would say for a couple 240 00:13:19,200 --> 00:13:21,960 Speaker 1: of reasons. But you could point to like a specific 241 00:13:21,960 --> 00:13:24,520 Speaker 1: headline or a specific narrative or specific theme that that 242 00:13:24,559 --> 00:13:26,680 Speaker 1: could be the cause of it. But it's really hard 243 00:13:26,720 --> 00:13:29,280 Speaker 1: to say if that was the ultimate reason why, you know, 244 00:13:29,320 --> 00:13:31,319 Speaker 1: the market sold off. At the end of the day, 245 00:13:31,600 --> 00:13:34,240 Speaker 1: the crypto market is really just a spot order book 246 00:13:34,280 --> 00:13:37,319 Speaker 1: and a derivatives order book. The derivatives order book is 247 00:13:37,320 --> 00:13:39,319 Speaker 1: is very levered, and you know, there's a lot of 248 00:13:39,600 --> 00:13:42,560 Speaker 1: people that take take positions down on futures and swaps 249 00:13:42,640 --> 00:13:45,079 Speaker 1: that that want to get upside but have like tight 250 00:13:45,120 --> 00:13:48,760 Speaker 1: liquidation levels to the downside. And you know, that market 251 00:13:49,120 --> 00:13:51,640 Speaker 1: has liquidity until it doesn't, and then you know it 252 00:13:51,640 --> 00:13:53,439 Speaker 1: could get a little hairy on the downside. And then 253 00:13:53,559 --> 00:13:56,280 Speaker 1: the spot market is the same thing. And the spot 254 00:13:56,320 --> 00:13:58,839 Speaker 1: market is consisted of people that are buying and trading 255 00:13:58,880 --> 00:14:02,480 Speaker 1: the underlying and I think really just what happened last 256 00:14:02,520 --> 00:14:06,120 Speaker 1: week was similar to what you've seen before, where the 257 00:14:06,720 --> 00:14:08,640 Speaker 1: you know, the futures market and the swaps market was 258 00:14:08,720 --> 00:14:12,800 Speaker 1: was pretty leveled up. People were very very long, especially 259 00:14:12,800 --> 00:14:15,120 Speaker 1: in the alt coins, thinking that, like, look, bitcoin has 260 00:14:15,200 --> 00:14:17,240 Speaker 1: kind of found a floor here. The next sort of 261 00:14:17,280 --> 00:14:20,600 Speaker 1: thematic narrative shift that we'll see is a rotation into alts, 262 00:14:20,640 --> 00:14:22,520 Speaker 1: and as long as Bitcoin doesn't fall through the floor, 263 00:14:23,000 --> 00:14:24,600 Speaker 1: the alts will kind of rallies. So a lot of 264 00:14:24,600 --> 00:14:27,760 Speaker 1: the positioning was skewed down the risk curve and in 265 00:14:28,080 --> 00:14:32,880 Speaker 1: more volatile assets, and pretty much the exact opposite happened, 266 00:14:32,920 --> 00:14:36,880 Speaker 1: which was spot Bitcoin started selling off in a significant way, 267 00:14:37,280 --> 00:14:40,920 Speaker 1: and when that happens, there's such a scramble for collateral 268 00:14:40,960 --> 00:14:42,640 Speaker 1: in the market, as well as like kind of getting 269 00:14:42,640 --> 00:14:45,240 Speaker 1: assets back to things that you know aren't really going 270 00:14:45,280 --> 00:14:47,840 Speaker 1: to fall like seventy or eight percent, but you know 271 00:14:47,880 --> 00:14:49,360 Speaker 1: things that are going to fall maybe like twenty or 272 00:14:49,400 --> 00:14:52,360 Speaker 1: thirty percent, like bitcoin. So there's a rotation back into bitcoin, 273 00:14:53,000 --> 00:14:55,800 Speaker 1: and you know when that happens that the liquidations can 274 00:14:55,840 --> 00:14:58,280 Speaker 1: get can get pretty wild on alts, and they kind 275 00:14:58,280 --> 00:15:01,920 Speaker 1: of cascade. And the difference I think with what happened 276 00:15:02,000 --> 00:15:05,840 Speaker 1: last week was usually when that happens once and gets 277 00:15:05,880 --> 00:15:08,360 Speaker 1: to a certain point, it kind of bottoms out in floors. 278 00:15:08,880 --> 00:15:11,280 Speaker 1: What was different last week it kind of just felt 279 00:15:11,280 --> 00:15:13,640 Speaker 1: like it kept going and the pressure for the spots 280 00:15:13,640 --> 00:15:16,440 Speaker 1: selling just sort of continued. You know that that that's 281 00:15:16,480 --> 00:15:19,360 Speaker 1: what made it particularly worse, I would say, relative to 282 00:15:19,480 --> 00:15:21,120 Speaker 1: let's say in March of last year, which was kind 283 00:15:21,160 --> 00:15:23,160 Speaker 1: of a one day thing and then kind of we 284 00:15:23,280 --> 00:15:25,320 Speaker 1: rallied and there was also some solace in knowing that 285 00:15:25,520 --> 00:15:28,320 Speaker 1: other markets were behaving the same way. The fact that 286 00:15:28,360 --> 00:15:30,240 Speaker 1: this was you know, sort of idios and neocratic to 287 00:15:30,320 --> 00:15:33,000 Speaker 1: crypto makes it even a little bit more painful, but 288 00:15:33,840 --> 00:15:35,240 Speaker 1: you know, at the end of the day, I think 289 00:15:35,440 --> 00:15:38,120 Speaker 1: what the takeaway is from it is more impactful than 290 00:15:38,160 --> 00:15:40,680 Speaker 1: like the than the actual sell off itself, which is 291 00:15:41,200 --> 00:15:43,080 Speaker 1: look like, you know, there was no lender of last 292 00:15:43,080 --> 00:15:45,760 Speaker 1: resort that had to step in. We sawraw down. There's 293 00:15:45,760 --> 00:15:48,640 Speaker 1: no you know, injection of capital into the market, no 294 00:15:48,760 --> 00:15:52,000 Speaker 1: firms defaulted, you know genesis. It's you know, on our side, 295 00:15:52,040 --> 00:15:54,560 Speaker 1: we manage our risk really well. All of our clients 296 00:15:54,880 --> 00:15:57,320 Speaker 1: you know, topped up or return loans or you know, 297 00:15:57,360 --> 00:15:59,800 Speaker 1: we didn't have any liquidations or defaults, and and the 298 00:15:59,840 --> 00:16:01,760 Speaker 1: more it kind of just carries on and now you 299 00:16:01,760 --> 00:16:04,720 Speaker 1: know that people left or another layer of survivors onto 300 00:16:04,720 --> 00:16:06,960 Speaker 1: the next uh you know sort of market cycle. So 301 00:16:07,480 --> 00:16:09,360 Speaker 1: it happens from time to time. It's hard to point 302 00:16:09,360 --> 00:16:13,160 Speaker 1: to exactly what it is, but overall market moves on 303 00:16:13,240 --> 00:16:15,640 Speaker 1: and we're in a healthier spot. Now, let's say, so 304 00:16:15,840 --> 00:16:19,560 Speaker 1: you mentioned the fact that we didn't get big defaults 305 00:16:19,600 --> 00:16:22,520 Speaker 1: or failures in the market. Can I ask, like, how 306 00:16:22,520 --> 00:16:27,200 Speaker 1: close do you think some market participants actually came to 307 00:16:27,920 --> 00:16:31,080 Speaker 1: failure in that week? Because I saw some pretty crazy 308 00:16:31,240 --> 00:16:34,200 Speaker 1: rumors flying around and I don't want to name specific 309 00:16:34,400 --> 00:16:37,520 Speaker 1: names for obvious reasons, but it does feel like some 310 00:16:37,560 --> 00:16:40,880 Speaker 1: people thought certain entities got pretty close to the brink. 311 00:16:41,480 --> 00:16:45,040 Speaker 1: I guess I'm I'm asking like, how crazy did it 312 00:16:45,120 --> 00:16:48,200 Speaker 1: get that week? Yeah, it's it's an interesting question because 313 00:16:48,920 --> 00:16:52,440 Speaker 1: it really depends on the entity and the sort of firm, 314 00:16:52,720 --> 00:16:54,640 Speaker 1: the type of firm you're talking about, if you're talking 315 00:16:54,680 --> 00:16:58,000 Speaker 1: about trading firms and art shops like, you know, kind 316 00:16:58,040 --> 00:17:00,240 Speaker 1: of our core client based. It was probably one of 317 00:17:00,240 --> 00:17:03,120 Speaker 1: their better weeks on their direction neutral books of all time, 318 00:17:03,640 --> 00:17:07,600 Speaker 1: primarily because their long spot short futures or short swaps, 319 00:17:07,920 --> 00:17:11,080 Speaker 1: and when a move like that happens, those spreads really collapse, 320 00:17:11,480 --> 00:17:13,560 Speaker 1: and not only do they come back to parity, they 321 00:17:13,600 --> 00:17:15,680 Speaker 1: sometimes go the other way, so like they go into 322 00:17:15,720 --> 00:17:17,800 Speaker 1: negative territories, so you get even more juice out of 323 00:17:17,800 --> 00:17:20,199 Speaker 1: the trade. So a lot of our clients actually, you know, 324 00:17:20,320 --> 00:17:24,680 Speaker 1: did really well that week kind of being positioned appropriately 325 00:17:24,760 --> 00:17:27,679 Speaker 1: for that trade and for that move. You know, if 326 00:17:27,720 --> 00:17:31,960 Speaker 1: you're like a crypto hedge fund that's like aggregating you know, 327 00:17:32,000 --> 00:17:34,240 Speaker 1: assets and kind of just sitting net long, it was 328 00:17:34,280 --> 00:17:36,560 Speaker 1: probably not so fun for you. But you're not you know, 329 00:17:37,080 --> 00:17:39,359 Speaker 1: as long as you're not levered on top of your 330 00:17:39,400 --> 00:17:41,480 Speaker 1: SPOT holdings, it's not really that bad for you. The 331 00:17:41,520 --> 00:17:44,119 Speaker 1: only the only way really I would say firms are 332 00:17:44,160 --> 00:17:45,840 Speaker 1: in a in a tough spot is if they're holding 333 00:17:46,000 --> 00:17:48,320 Speaker 1: just spot, they have no cash and then on top 334 00:17:48,359 --> 00:17:50,800 Speaker 1: of that they've taken leverage out against that. You know, 335 00:17:50,920 --> 00:17:54,760 Speaker 1: in this market, I think the participants that do that 336 00:17:54,880 --> 00:17:57,760 Speaker 1: sort of style of trading are it's just almost like 337 00:17:57,800 --> 00:17:59,679 Speaker 1: a ticking time bomb, right. It's like they're not going 338 00:17:59,720 --> 00:18:01,600 Speaker 1: to a round for that long because you don't really 339 00:18:01,600 --> 00:18:04,760 Speaker 1: need that much leverage to capture this market. And even 340 00:18:04,800 --> 00:18:07,520 Speaker 1: Spot itself is volatile enough where where you know you 341 00:18:07,680 --> 00:18:10,199 Speaker 1: you don't really need to like go crazy with futures 342 00:18:10,280 --> 00:18:12,760 Speaker 1: or swaps. So I think people like to speculate and 343 00:18:12,800 --> 00:18:14,680 Speaker 1: say like, oh, you know, this market sold off like 344 00:18:14,720 --> 00:18:16,760 Speaker 1: all you know, there's X, Y and Z might have 345 00:18:16,800 --> 00:18:18,480 Speaker 1: been in a tough spot. But when you really dig 346 00:18:18,520 --> 00:18:21,600 Speaker 1: into it, it's like, you know, exchanges or fine, you know, 347 00:18:21,600 --> 00:18:24,160 Speaker 1: they're just facilitating trades. Trading firms had a great week 348 00:18:24,520 --> 00:18:26,640 Speaker 1: even if they're long on their core spot or down 349 00:18:26,640 --> 00:18:29,560 Speaker 1: on their core long positions and um, yeah, you know, 350 00:18:29,600 --> 00:18:32,000 Speaker 1: service providers like Genesis, as long as you know, we're 351 00:18:32,000 --> 00:18:34,120 Speaker 1: managing our risk and knowing our clients positions and knowing 352 00:18:34,240 --> 00:18:36,360 Speaker 1: what our clients are are up to in their risk. 353 00:18:36,520 --> 00:18:39,320 Speaker 1: Well we're doing fine as well. So overall I think 354 00:18:39,320 --> 00:18:41,960 Speaker 1: it's you know, the price is probably the scariest part. 355 00:18:42,119 --> 00:18:44,880 Speaker 1: The actual underlying behind it is, it's not so bad. 356 00:19:00,920 --> 00:19:03,520 Speaker 1: Can you talk a little bit more. There's been some 357 00:19:03,640 --> 00:19:07,399 Speaker 1: research done. Josh Younger at JP Morgan put out a 358 00:19:07,440 --> 00:19:11,720 Speaker 1: note about different times when the crypto market seems vulnerable, 359 00:19:11,760 --> 00:19:14,040 Speaker 1: and you noted that US hours seem to be a 360 00:19:14,080 --> 00:19:16,960 Speaker 1: little bit more volatile lately than Asian and europe hours. 361 00:19:17,320 --> 00:19:19,359 Speaker 1: And there's been a number of people who have observed 362 00:19:19,680 --> 00:19:22,840 Speaker 1: that weekends tend to be more volatile, maybe there's less 363 00:19:22,880 --> 00:19:25,560 Speaker 1: liquidity than the weeks. And in fact I saw some 364 00:19:25,600 --> 00:19:29,199 Speaker 1: people talking about that on Thursday and Friday before all this, 365 00:19:29,359 --> 00:19:31,439 Speaker 1: like this could be an interesting weekend, and then of 366 00:19:31,480 --> 00:19:33,919 Speaker 1: course it turned out to be. Can you talk a 367 00:19:33,920 --> 00:19:36,320 Speaker 1: little bit more about the texture of markets in different 368 00:19:36,359 --> 00:19:41,720 Speaker 1: times and the way, say, traditional finance wires and institutions 369 00:19:41,920 --> 00:19:44,600 Speaker 1: taking a break for the weekend has an effect on crypto, 370 00:19:44,680 --> 00:19:49,480 Speaker 1: which obviously trades seven. Yeah, there is definitely a case 371 00:19:49,600 --> 00:19:51,720 Speaker 1: of the market depending on the hours, depending on the 372 00:19:51,800 --> 00:19:53,560 Speaker 1: day of the week. I think there's a couple of 373 00:19:53,600 --> 00:19:56,200 Speaker 1: reasons for that. One is like there's like a sort 374 00:19:56,240 --> 00:20:00,920 Speaker 1: of Western market and in an Asian market, um they 375 00:20:00,960 --> 00:20:03,879 Speaker 1: have different Sometimes they're very in line and doing the 376 00:20:03,920 --> 00:20:07,560 Speaker 1: same thing. Other times they have different risk taking proclivities 377 00:20:07,600 --> 00:20:11,520 Speaker 1: and preferences, and you know, they could sometimes be um 378 00:20:11,560 --> 00:20:13,159 Speaker 1: fighting each other in a sense. So like you know, 379 00:20:13,200 --> 00:20:15,320 Speaker 1: you can see different price action in the Asia session 380 00:20:15,440 --> 00:20:17,920 Speaker 1: versus the U S session just because the user base 381 00:20:18,160 --> 00:20:21,359 Speaker 1: is positioned differently and then moving in a different sense, 382 00:20:21,400 --> 00:20:24,679 Speaker 1: like you know, last summer, for example, in May, or 383 00:20:24,720 --> 00:20:27,720 Speaker 1: really after the March crash, a lot of the minors 384 00:20:27,760 --> 00:20:30,320 Speaker 1: and a lot of the sort of very long Asian 385 00:20:30,320 --> 00:20:33,320 Speaker 1: firms had a little bit of concern after the way 386 00:20:33,400 --> 00:20:36,760 Speaker 1: March moved that they were more inclined to hedge, So 387 00:20:36,800 --> 00:20:38,679 Speaker 1: a lot of the cell pressure came out of Asia, 388 00:20:39,160 --> 00:20:41,720 Speaker 1: whereas the U S side of things had more of 389 00:20:41,760 --> 00:20:44,320 Speaker 1: a bid, especially in the spot market. So those kind 390 00:20:44,359 --> 00:20:46,720 Speaker 1: of flows were competing against each other a bit, you know, 391 00:20:46,760 --> 00:20:50,119 Speaker 1: regarding weekends and volatility on the weekends, I think a 392 00:20:50,200 --> 00:20:52,880 Speaker 1: huge part of that is really the market is still 393 00:20:53,840 --> 00:20:58,120 Speaker 1: very human driven it's not like everything is extremely algorithmic 394 00:20:58,160 --> 00:21:01,000 Speaker 1: and high frequency trading and super qui pentative at the 395 00:21:01,080 --> 00:21:02,439 Speaker 1: end of the day, that this is more of a 396 00:21:02,840 --> 00:21:06,920 Speaker 1: speculative marketplace where there's you know, there's leverage, of course, 397 00:21:06,960 --> 00:21:08,880 Speaker 1: but also a lot of humans just kind of clicking 398 00:21:09,480 --> 00:21:12,840 Speaker 1: buying and selling and on the weekend of course, like yeah, 399 00:21:12,960 --> 00:21:15,280 Speaker 1: you know, no wires is definitely a part of it, 400 00:21:15,320 --> 00:21:18,560 Speaker 1: but also like the larger liquidity providers might just be 401 00:21:18,600 --> 00:21:22,840 Speaker 1: a little bit more wide on the screens, so you know, 402 00:21:22,920 --> 00:21:26,120 Speaker 1: you'll kind of have like a easy way to like 403 00:21:26,119 --> 00:21:28,239 Speaker 1: like there's just like a high chance that like a 404 00:21:28,280 --> 00:21:31,200 Speaker 1: small amount of capital could could wipe through a lot 405 00:21:31,240 --> 00:21:33,360 Speaker 1: of levels of the book, so you kind of get 406 00:21:33,400 --> 00:21:35,760 Speaker 1: those sort of drawn out moves. So I think it's 407 00:21:35,800 --> 00:21:37,720 Speaker 1: really just the human element of it and the fact 408 00:21:37,720 --> 00:21:41,040 Speaker 1: that Asia and the West are sort of two different 409 00:21:41,040 --> 00:21:45,040 Speaker 1: markets and have their own little tendencies. So you mentioned 410 00:21:45,080 --> 00:21:48,719 Speaker 1: algorithmic trading, just then why isn't there more algorithmic trading 411 00:21:48,800 --> 00:21:52,119 Speaker 1: in crypto Because when you look at the space, you 412 00:21:52,119 --> 00:21:55,520 Speaker 1: see a lot of fragmentation, a lot of inefficiencies um 413 00:21:55,520 --> 00:22:00,000 Speaker 1: and pricing discrepancies like could in theory um that someone 414 00:22:00,000 --> 00:22:02,840 Speaker 1: had a lot of profits. Why hasn't that happened more? 415 00:22:03,480 --> 00:22:05,400 Speaker 1: Don't get me wrong here, Like I think there's there's 416 00:22:05,440 --> 00:22:07,440 Speaker 1: definitely a lot of algo trade and going out a crypto, 417 00:22:07,520 --> 00:22:09,600 Speaker 1: especially on the art of it at exchange side. Um 418 00:22:09,760 --> 00:22:13,800 Speaker 1: really since since when when March or kind of January 419 00:22:13,840 --> 00:22:17,560 Speaker 1: to February where those spreads were really wild, the very 420 00:22:17,600 --> 00:22:20,919 Speaker 1: smart art trading firms out there definitely started looking at 421 00:22:20,920 --> 00:22:23,080 Speaker 1: the space or and got involved in a big way. 422 00:22:23,560 --> 00:22:26,320 Speaker 1: I just think the way the market is structured leads 423 00:22:26,320 --> 00:22:28,720 Speaker 1: to like some ways that you know, it's it's more 424 00:22:28,760 --> 00:22:30,760 Speaker 1: difficult to be an art shop in crypto. You have 425 00:22:30,800 --> 00:22:34,119 Speaker 1: to manage a lot more nuanced than say like uh 426 00:22:34,119 --> 00:22:37,439 Speaker 1: an exchange or et F art shop. One example is 427 00:22:37,440 --> 00:22:40,000 Speaker 1: really just the blockchain itself. You know, there's a men pool, 428 00:22:40,400 --> 00:22:43,720 Speaker 1: there's different chains. You know, it could be clogged with transactions. 429 00:22:43,720 --> 00:22:46,440 Speaker 1: Things could be slower on chain, so it's like physically 430 00:22:46,440 --> 00:22:48,960 Speaker 1: more difficult to get assets from point A to point B. 431 00:22:49,680 --> 00:22:52,800 Speaker 1: Even service providers like Genesis, you know, we we settle 432 00:22:52,840 --> 00:22:55,560 Speaker 1: trades as fast as we possibly can, but when you 433 00:22:55,560 --> 00:22:57,840 Speaker 1: know the network is clogged, there's really not much that 434 00:22:57,880 --> 00:22:59,720 Speaker 1: we can do other than kind of put put in 435 00:22:59,800 --> 00:23:02,639 Speaker 1: high our fees and wait for transactions to go through. 436 00:23:03,040 --> 00:23:06,360 Speaker 1: So all those sorts of elements make make our nuances 437 00:23:06,760 --> 00:23:09,160 Speaker 1: more prevalent, so you know, you do see a little 438 00:23:09,200 --> 00:23:12,359 Speaker 1: bit of widening there. And then there's also like limits 439 00:23:12,359 --> 00:23:14,800 Speaker 1: on how much you can withdraw from certain places and 440 00:23:15,119 --> 00:23:17,439 Speaker 1: liquidity constraints in terms of how much size can be 441 00:23:17,480 --> 00:23:20,120 Speaker 1: actually thrown at this, where like people that have really 442 00:23:20,160 --> 00:23:23,960 Speaker 1: big balance sheets and really big our trading capabilities might 443 00:23:24,000 --> 00:23:27,160 Speaker 1: not be looking at a specific small art because it's 444 00:23:27,160 --> 00:23:29,760 Speaker 1: not worth their time just notionally what they can make. 445 00:23:30,160 --> 00:23:33,080 Speaker 1: So you know, for all those reasons, I think you 446 00:23:33,119 --> 00:23:35,879 Speaker 1: know you're gonna see these spreads sort of persists for 447 00:23:35,880 --> 00:23:38,240 Speaker 1: a while and and it's a good opportunity I would 448 00:23:38,240 --> 00:23:41,840 Speaker 1: say for like more like nimble, smaller size firms to 449 00:23:41,840 --> 00:23:45,639 Speaker 1: to to really take advantage of. So just out of curiosity, 450 00:23:45,720 --> 00:23:48,879 Speaker 1: what we're settlement times actually like um, the week of 451 00:23:48,920 --> 00:23:53,359 Speaker 1: the big sell off, um, you know, settlement times specifically 452 00:23:53,359 --> 00:23:55,640 Speaker 1: for Genesis. I mean, we we were pretty good about them, 453 00:23:55,640 --> 00:23:58,080 Speaker 1: you know, we we got through all of them totally fine. 454 00:23:58,240 --> 00:24:00,959 Speaker 1: I think on the exchange there are some delays here 455 00:24:00,960 --> 00:24:02,639 Speaker 1: and they're like kind of t plus one, which is 456 00:24:02,720 --> 00:24:06,159 Speaker 1: really just an eternity in crypto, which you know normally 457 00:24:06,160 --> 00:24:08,240 Speaker 1: in traditional finance, it's like T plus three and it's 458 00:24:08,240 --> 00:24:11,960 Speaker 1: like wow, arrives on time. And I think you know, 459 00:24:12,000 --> 00:24:14,000 Speaker 1: there was a little bit of clogging of the ethereum 460 00:24:14,040 --> 00:24:17,040 Speaker 1: mem pool where gas fees went super high, and oh, 461 00:24:17,080 --> 00:24:19,800 Speaker 1: I forgot to mention this earlier. You know that that 462 00:24:19,880 --> 00:24:21,880 Speaker 1: causes it so that it's basically really hard to move 463 00:24:21,880 --> 00:24:24,280 Speaker 1: assets on ethereum. And there is a lot of collateralized 464 00:24:24,359 --> 00:24:26,880 Speaker 1: lending going on on Etherium, like you know, people are 465 00:24:26,880 --> 00:24:30,439 Speaker 1: posting the RC twenty tokens or eth as collateral to 466 00:24:30,480 --> 00:24:33,400 Speaker 1: borrow like stable coins from protocols. When a sell off 467 00:24:33,440 --> 00:24:36,400 Speaker 1: like that happens in spot moves so significantly, all those 468 00:24:36,400 --> 00:24:40,240 Speaker 1: sort of on chain deposits are very difficult to top up, 469 00:24:40,280 --> 00:24:43,000 Speaker 1: both from a collateral perspective or returning the loan perspective. 470 00:24:43,240 --> 00:24:46,480 Speaker 1: So you get this cascade of on chain liquidations where 471 00:24:46,480 --> 00:24:50,560 Speaker 1: the prices of things on decentralized exchanges might be vastly 472 00:24:50,640 --> 00:24:54,160 Speaker 1: different than the price on centralized exchanges. And it's really 473 00:24:54,200 --> 00:24:57,240 Speaker 1: just a product of difficulty actually, you know, coming in 474 00:24:57,320 --> 00:24:58,879 Speaker 1: to support the bid and then and then it all 475 00:24:58,920 --> 00:25:01,080 Speaker 1: sorts of normalizes and then and then it kind of 476 00:25:01,080 --> 00:25:03,800 Speaker 1: builds back from there. But yeah, that that the pace 477 00:25:03,880 --> 00:25:07,040 Speaker 1: of that is difficult, right, and I want to go 478 00:25:07,080 --> 00:25:08,919 Speaker 1: back to the crash, But just from a sort of 479 00:25:08,920 --> 00:25:13,120 Speaker 1: market structure standpoint, speaking of the d the defy exchanges, 480 00:25:13,760 --> 00:25:17,359 Speaker 1: they don't go down, but the fees absolutely sore. The 481 00:25:17,440 --> 00:25:21,120 Speaker 1: gas fees, the sort of the the block space that's 482 00:25:21,160 --> 00:25:24,720 Speaker 1: required to execute your trades, everyone rushing through the door, 483 00:25:24,840 --> 00:25:28,320 Speaker 1: it all, it all holds up structurally, but you could 484 00:25:28,359 --> 00:25:30,240 Speaker 1: it's I guess it's easy to imagine and I'm thinking 485 00:25:30,280 --> 00:25:34,719 Speaker 1: about algorithmic trading, how in periods of high vall are 486 00:25:34,880 --> 00:25:38,840 Speaker 1: opportunities just completely disappear when the sort of I guess 487 00:25:38,880 --> 00:25:41,440 Speaker 1: you could say the de facto commission of the trade 488 00:25:41,440 --> 00:25:45,600 Speaker 1: absolutely sours. Yeah, I mean it depends on the size 489 00:25:45,600 --> 00:25:48,560 Speaker 1: of the art. But in a sense like sort of 490 00:25:48,640 --> 00:25:51,000 Speaker 1: because like people can still pay really high gas fees 491 00:25:51,000 --> 00:25:53,840 Speaker 1: and jam themselves into the into the pool and get 492 00:25:53,880 --> 00:25:56,520 Speaker 1: top priority from miners. It's just a matter of like 493 00:25:56,600 --> 00:25:59,399 Speaker 1: what if the opportunity you're looking at is worth that, 494 00:26:00,160 --> 00:26:02,720 Speaker 1: Like a lot of like the smaller things aren't really 495 00:26:02,720 --> 00:26:04,600 Speaker 1: worth that, so they just kind of hang for a bit, 496 00:26:05,400 --> 00:26:08,600 Speaker 1: so just to go back to uh Sunday for a 497 00:26:08,600 --> 00:26:11,119 Speaker 1: second or that that crash And by the time people 498 00:26:11,160 --> 00:26:13,479 Speaker 1: listen to this, I think it'll be two Sundays from now, 499 00:26:13,480 --> 00:26:16,119 Speaker 1: but everyone should know we're talking about going back to 500 00:26:16,200 --> 00:26:20,480 Speaker 1: that crash. Who bought the dip and you? Was it institutions? 501 00:26:20,680 --> 00:26:23,560 Speaker 1: Was it funds? Was it retail? I actually had someone 502 00:26:23,960 --> 00:26:26,000 Speaker 1: talked to me like, I bought my first crypto today 503 00:26:26,000 --> 00:26:28,040 Speaker 1: after the big crash. I know there was at least 504 00:26:28,119 --> 00:26:30,679 Speaker 1: I know there was at least one retail buyer, probably 505 00:26:30,400 --> 00:26:33,239 Speaker 1: many more. But I'm curious, like what your senses in 506 00:26:33,359 --> 00:26:35,879 Speaker 1: terms of like what what put the floor under the 507 00:26:35,920 --> 00:26:38,320 Speaker 1: market and sort of what contributed to what's actually been 508 00:26:38,359 --> 00:26:40,840 Speaker 1: a very strong bounce back as of right now. Yeah, 509 00:26:40,880 --> 00:26:42,840 Speaker 1: it's it's so funny. I mean, I was working on 510 00:26:42,880 --> 00:26:45,119 Speaker 1: Sunday and kind of on shot with the desk, and 511 00:26:45,560 --> 00:26:48,280 Speaker 1: the amount of times I said, like, who is selling? 512 00:26:48,760 --> 00:26:51,200 Speaker 1: Was that it was kind of crazy because the only 513 00:26:51,240 --> 00:26:54,160 Speaker 1: thing we're seeing on dips like that are our net buyers. 514 00:26:54,280 --> 00:26:57,639 Speaker 1: And granted, our our flow is very skewed and biased 515 00:26:57,680 --> 00:26:59,960 Speaker 1: towards the buy side because it kind of the new 516 00:27:00,040 --> 00:27:02,359 Speaker 1: Sure the clients were dealing with, but we were seeing 517 00:27:02,400 --> 00:27:04,560 Speaker 1: institutions come in buying the dip, like you know, large 518 00:27:04,560 --> 00:27:08,200 Speaker 1: hedge funds, trading firms, as well as ultra high networth individuals. 519 00:27:08,280 --> 00:27:10,840 Speaker 1: Like really every single piece of flow that we saw 520 00:27:10,960 --> 00:27:14,200 Speaker 1: in like the sub two k eight range and sub 521 00:27:14,240 --> 00:27:16,720 Speaker 1: thirty five k bitcoin range was just net buyers. So 522 00:27:16,840 --> 00:27:19,240 Speaker 1: like we were supporting the bid in many ways there, 523 00:27:19,760 --> 00:27:22,359 Speaker 1: and the question was really like, why the heck is 524 00:27:22,520 --> 00:27:24,960 Speaker 1: you know kind of selling off so hard? So you know, 525 00:27:25,240 --> 00:27:27,400 Speaker 1: we we've just seen a lot of net buyers there. Well, 526 00:27:27,520 --> 00:27:29,359 Speaker 1: what's the answer to that question? Like when you were 527 00:27:29,400 --> 00:27:32,199 Speaker 1: asking that, why, so what is the answer? Because I 528 00:27:32,200 --> 00:27:34,600 Speaker 1: feel like we haven't really correct It's like who where 529 00:27:34,600 --> 00:27:37,120 Speaker 1: did the selling pressure come from? And who wasn't Yeah, 530 00:27:37,119 --> 00:27:39,600 Speaker 1: I mean it's like the billion dollar age old question, right, 531 00:27:39,600 --> 00:27:40,879 Speaker 1: It's like I think it's just at the end of 532 00:27:40,920 --> 00:27:42,280 Speaker 1: the day, you kind of just have to look at 533 00:27:42,800 --> 00:27:45,560 Speaker 1: the activity on exchanges and the sort of the trading 534 00:27:45,560 --> 00:27:49,040 Speaker 1: that that occurred. And there was large spots selling on 535 00:27:49,240 --> 00:27:53,040 Speaker 1: certain exchanges. So someone out there with a lot of inventory, 536 00:27:53,320 --> 00:27:56,600 Speaker 1: um basically, and maybe it's not someone. I don't think 537 00:27:56,600 --> 00:27:59,040 Speaker 1: it's definitely one person or anything. Like that. It's just 538 00:27:59,119 --> 00:28:01,320 Speaker 1: like there was just a lot of exiting from the 539 00:28:01,320 --> 00:28:04,200 Speaker 1: market in spots. So you know, we don't know who 540 00:28:04,280 --> 00:28:06,359 Speaker 1: who that was because it's not really the flow that 541 00:28:06,400 --> 00:28:12,720 Speaker 1: we see, but it definitely existed. So you mentioned UM 542 00:28:13,119 --> 00:28:16,280 Speaker 1: leverage right at the very start of this conversation and 543 00:28:16,480 --> 00:28:19,680 Speaker 1: UM more recently, you you mentioned this idea of people 544 00:28:20,119 --> 00:28:25,000 Speaker 1: borrowing in ethere um too and using that to borrow 545 00:28:25,280 --> 00:28:27,919 Speaker 1: UM stable coins and then do something else with them. 546 00:28:27,960 --> 00:28:30,440 Speaker 1: I mean, this is something that has come up again 547 00:28:30,440 --> 00:28:33,719 Speaker 1: and again in all our podcasts on Defy, and I 548 00:28:33,760 --> 00:28:36,840 Speaker 1: know Joe has been asking this question of like where 549 00:28:36,920 --> 00:28:40,719 Speaker 1: is the yield actually coming from? And why is it 550 00:28:40,800 --> 00:28:45,560 Speaker 1: all crypto doing stuff with crypto? I guess it just 551 00:28:45,600 --> 00:28:48,280 Speaker 1: feels very circular or sort of like crypto all the 552 00:28:48,280 --> 00:28:52,840 Speaker 1: way down, Like somehow crypto is generating money from other crypto, 553 00:28:52,960 --> 00:28:57,000 Speaker 1: but like what is the underlying mechanations of like how 554 00:28:57,040 --> 00:29:01,400 Speaker 1: that yield is generated. Yeah, now I've been watching I've 555 00:29:01,400 --> 00:29:03,800 Speaker 1: been listening to kind of the recent podcast and it's 556 00:29:03,840 --> 00:29:05,400 Speaker 1: it's it's it's a question that comes up so off 557 00:29:05,440 --> 00:29:07,320 Speaker 1: and the Aaron one was great, by the way, you know, 558 00:29:07,360 --> 00:29:09,640 Speaker 1: I think there's two there's two sort of aspects of 559 00:29:09,640 --> 00:29:11,560 Speaker 1: that yield that comes from the table point. One is 560 00:29:11,560 --> 00:29:14,000 Speaker 1: the more the one that makes more sense, and the 561 00:29:14,000 --> 00:29:16,760 Speaker 1: one that's easier to understand. It's really just the basis trade, 562 00:29:16,760 --> 00:29:19,760 Speaker 1: which is of course retail and leverage traders want to 563 00:29:19,760 --> 00:29:22,800 Speaker 1: be long. They bid up the market in futures. There 564 00:29:22,840 --> 00:29:25,000 Speaker 1: was a good tweet actually by Sam Bank and Free 565 00:29:25,040 --> 00:29:27,600 Speaker 1: who was on this podcast, that kind of described why 566 00:29:27,720 --> 00:29:30,360 Speaker 1: that exists, and in a nutshell, it's basically like, if 567 00:29:30,400 --> 00:29:32,360 Speaker 1: the crypto market is worth you know, one or two 568 00:29:32,360 --> 00:29:36,240 Speaker 1: trillion dollars, and the sort of traders in the market 569 00:29:36,280 --> 00:29:39,000 Speaker 1: wanted to be worth four trillion dollars, but only five 570 00:29:39,360 --> 00:29:41,920 Speaker 1: billion dollars is being lent to the market as spot 571 00:29:42,480 --> 00:29:46,560 Speaker 1: sort of cash leverage to use. The remaining difference is 572 00:29:46,600 --> 00:29:48,920 Speaker 1: sort of bid up in interest rates, and that causes 573 00:29:48,920 --> 00:29:53,040 Speaker 1: derivatives and futures, you know, to kind of go bid 574 00:29:53,120 --> 00:29:56,480 Speaker 1: relative to spot, and then that's reflected in interest rates, 575 00:29:56,480 --> 00:29:58,960 Speaker 1: and then of course you get good yields on cash 576 00:29:59,000 --> 00:30:00,640 Speaker 1: for coming into the other out of that trade and 577 00:30:00,680 --> 00:30:03,120 Speaker 1: trying to help close it, which you know, it's not 578 00:30:03,640 --> 00:30:07,240 Speaker 1: completely free money in any sense, but it's it's very 579 00:30:07,360 --> 00:30:09,680 Speaker 1: simple to understand why you could earn yield on your 580 00:30:09,720 --> 00:30:12,680 Speaker 1: castion that way, and it makes sense like from an 581 00:30:12,760 --> 00:30:17,800 Speaker 1: end to end non circular crypto perspective. The crypto circular 582 00:30:17,800 --> 00:30:19,600 Speaker 1: perspective is, I think where you're gonna get as more 583 00:30:19,640 --> 00:30:23,239 Speaker 1: on the yield farming side of things, which you know 584 00:30:23,640 --> 00:30:27,480 Speaker 1: that that aspect of the market is game theory psychology 585 00:30:27,480 --> 00:30:29,880 Speaker 1: in terms of kind of getting in getting out yields 586 00:30:29,920 --> 00:30:32,520 Speaker 1: like kind of delta risk and an impermanent loss and 587 00:30:32,600 --> 00:30:34,880 Speaker 1: thinking about all the ways that you know you can 588 00:30:34,920 --> 00:30:38,120 Speaker 1: actually extract the yield but also walk away in notional 589 00:30:38,160 --> 00:30:40,960 Speaker 1: dollar terms in a decent sense without having to take 590 00:30:41,400 --> 00:30:43,840 Speaker 1: uh sort of large bosses there. I would say the 591 00:30:43,840 --> 00:30:47,200 Speaker 1: main reason why those yields exist is really protocols are 592 00:30:47,200 --> 00:30:52,320 Speaker 1: formed which have an native token. That token contributes to 593 00:30:52,360 --> 00:30:55,760 Speaker 1: governance or has some sort of value tied to the protocol, 594 00:30:55,840 --> 00:30:58,520 Speaker 1: either through like a burn mechanism or some sort of 595 00:30:58,520 --> 00:31:02,520 Speaker 1: fee generation mechanism. Basically it's somewhat valuable if the protocol 596 00:31:02,600 --> 00:31:06,600 Speaker 1: is valuable, and then to incentivize people to use the protocol, 597 00:31:07,120 --> 00:31:10,560 Speaker 1: especially at the start of the protocol's launch, the protocol 598 00:31:10,600 --> 00:31:15,160 Speaker 1: will emit sort of that token. Two people that contribute 599 00:31:15,160 --> 00:31:18,720 Speaker 1: to providing liquidity on on the protocol, and that causes 600 00:31:19,240 --> 00:31:23,360 Speaker 1: you to have good yield opportunities in crypto. But you know, 601 00:31:23,400 --> 00:31:24,760 Speaker 1: a lot of what I just said there was like 602 00:31:24,800 --> 00:31:26,800 Speaker 1: you know, at the start and at the beginning, and 603 00:31:27,320 --> 00:31:29,880 Speaker 1: you know that eventually dies down, so like it's not 604 00:31:29,960 --> 00:31:34,760 Speaker 1: really something for like the passive yield yield seeking investor 605 00:31:34,840 --> 00:31:36,160 Speaker 1: to kind of just be like, oh, I'll just park 606 00:31:36,240 --> 00:31:37,880 Speaker 1: this here for a bit, And you can do that 607 00:31:37,880 --> 00:31:40,240 Speaker 1: in many ways on chain, but the sort of the 608 00:31:40,600 --> 00:31:43,000 Speaker 1: crazy yields that you're talking about, you know, you wouldn't 609 00:31:43,000 --> 00:31:45,080 Speaker 1: you wouldn't quite see if you were just so passive. 610 00:31:45,120 --> 00:31:47,920 Speaker 1: It takes a little bit of understanding as well as 611 00:31:47,920 --> 00:31:50,560 Speaker 1: like nimbleness and willingness to be able to move around. 612 00:31:51,080 --> 00:31:54,400 Speaker 1: And also like the fact that Ethereum has like two 613 00:31:54,520 --> 00:31:57,760 Speaker 1: pretty large side chains now. One is called Matic it 614 00:31:57,880 --> 00:32:01,719 Speaker 1: rebranded to Polygon, and the other is Antum, where you know, 615 00:32:01,800 --> 00:32:05,600 Speaker 1: though you're basically if you're willing to go change up 616 00:32:05,680 --> 00:32:08,000 Speaker 1: the change you're looking at, you know, you can be 617 00:32:08,040 --> 00:32:09,880 Speaker 1: compensated in a way because a lot of people aren't 618 00:32:09,920 --> 00:32:11,840 Speaker 1: just going to go do that, so like less people 619 00:32:11,880 --> 00:32:13,840 Speaker 1: are looking at it. And then you get into other 620 00:32:14,080 --> 00:32:16,520 Speaker 1: sort of layer ones like Salana and things like that, 621 00:32:17,000 --> 00:32:20,160 Speaker 1: and you know you're compensated effectively for dealing with crypto, 622 00:32:20,200 --> 00:32:23,600 Speaker 1: but then also going further down the rabbit hole and 623 00:32:23,640 --> 00:32:25,600 Speaker 1: into into areas where you know a lot of people 624 00:32:25,640 --> 00:32:28,960 Speaker 1: might not be looking. So yeah, you know, the first 625 00:32:29,000 --> 00:32:31,280 Speaker 1: time Roe, you and I connected, we were talking about 626 00:32:31,320 --> 00:32:33,920 Speaker 1: the basis trade and I want to get to that 627 00:32:34,000 --> 00:32:36,320 Speaker 1: in a minute, but before we do, just you know, 628 00:32:36,400 --> 00:32:41,360 Speaker 1: one of the theories going into the crash, and you know, 629 00:32:41,440 --> 00:32:43,560 Speaker 1: you were sort of racically questions like who is selling, 630 00:32:43,560 --> 00:32:47,680 Speaker 1: who is selling, and there's some One of the headlines 631 00:32:47,720 --> 00:32:51,720 Speaker 1: that initially hit the market was China climbing down on 632 00:32:51,800 --> 00:32:55,040 Speaker 1: mining activity. And I know there's so many rumors in 633 00:32:55,080 --> 00:32:58,680 Speaker 1: this area and it's always contradictory headlines and very opaque. 634 00:32:59,200 --> 00:33:05,280 Speaker 1: But minors have Fiat obligations. Their liabilities are in FIAT, 635 00:33:05,320 --> 00:33:07,880 Speaker 1: either in the form of electricity or acquiring new hardware 636 00:33:07,880 --> 00:33:11,760 Speaker 1: in the form of chips. How much could that have contributed? 637 00:33:11,800 --> 00:33:14,520 Speaker 1: And I saw a bunch again on Twitter and things 638 00:33:14,560 --> 00:33:19,000 Speaker 1: that are translated out of Chinese like multiple times and reinterpreted. 639 00:33:19,280 --> 00:33:21,680 Speaker 1: But this sort of like miners having to pick up 640 00:33:21,680 --> 00:33:25,120 Speaker 1: their stakes, so to speak, pay off their bills, liquidate 641 00:33:25,320 --> 00:33:29,600 Speaker 1: any holdings of coins that they had generated before winding down. 642 00:33:30,040 --> 00:33:33,320 Speaker 1: How much plausibly could that have been a catalyst. And 643 00:33:33,360 --> 00:33:35,880 Speaker 1: I'm just curious, like sort of more broadly, I know, 644 00:33:35,960 --> 00:33:39,080 Speaker 1: like Genesis, I think you have a mining cousin or 645 00:33:39,200 --> 00:33:42,600 Speaker 1: sister company out there, Genesis Mining. Correct me if I'm wrong, 646 00:33:42,800 --> 00:33:44,920 Speaker 1: But how much does that play into you know, sort 647 00:33:44,960 --> 00:33:48,280 Speaker 1: of like that fit into the ecosystem. Yeah, so our 648 00:33:48,320 --> 00:33:51,400 Speaker 1: our sister company is actually a DCG foundry, which is 649 00:33:51,520 --> 00:33:54,920 Speaker 1: uh it is effectively a mining and staking company that's 650 00:33:54,960 --> 00:33:56,960 Speaker 1: it also has like a core mission to help bring 651 00:33:57,360 --> 00:34:00,440 Speaker 1: pass rate to North America and also do it in 652 00:34:00,440 --> 00:34:04,360 Speaker 1: a more conscious renewable way. But you know, the mining thing, 653 00:34:04,360 --> 00:34:06,400 Speaker 1: and I've talked to to Mike Colier. They're a bunch 654 00:34:06,640 --> 00:34:09,200 Speaker 1: who's kind of runs that business and it's very very 655 00:34:09,280 --> 00:34:12,680 Speaker 1: in tune with with the mining ecosystem. And you know, 656 00:34:12,719 --> 00:34:15,520 Speaker 1: we have fins that are that are miners as as well. 657 00:34:15,560 --> 00:34:18,960 Speaker 1: I think it's it's less likely that the whole cash 658 00:34:19,000 --> 00:34:23,040 Speaker 1: obligation uh woe was like it was a reason for 659 00:34:23,040 --> 00:34:26,200 Speaker 1: this most recent sell off, mostly because the break evens 660 00:34:26,200 --> 00:34:28,480 Speaker 1: for miners in terms of like the prices they need 661 00:34:28,560 --> 00:34:31,920 Speaker 1: these assets to be apt to sustain their electricity costs 662 00:34:31,920 --> 00:34:35,759 Speaker 1: and operational costs are significantly lower than where spot was. 663 00:34:35,920 --> 00:34:38,160 Speaker 1: It was more of the relevant concern, I would say 664 00:34:38,440 --> 00:34:41,440 Speaker 1: in like the March of crash where we saw a 665 00:34:41,560 --> 00:34:44,200 Speaker 1: move past like four k and kind of into the 666 00:34:44,239 --> 00:34:47,080 Speaker 1: five K range on bitcoin, because at those levels you're 667 00:34:47,080 --> 00:34:51,200 Speaker 1: getting really close to this sort of cost of mining, 668 00:34:51,280 --> 00:34:53,040 Speaker 1: and and like you know, it gets a little harrier 669 00:34:53,120 --> 00:34:56,280 Speaker 1: down there in terms of miners staying profitable if prices 670 00:34:56,280 --> 00:34:59,359 Speaker 1: were to sustain in the lows they're here at like 671 00:34:59,440 --> 00:35:02,120 Speaker 1: you know, over third k, miners are doing fine in 672 00:35:02,239 --> 00:35:06,279 Speaker 1: terms of operational expenses relatives revenue. So I don't think 673 00:35:06,320 --> 00:35:08,800 Speaker 1: like a sudden urge for like you know, oh, you know, 674 00:35:08,880 --> 00:35:10,480 Speaker 1: we have to pay our bills, you know, cause the 675 00:35:10,520 --> 00:35:13,680 Speaker 1: sell off. Just on a related note, I mean, even 676 00:35:13,760 --> 00:35:17,160 Speaker 1: before the massive sell off that we saw in May, 677 00:35:17,239 --> 00:35:20,440 Speaker 1: there was a sharp dip in bitcoin. I think it 678 00:35:20,480 --> 00:35:24,160 Speaker 1: was a few weeks before where some people were blaming 679 00:35:24,200 --> 00:35:27,879 Speaker 1: it on a power outage in Shenjong where there are 680 00:35:27,920 --> 00:35:31,120 Speaker 1: supposed to be a bunch of miners. Can you maybe 681 00:35:31,160 --> 00:35:35,760 Speaker 1: just talk more generally about how the miners and changes 682 00:35:35,760 --> 00:35:38,759 Speaker 1: in hash rates and things like that actually feed into 683 00:35:38,880 --> 00:35:43,000 Speaker 1: pricing and the market, because it seems like when like 684 00:35:43,040 --> 00:35:47,040 Speaker 1: every time Bitcoin does something that people can't quite explain, 685 00:35:47,560 --> 00:35:50,400 Speaker 1: the miners often come up. And it's unclear to me 686 00:35:50,440 --> 00:35:53,560 Speaker 1: whether that's just a convenient thing for people to point 687 00:35:53,600 --> 00:35:58,960 Speaker 1: to or whether it's something that actually matters for the market. Yeah, 688 00:35:58,960 --> 00:36:00,560 Speaker 1: I think I think you actually that they're and you know, 689 00:36:00,600 --> 00:36:03,239 Speaker 1: I'll speak broadly on this because I'm by no means 690 00:36:03,400 --> 00:36:05,399 Speaker 1: a mining expert or anything like that, but I think 691 00:36:06,200 --> 00:36:10,120 Speaker 1: from a psychological perspective and a trading perspective and markets perspective, 692 00:36:10,320 --> 00:36:13,520 Speaker 1: and our markets sell off drastically and suddenly all of 693 00:36:13,560 --> 00:36:16,080 Speaker 1: a sudden, there's like a there's a feeling that like 694 00:36:16,120 --> 00:36:18,879 Speaker 1: who is responsible for this? Like where do I point 695 00:36:18,880 --> 00:36:21,279 Speaker 1: the finger? Like someone has to there's something that you know, 696 00:36:21,600 --> 00:36:24,480 Speaker 1: can can bear the blame here. I think miners just 697 00:36:24,560 --> 00:36:29,200 Speaker 1: kind of given there maybe like elusive nature and activity 698 00:36:29,280 --> 00:36:32,759 Speaker 1: are easy to point to, but in reality, like it's 699 00:36:32,800 --> 00:36:35,360 Speaker 1: not really you know, it's not really the cause of 700 00:36:35,360 --> 00:36:37,480 Speaker 1: like you know, like the electricity concerns and the capex 701 00:36:37,480 --> 00:36:40,600 Speaker 1: concerns or the or the or the outages and shen 702 00:36:40,840 --> 00:36:43,200 Speaker 1: and like, you know, those things relative to the actual 703 00:36:43,640 --> 00:36:46,080 Speaker 1: blows in the market, I think are are pretty small 704 00:36:46,080 --> 00:36:48,880 Speaker 1: and and don't don't matter as much. But people like to, 705 00:36:48,960 --> 00:36:51,600 Speaker 1: you know, paint narratives and and find a way to 706 00:36:51,680 --> 00:36:53,759 Speaker 1: like be like why is this happening? So that I 707 00:36:53,800 --> 00:36:55,439 Speaker 1: think you kind of nailed it with like why people 708 00:36:55,480 --> 00:36:57,440 Speaker 1: do it? It's just because people want a reason, and 709 00:36:57,640 --> 00:37:00,960 Speaker 1: miners are conveniently, you know, not that public about what 710 00:37:01,000 --> 00:37:02,600 Speaker 1: they do, so it's easy to kind of say, like, oh, 711 00:37:02,600 --> 00:37:06,320 Speaker 1: it must be the minor. Alright, one last miners question, 712 00:37:06,560 --> 00:37:08,440 Speaker 1: But this is something I've wondered about, and I'm kind 713 00:37:08,440 --> 00:37:10,680 Speaker 1: of guessing the answer is no, because there is, as 714 00:37:10,719 --> 00:37:14,480 Speaker 1: you say, this huge gap currently between spot and UM 715 00:37:14,640 --> 00:37:19,080 Speaker 1: cost for most of them. Do minors currently participate in 716 00:37:19,120 --> 00:37:22,080 Speaker 1: the futures market and use them as hedging instruments at all? 717 00:37:22,200 --> 00:37:24,840 Speaker 1: Kind of the same way oil companies locked in prices? 718 00:37:25,200 --> 00:37:27,520 Speaker 1: And if not, do you see a future in which 719 00:37:27,560 --> 00:37:32,000 Speaker 1: the futures market serves a commercial purpose for miners? If 720 00:37:32,000 --> 00:37:35,719 Speaker 1: that spread word to compress and it became and the 721 00:37:35,719 --> 00:37:38,640 Speaker 1: they had a need to hedge volatility, So they definitely 722 00:37:38,680 --> 00:37:41,040 Speaker 1: do they definitely do they used UM, They use futures 723 00:37:41,080 --> 00:37:44,480 Speaker 1: the use options, I think really after March of last year, 724 00:37:44,640 --> 00:37:46,279 Speaker 1: with with that sell off, I think a lot of 725 00:37:46,280 --> 00:37:48,600 Speaker 1: them are even more inclined to do so, which is 726 00:37:48,640 --> 00:37:51,920 Speaker 1: kind of why you saw us rally from the lows 727 00:37:51,920 --> 00:37:54,000 Speaker 1: of like let's say four four K on bitcoin to 728 00:37:54,080 --> 00:37:57,799 Speaker 1: ten k in June on pretty much a pancake forward curve, 729 00:37:57,920 --> 00:38:01,520 Speaker 1: Like the June futures were barely above or the September 730 00:38:01,520 --> 00:38:04,560 Speaker 1: futures were barely above Spot throughout that whole move up, 731 00:38:04,840 --> 00:38:07,680 Speaker 1: which is historically very different from than what you've seen 732 00:38:07,719 --> 00:38:09,680 Speaker 1: in the crypto market, where like if the market swings 733 00:38:09,719 --> 00:38:12,080 Speaker 1: bullish and like two X is, you know, usually you 734 00:38:12,120 --> 00:38:14,359 Speaker 1: see a bit up in premiums. But the futures were 735 00:38:14,400 --> 00:38:17,160 Speaker 1: really tight relative to Spot. So the prevailing theory is 736 00:38:17,200 --> 00:38:18,680 Speaker 1: there is that, like, you know, there must have been 737 00:38:18,680 --> 00:38:21,640 Speaker 1: a tight offer on futures. Who is selling those futures? 738 00:38:21,880 --> 00:38:23,520 Speaker 1: You know, I think a lot of that people that 739 00:38:23,600 --> 00:38:26,440 Speaker 1: have you know, sort of forward receivables in crypto and 740 00:38:26,520 --> 00:38:28,560 Speaker 1: want to be able to hedge that, and and so 741 00:38:28,680 --> 00:38:29,800 Speaker 1: you know, that's why you saw a little bit of 742 00:38:29,800 --> 00:38:33,319 Speaker 1: pressure there. So there's definitely a sophisticated, you know, participant 743 00:38:33,800 --> 00:38:37,520 Speaker 1: in derivatives by miners. So I want to get to 744 00:38:37,680 --> 00:38:40,839 Speaker 1: We talked about this um several weeks ago Row, and 745 00:38:40,920 --> 00:38:42,640 Speaker 1: you know, I think this trade is still out there, 746 00:38:42,640 --> 00:38:44,480 Speaker 1: and you sort of hinted at it. But there is 747 00:38:44,520 --> 00:38:48,240 Speaker 1: this sort of like I called it in a newsletter, 748 00:38:48,320 --> 00:38:51,120 Speaker 1: the sort of like free money bitcoin trade. And you know, 749 00:38:51,239 --> 00:38:53,719 Speaker 1: nothing is free money, there's nothing guaranteed, but there is 750 00:38:53,760 --> 00:38:58,440 Speaker 1: this big arbitrage opportunity that exists that more and more 751 00:38:58,440 --> 00:39:00,560 Speaker 1: people are talking about, which is that there is a 752 00:39:00,640 --> 00:39:04,719 Speaker 1: huge gap, at least there was between bitcoin spot on 753 00:39:04,760 --> 00:39:08,719 Speaker 1: the various exchanges and the various flavors of futures, whether 754 00:39:08,719 --> 00:39:11,560 Speaker 1: we're talking about CMME futures or some of them more 755 00:39:12,080 --> 00:39:14,840 Speaker 1: exotic futures on the exchanges like f t X and 756 00:39:14,920 --> 00:39:18,240 Speaker 1: cracking and so forth. And a lot of people seem 757 00:39:18,320 --> 00:39:21,880 Speaker 1: to be interested in this opportunity to centrally by bitcoin 758 00:39:22,000 --> 00:39:25,440 Speaker 1: now short the futures because they're trading so much higher, 759 00:39:25,480 --> 00:39:28,000 Speaker 1: and then over time and theory they converge and you 760 00:39:28,040 --> 00:39:30,920 Speaker 1: get free money. And these sort of basis trades are 761 00:39:30,960 --> 00:39:33,880 Speaker 1: like common in commodities, but they tend to be like 762 00:39:34,320 --> 00:39:37,640 Speaker 1: way narrower and rarer than they are, and usually there's 763 00:39:37,640 --> 00:39:40,120 Speaker 1: a cost of carrying. So can you quickly sort of 764 00:39:40,160 --> 00:39:44,359 Speaker 1: like describe this opportunity and the degree to which sort 765 00:39:44,360 --> 00:39:48,879 Speaker 1: of like non crypto interested money is sensing this opportunity 766 00:39:48,960 --> 00:39:53,040 Speaker 1: and interested in exploiting it. Yes, I mean on the 767 00:39:53,040 --> 00:39:54,960 Speaker 1: interest side, there's definitely a lot of more eyes on 768 00:39:55,000 --> 00:39:57,960 Speaker 1: it right now than I would say there ever had been. Um, 769 00:39:58,040 --> 00:39:59,799 Speaker 1: you know, it's it's a lot more popular, it's talked 770 00:39:59,840 --> 00:40:01,960 Speaker 1: abou a lot more. You know, in a nutshell, I 771 00:40:01,960 --> 00:40:04,279 Speaker 1: think you know, you described it pretty well. But you know, 772 00:40:04,320 --> 00:40:07,839 Speaker 1: derivatives traded a premium to spot primarily because people want 773 00:40:07,920 --> 00:40:10,200 Speaker 1: leverage and people bid up those interest rates similar to 774 00:40:10,239 --> 00:40:12,439 Speaker 1: kind of I was talking about what the market cap 775 00:40:12,760 --> 00:40:15,200 Speaker 1: should be worth in the eyes of traders relative to 776 00:40:15,239 --> 00:40:17,600 Speaker 1: what it is versus the amount of cash that's been 777 00:40:17,840 --> 00:40:20,759 Speaker 1: that's being lent to those traders. So you know, all 778 00:40:20,760 --> 00:40:24,120 Speaker 1: those parameters slide around, and I think you know, in 779 00:40:24,120 --> 00:40:27,960 Speaker 1: in February and May and March and April, you had 780 00:40:28,000 --> 00:40:31,839 Speaker 1: a pretty wide gap between where the market cap was 781 00:40:32,200 --> 00:40:34,920 Speaker 1: trading and versus where people thought it was going to go. 782 00:40:35,520 --> 00:40:38,320 Speaker 1: But that is a you know, that is an emotional difference, 783 00:40:38,360 --> 00:40:40,440 Speaker 1: I think, and and it and it ebbs and flows 784 00:40:40,480 --> 00:40:43,160 Speaker 1: over time. So if that gap narrows, which it actually 785 00:40:43,239 --> 00:40:46,359 Speaker 1: has right now as we're talking right now on this date, 786 00:40:46,760 --> 00:40:48,400 Speaker 1: you know, the futures are much more in line with 787 00:40:48,480 --> 00:40:51,280 Speaker 1: Spot because after the whole sell off, all of a sudden, 788 00:40:51,280 --> 00:40:52,920 Speaker 1: people think that the market is not going to go 789 00:40:53,320 --> 00:40:55,040 Speaker 1: up as much and they don't really have a desire 790 00:40:55,080 --> 00:40:57,440 Speaker 1: to own the curve as much. So to the spreads 791 00:40:57,440 --> 00:41:00,480 Speaker 1: and the sort of yields have compressed there in terms 792 00:41:00,480 --> 00:41:04,680 Speaker 1: of the difference between the two. But the underlying market 793 00:41:04,760 --> 00:41:07,719 Speaker 1: is so volatile in crypto like the spot market, where 794 00:41:08,239 --> 00:41:10,560 Speaker 1: you know, the the interest rate market, which is basically 795 00:41:10,560 --> 00:41:14,120 Speaker 1: the basis market, is equally as volatile. So these these 796 00:41:14,160 --> 00:41:17,680 Speaker 1: annualized rates swing all over the place like they were 797 00:41:17,680 --> 00:41:20,800 Speaker 1: pretty much negative the whole way through really since nineteen 798 00:41:20,840 --> 00:41:23,200 Speaker 1: twenty they've been positive, and then you have these like 799 00:41:23,320 --> 00:41:27,240 Speaker 1: really really wild moves where the rates are super positive 800 00:41:27,280 --> 00:41:29,160 Speaker 1: because they're so bit up, and then they kind of 801 00:41:29,239 --> 00:41:31,040 Speaker 1: usually come down. And I would say it's actually a 802 00:41:31,360 --> 00:41:33,480 Speaker 1: in many ways, it's a it's a leading indicator as 803 00:41:33,520 --> 00:41:36,759 Speaker 1: to where kind of spot could move next, because and 804 00:41:36,920 --> 00:41:39,359 Speaker 1: traders talk about this all the time. It's like, as 805 00:41:39,360 --> 00:41:41,280 Speaker 1: these rates kind of get bit up and these curves 806 00:41:41,320 --> 00:41:44,680 Speaker 1: are very blown out. You know, it could indicate that, like, 807 00:41:44,800 --> 00:41:47,080 Speaker 1: look like there's there's some sort of wash up coming 808 00:41:47,120 --> 00:41:49,400 Speaker 1: up next, because you know, things are just a little 809 00:41:49,400 --> 00:41:51,360 Speaker 1: out of control right now and it's way too profitable 810 00:41:51,400 --> 00:41:53,520 Speaker 1: to just buy spots sell future, where like I kind 811 00:41:53,520 --> 00:41:55,160 Speaker 1: of just have to do it, and you know, the 812 00:41:55,239 --> 00:41:57,759 Speaker 1: unwinding of that trade, you know, kind of going back 813 00:41:57,800 --> 00:41:59,840 Speaker 1: to talking about, oh, why is the sell off happening? 814 00:42:00,239 --> 00:42:01,960 Speaker 1: I forgot to mention this then, but I'll mention it 815 00:42:01,960 --> 00:42:04,440 Speaker 1: now because it came up when you unwind this trade 816 00:42:04,480 --> 00:42:06,400 Speaker 1: that the action you have to perform in the market 817 00:42:06,480 --> 00:42:10,200 Speaker 1: is buying future and but more importantly selling spot at 818 00:42:10,239 --> 00:42:13,880 Speaker 1: the same time. So when markets sell off, the basis 819 00:42:13,880 --> 00:42:16,440 Speaker 1: traders that are involved in the market are going to 820 00:42:16,480 --> 00:42:19,440 Speaker 1: have to sell spot and buy future, adding to the 821 00:42:19,480 --> 00:42:21,560 Speaker 1: spot pressure that you see on the order book. So 822 00:42:22,040 --> 00:42:24,880 Speaker 1: that is definitely a huge portion of the of the 823 00:42:24,920 --> 00:42:28,120 Speaker 1: offer you see right after a liquidation sell off. So 824 00:42:28,360 --> 00:42:30,440 Speaker 1: you know, I would say those are kind of the 825 00:42:30,920 --> 00:42:33,600 Speaker 1: things to consider there. But also the margin on the 826 00:42:33,600 --> 00:42:37,160 Speaker 1: futures leg is a concern generally for all traders and 827 00:42:37,520 --> 00:42:40,200 Speaker 1: part of the reason why potentially these markets blow out 828 00:42:40,239 --> 00:42:42,800 Speaker 1: so wide because you don't really want to be in 829 00:42:42,840 --> 00:42:45,480 Speaker 1: a position where you buy spots sell future, but then 830 00:42:45,520 --> 00:42:48,279 Speaker 1: the underlying ten xes or five x is from there. 831 00:42:48,800 --> 00:42:50,600 Speaker 1: You know, it's it's a it's a very tough position 832 00:42:50,640 --> 00:42:52,879 Speaker 1: to be. And like last summer, for example, if you'ring 833 00:42:53,000 --> 00:42:57,360 Speaker 1: was probably trading around, and the September and December futures 834 00:42:57,360 --> 00:42:59,239 Speaker 1: were trading, and even the March futures were trading at 835 00:42:59,239 --> 00:43:01,560 Speaker 1: a pretty good annual eyes basis yield where you would 836 00:43:01,560 --> 00:43:04,160 Speaker 1: be very comfortable to buy spot self future, but then 837 00:43:04,160 --> 00:43:08,160 Speaker 1: ethereum teleports all of a sudden, you're scrambling for margin 838 00:43:08,239 --> 00:43:10,400 Speaker 1: on your future's leg and you know, it gets a 839 00:43:10,440 --> 00:43:13,200 Speaker 1: little harrier. So it's not it's not totally cut and 840 00:43:13,280 --> 00:43:15,719 Speaker 1: dry and and as riskless as as it might seem 841 00:43:15,760 --> 00:43:18,880 Speaker 1: on the surface. This is gonna be a weird question, 842 00:43:19,160 --> 00:43:24,200 Speaker 1: but how much does cryptos allure sort of depend on 843 00:43:24,320 --> 00:43:28,960 Speaker 1: these inefficiencies and having a fragmented market, because it does 844 00:43:29,000 --> 00:43:31,160 Speaker 1: feel like a lot of people are clearly in the space. 845 00:43:31,560 --> 00:43:33,880 Speaker 1: You know, they might talk about blockchain technology and changing 846 00:43:33,920 --> 00:43:36,000 Speaker 1: the world, but there is a big chunk of people 847 00:43:36,040 --> 00:43:39,480 Speaker 1: who just want to make money. Bitcoin is really volatile. 848 00:43:39,760 --> 00:43:43,160 Speaker 1: It's fun to trade. Stuff is happening every day, but 849 00:43:43,360 --> 00:43:48,960 Speaker 1: it does feel like as the market matures, the potential 850 00:43:49,239 --> 00:43:53,520 Speaker 1: for those sort of big discrepancies in things like spot 851 00:43:53,680 --> 00:43:56,600 Speaker 1: versus futures, like maybe that starts to go away a 852 00:43:56,600 --> 00:44:02,000 Speaker 1: little bit and that attracts and starts to wait. I 853 00:44:02,040 --> 00:44:04,880 Speaker 1: don't know if that's I'm having a hard time putting 854 00:44:04,880 --> 00:44:07,680 Speaker 1: this intowards but hopefully you understand what I mean. Yeah, 855 00:44:07,920 --> 00:44:09,279 Speaker 1: I think I get what you're saying, which is like 856 00:44:09,920 --> 00:44:11,520 Speaker 1: a lot of people will be a lot of market 857 00:44:11,520 --> 00:44:15,200 Speaker 1: participants are here for the the inefficiencies of the market, 858 00:44:15,200 --> 00:44:17,920 Speaker 1: and once the market becomes super efficient, it's like, Okay, 859 00:44:17,920 --> 00:44:21,000 Speaker 1: onto the next thing. What's next? Right, It kind of 860 00:44:21,000 --> 00:44:24,520 Speaker 1: gets to the the yield farming idea that you mentioned earlier, right, 861 00:44:24,600 --> 00:44:26,360 Speaker 1: Like a lot of it depends on the new the 862 00:44:26,400 --> 00:44:28,880 Speaker 1: new coins, and that's where the opportunities are. But sorry, 863 00:44:28,880 --> 00:44:31,480 Speaker 1: go ahead, no, I agree with you. I mean, like 864 00:44:31,920 --> 00:44:33,719 Speaker 1: broadly speaking, like, yes, the market is going to get 865 00:44:33,719 --> 00:44:37,400 Speaker 1: more efficient over time, and the amount of very blown 866 00:44:37,400 --> 00:44:42,000 Speaker 1: out or you know, high yield arbitrage opportunities and similar 867 00:44:42,080 --> 00:44:45,800 Speaker 1: kind of are are smaller. At the same time, though, 868 00:44:46,040 --> 00:44:48,840 Speaker 1: I do think the tailwind of the fact that like 869 00:44:48,840 --> 00:44:50,759 Speaker 1: a new asset class is born here, which is like 870 00:44:50,760 --> 00:44:53,360 Speaker 1: pretty rare for anyone to see in their lifetimes. Like 871 00:44:53,400 --> 00:44:56,120 Speaker 1: you know, you don't really get like a new asset class, right, 872 00:44:56,160 --> 00:44:57,880 Speaker 1: Like it's like, okay, you know, you have assets and 873 00:44:58,080 --> 00:45:00,960 Speaker 1: they kind of exist like stocks, realistic a gold, but like, 874 00:45:01,000 --> 00:45:03,120 Speaker 1: you know, now there's a new asset class. It's called crypto, 875 00:45:03,239 --> 00:45:05,080 Speaker 1: whether people like it or not, Like it's here to 876 00:45:05,120 --> 00:45:07,160 Speaker 1: stay that it's like Pandora's boxes open, like you know, 877 00:45:07,200 --> 00:45:09,160 Speaker 1: you can't just put this back and like end it. 878 00:45:09,239 --> 00:45:11,200 Speaker 1: So it's gonna be around in some form of the other. 879 00:45:11,640 --> 00:45:14,279 Speaker 1: And and given the difference between the crypto market and 880 00:45:14,320 --> 00:45:16,560 Speaker 1: the traditional market, which I think the key difference really 881 00:45:16,640 --> 00:45:20,120 Speaker 1: is access, Like there's really low barriers to entry for 882 00:45:20,280 --> 00:45:22,719 Speaker 1: someone and and individuals to kind of come in and 883 00:45:22,719 --> 00:45:25,200 Speaker 1: trade and and you know, do leverage or whatever they 884 00:45:25,200 --> 00:45:28,279 Speaker 1: want to do. Where um, it's going to be much 885 00:45:28,280 --> 00:45:31,520 Speaker 1: more tied into like the nature of like the way 886 00:45:31,600 --> 00:45:34,200 Speaker 1: humans are are trading, and the emotional aspect of and 887 00:45:34,200 --> 00:45:36,880 Speaker 1: then the psychological aspect of markets more so than like 888 00:45:36,960 --> 00:45:39,560 Speaker 1: let's say the stock market and the you know, the 889 00:45:39,560 --> 00:45:42,000 Speaker 1: commodities markets, out there. And on top of that, there's 890 00:45:42,000 --> 00:45:44,680 Speaker 1: no sort of blender of rap last resort or or 891 00:45:44,800 --> 00:45:47,000 Speaker 1: or similar in crypto, where like you know, liquidations can 892 00:45:47,040 --> 00:45:49,879 Speaker 1: happen and markets can can go really really south and 893 00:45:49,880 --> 00:45:51,600 Speaker 1: and no one's really gonna no one really has to 894 00:45:51,600 --> 00:45:53,799 Speaker 1: come in and step in and be like a designated 895 00:45:53,800 --> 00:45:56,160 Speaker 1: market maker. Similar like you know on the CME there 896 00:45:56,160 --> 00:45:58,360 Speaker 1: are designated market makers and a lot of these products 897 00:45:58,360 --> 00:45:59,920 Speaker 1: out there which are forced to be on the bid 898 00:46:00,040 --> 00:46:02,040 Speaker 1: if markets sell off a certain amount. You don't have 899 00:46:02,080 --> 00:46:04,680 Speaker 1: that in crypto. So the democratic nature of the market, 900 00:46:04,719 --> 00:46:06,319 Speaker 1: the fact that it's a new asset class, I think 901 00:46:06,440 --> 00:46:09,520 Speaker 1: it's going to cause these opportunities to almost persist a 902 00:46:09,560 --> 00:46:12,480 Speaker 1: lot longer than we think. So, you know, maybe some 903 00:46:12,719 --> 00:46:15,560 Speaker 1: very very future hyper efficient state like crypto has just 904 00:46:15,719 --> 00:46:18,920 Speaker 1: used as colloquially as as as cash or or you know, 905 00:46:19,000 --> 00:46:21,440 Speaker 1: venomo or stable clans, whatever, But I think we're long 906 00:46:21,480 --> 00:46:24,000 Speaker 1: ways away and these inefficiencies should persist for some time. 907 00:46:40,320 --> 00:46:42,400 Speaker 1: I just want to go back real quickly to the 908 00:46:42,960 --> 00:46:46,400 Speaker 1: orb the spot futures are. I mean, you mentioned the 909 00:46:46,560 --> 00:46:49,759 Speaker 1: risk that can happen even if the trade should close profitably. 910 00:46:50,200 --> 00:46:52,799 Speaker 1: We get this sort of teleportation higher, which happens all 911 00:46:52,840 --> 00:46:55,560 Speaker 1: the time in crypto, and so even if eventually the 912 00:46:55,600 --> 00:46:58,399 Speaker 1: spread does close, you have to put up a lot 913 00:46:58,440 --> 00:47:02,960 Speaker 1: of cash. Potentially. Is anyone working on or you know, 914 00:47:03,080 --> 00:47:07,000 Speaker 1: just solving the problem of using your spot as as 915 00:47:07,040 --> 00:47:09,759 Speaker 1: your collateral. Josh Younger has done that work. It's like 916 00:47:09,800 --> 00:47:11,640 Speaker 1: if there was an e t F, then it would 917 00:47:11,680 --> 00:47:14,480 Speaker 1: be super simple because then you'd have this liquid product 918 00:47:14,560 --> 00:47:17,160 Speaker 1: that traded on all the normal exchanges, just let you know, 919 00:47:17,320 --> 00:47:19,680 Speaker 1: on a desk, and then the futures trade on a desk, 920 00:47:19,719 --> 00:47:21,440 Speaker 1: and then the e t F becomes your collateral and 921 00:47:21,480 --> 00:47:23,760 Speaker 1: you don't have to worry about putting up new cash. 922 00:47:23,920 --> 00:47:27,160 Speaker 1: Like how much could that you know, could that be 923 00:47:27,239 --> 00:47:30,719 Speaker 1: made easier? But basically yeah, I mean you know one 924 00:47:30,719 --> 00:47:33,560 Speaker 1: example of this is and it's very relevant, is really 925 00:47:33,960 --> 00:47:37,880 Speaker 1: Genesis started our registrating desk in May. We've seen explosive 926 00:47:37,960 --> 00:47:40,080 Speaker 1: volumes there. I think that's actually kind of why I'm 927 00:47:40,080 --> 00:47:42,279 Speaker 1: on this podcast. Anyways, Joe I shared you that that 928 00:47:42,360 --> 00:47:46,240 Speaker 1: report on Q one which had a huge options and forwards, 929 00:47:46,480 --> 00:47:49,640 Speaker 1: uh sort of trading section. Genesis is one of those 930 00:47:49,719 --> 00:47:53,080 Speaker 1: venues where you can post spot bitcoin against a short 931 00:47:53,120 --> 00:47:55,720 Speaker 1: futures position. You could face this bilatterally over the counter, 932 00:47:56,200 --> 00:47:58,040 Speaker 1: or you know, we can cross you on CME or 933 00:47:58,400 --> 00:48:00,839 Speaker 1: a different exchange of your choice. But you know, well 934 00:48:00,880 --> 00:48:02,839 Speaker 1: we'll we'll do that for you because like we think 935 00:48:02,880 --> 00:48:05,000 Speaker 1: it's good collateral. We know that your short future is 936 00:48:05,040 --> 00:48:08,000 Speaker 1: long spot. It's a place that you know, it makes 937 00:48:08,040 --> 00:48:09,640 Speaker 1: sense to us and we're happy to Can we just 938 00:48:09,680 --> 00:48:12,160 Speaker 1: set that up after the podcast? Can I just go 939 00:48:12,239 --> 00:48:14,880 Speaker 1: do a Genesis account to like do that because it 940 00:48:14,920 --> 00:48:17,840 Speaker 1: seems pretty easy. Yeah, just onward and yeah, shoot me 941 00:48:17,920 --> 00:48:19,799 Speaker 1: a message and I'll get I'll get you also have 942 00:48:19,920 --> 00:48:23,640 Speaker 1: very very simple and straightforward but in all seriousness, um, 943 00:48:23,920 --> 00:48:26,960 Speaker 1: the Genesis is one. But but also more exchanges are 944 00:48:27,120 --> 00:48:29,680 Speaker 1: are getting involved in that too. I think what Josh 945 00:48:29,719 --> 00:48:33,520 Speaker 1: Younger brings up is really like a liquid point of 946 00:48:33,560 --> 00:48:37,359 Speaker 1: access for similar in the brokerage model, like the CMME model, 947 00:48:37,400 --> 00:48:39,640 Speaker 1: the ETF model needs to have that sort of be 948 00:48:39,719 --> 00:48:42,759 Speaker 1: a thing to to really close the spread. That is 949 00:48:42,760 --> 00:48:44,359 Speaker 1: true in the sense that we would we would need 950 00:48:44,400 --> 00:48:47,399 Speaker 1: that to see like that the trade be much more 951 00:48:47,480 --> 00:48:50,640 Speaker 1: in line with like the traditional cash financing. Great in 952 00:48:50,680 --> 00:48:53,120 Speaker 1: the market. I think the closest thing honestly you can 953 00:48:53,160 --> 00:48:55,280 Speaker 1: see to that you know not financial advice or anything, 954 00:48:55,320 --> 00:48:59,319 Speaker 1: but like if hypothetically, you know, g BTC was used 955 00:48:59,360 --> 00:49:01,640 Speaker 1: as collateral, which is not actually you know, how to 956 00:49:01,680 --> 00:49:03,799 Speaker 1: discount to NAV, Like you know that that's something where 957 00:49:03,840 --> 00:49:06,600 Speaker 1: like you know, long GBTC short features is like a 958 00:49:06,600 --> 00:49:08,640 Speaker 1: trade where you get the discount to NAV and then 959 00:49:08,680 --> 00:49:11,480 Speaker 1: also the collapse of the curve as well. So there's like, 960 00:49:11,719 --> 00:49:14,319 Speaker 1: if you're prime broker, even where to take that and 961 00:49:14,360 --> 00:49:15,840 Speaker 1: maybe some out there to do. I'm not I'm not 962 00:49:15,880 --> 00:49:17,800 Speaker 1: actually quite sure, but you know, those are kind of 963 00:49:17,920 --> 00:49:19,960 Speaker 1: things you have to see for it to be more 964 00:49:20,000 --> 00:49:22,040 Speaker 1: of a point of access from those sort of brokerage 965 00:49:22,040 --> 00:49:26,879 Speaker 1: accounts into the marketplace. So yeah, wait, the idea of 966 00:49:27,440 --> 00:49:30,400 Speaker 1: Joe transacting with you actually reminds me of a question 967 00:49:30,440 --> 00:49:32,360 Speaker 1: that I wanted to ask, which is how do you 968 00:49:32,400 --> 00:49:36,080 Speaker 1: manage your counterparty risk? Because you know there are a 969 00:49:36,120 --> 00:49:40,560 Speaker 1: lot of i would say sketchy players in the crypto space. Um, 970 00:49:40,560 --> 00:49:44,120 Speaker 1: there's a huge question mark over doing due diligence and 971 00:49:44,400 --> 00:49:47,040 Speaker 1: how you do that and avoid money laundering and things 972 00:49:47,080 --> 00:49:52,319 Speaker 1: like that. Joe clearly sketchy guy. Um No, but like 973 00:49:52,520 --> 00:49:54,600 Speaker 1: how would you how would you go about like doing 974 00:49:54,719 --> 00:49:57,399 Speaker 1: due diligence? On a potential client, and how does it 975 00:49:57,560 --> 00:50:03,040 Speaker 1: differ from investment than doing due diligence for prime brokerage 976 00:50:03,040 --> 00:50:07,000 Speaker 1: services for something more traditional like a hedge fund. I 977 00:50:07,040 --> 00:50:08,800 Speaker 1: mean to start regarding the m L and ky C 978 00:50:09,160 --> 00:50:11,960 Speaker 1: we we actually Genesis is in the New York entity. 979 00:50:12,000 --> 00:50:14,360 Speaker 1: The broker dealer is kind of the point of access 980 00:50:14,400 --> 00:50:17,080 Speaker 1: for all the onboarding. So we're SEC and FINN are regulated, 981 00:50:17,400 --> 00:50:19,640 Speaker 1: and our onboarding is the same that you'd see for 982 00:50:19,760 --> 00:50:22,720 Speaker 1: onboarding to any broker dealer, which you know, in short, 983 00:50:22,760 --> 00:50:25,640 Speaker 1: means that it's a long process and very thorough. Then 984 00:50:25,680 --> 00:50:28,319 Speaker 1: we do kind of warren clients before they onboard, like 985 00:50:28,360 --> 00:50:30,239 Speaker 1: look like you know, set aside thirty minutes to fill 986 00:50:30,280 --> 00:50:32,600 Speaker 1: out the app and then also expect some questions from 987 00:50:32,680 --> 00:50:36,000 Speaker 1: compliance if anything isn't perfectly right, so you know they're 988 00:50:36,000 --> 00:50:38,399 Speaker 1: The onboarding is I would say, as robust as any 989 00:50:38,400 --> 00:50:41,000 Speaker 1: bank out there in terms of the other part of 990 00:50:41,000 --> 00:50:44,200 Speaker 1: the risk, which is the counterparty and credit risk. And 991 00:50:44,239 --> 00:50:46,000 Speaker 1: this is kind of I think what makes Genesis a 992 00:50:46,160 --> 00:50:48,320 Speaker 1: pretty unique player in the space because of the client 993 00:50:48,360 --> 00:50:51,040 Speaker 1: base we've chose to to have at this point, you know, 994 00:50:51,080 --> 00:50:54,040 Speaker 1: there's definitely a lot of variety of players out there 995 00:50:54,040 --> 00:50:55,879 Speaker 1: in the crypto market. What we do is we kind 996 00:50:55,920 --> 00:50:59,319 Speaker 1: of are facing not that many borrowers really, you know, 997 00:50:59,360 --> 00:51:01,239 Speaker 1: we're not a type of shop where you know, any 998 00:51:01,320 --> 00:51:04,000 Speaker 1: sort of retail client can just post bitcoin is collateral, 999 00:51:04,040 --> 00:51:06,000 Speaker 1: borrow cash, go do whatever with it. But then like 1000 00:51:06,040 --> 00:51:08,719 Speaker 1: if the price sells off, there's no like human interaction there, 1001 00:51:08,719 --> 00:51:11,440 Speaker 1: and like we're just gonna liquidate that collateral across thousands 1002 00:51:11,440 --> 00:51:14,400 Speaker 1: and thousands of customer accounts right now as at a 1003 00:51:14,480 --> 00:51:17,920 Speaker 1: nine billion dollar it's probably ten billion now active loan 1004 00:51:18,000 --> 00:51:20,680 Speaker 1: book outstanding, you know, we have I would say less 1005 00:51:20,719 --> 00:51:24,040 Speaker 1: than a hundred and fifty active borrowers, which is, you know, 1006 00:51:24,080 --> 00:51:27,400 Speaker 1: not that many considering the size. And also like the 1007 00:51:27,960 --> 00:51:30,040 Speaker 1: top ones, the top trading firms, you know, like our 1008 00:51:30,160 --> 00:51:32,760 Speaker 1: our core clients that we've known for years. But also 1009 00:51:32,800 --> 00:51:35,560 Speaker 1: we understand the nature of the risk they're taking, the 1010 00:51:35,680 --> 00:51:38,640 Speaker 1: nature of the of the markets they're participating and the 1011 00:51:38,680 --> 00:51:40,960 Speaker 1: and the trades that they're involved in. So when an 1012 00:51:41,000 --> 00:51:44,400 Speaker 1: event like March happens and bitcoin goes from like eight 1013 00:51:44,480 --> 00:51:47,680 Speaker 1: K to five K, like rather than liquidating a bunch 1014 00:51:47,680 --> 00:51:50,799 Speaker 1: of retail accounts across thousands and thousands of clients, like 1015 00:51:50,840 --> 00:51:53,520 Speaker 1: what we're doing is like, hey, like we understand that 1016 00:51:53,560 --> 00:51:55,799 Speaker 1: the bitcoin or the ethereum collateral you've posted with us 1017 00:51:55,920 --> 00:51:58,600 Speaker 1: is has fallen in value significantly, Like how fast can 1018 00:51:58,640 --> 00:52:00,000 Speaker 1: you get me the p m L from the future 1019 00:52:00,120 --> 00:52:02,920 Speaker 1: is leg to close up this margin gap, like whereas 1020 00:52:02,960 --> 00:52:04,600 Speaker 1: it is it on CMME, is it on some of 1021 00:52:04,600 --> 00:52:07,080 Speaker 1: the more faster settlement exchanges. And we kind of have 1022 00:52:07,160 --> 00:52:09,960 Speaker 1: that conversation and we work with our clients to to 1023 00:52:10,040 --> 00:52:12,880 Speaker 1: understand their risk and and and bring bring the assets 1024 00:52:12,880 --> 00:52:15,080 Speaker 1: back into line with with where they should be on 1025 00:52:15,160 --> 00:52:17,200 Speaker 1: collateral levels. So that's kind of the main thing. And 1026 00:52:17,200 --> 00:52:19,520 Speaker 1: then really just like in terms of managing our book, 1027 00:52:19,560 --> 00:52:22,080 Speaker 1: I think we've done a really good job of understanding 1028 00:52:22,480 --> 00:52:25,239 Speaker 1: you know, liquidity and duration and and creating like a 1029 00:52:25,360 --> 00:52:27,880 Speaker 1: very good internal platform which we spent a lot of 1030 00:52:27,880 --> 00:52:31,879 Speaker 1: time in nineteen developing to help us have very good 1031 00:52:31,960 --> 00:52:35,400 Speaker 1: visibility into purve risk and things like that, so a 1032 00:52:35,480 --> 00:52:37,560 Speaker 1: very good picture of kind of how assets are going 1033 00:52:37,600 --> 00:52:39,520 Speaker 1: to move in and out of the firm. And then 1034 00:52:39,600 --> 00:52:42,120 Speaker 1: also lastly on this point, I'll bring up kind of 1035 00:52:42,120 --> 00:52:45,239 Speaker 1: like reserves and balances, like banks have to obviously keep 1036 00:52:45,280 --> 00:52:47,839 Speaker 1: like reserves on their balance sheet for outflows and things 1037 00:52:47,880 --> 00:52:50,680 Speaker 1: like that. We're really good at like kind of thinking 1038 00:52:50,719 --> 00:52:53,799 Speaker 1: about the interest rate market and kind of how the 1039 00:52:53,840 --> 00:52:56,600 Speaker 1: market is position from a demand perspective and supply perspective 1040 00:52:56,600 --> 00:52:59,600 Speaker 1: in terms of Bitcoin, ethery UM, and cash and then 1041 00:52:59,640 --> 00:53:01,080 Speaker 1: all the other or altos of course, but those are 1042 00:53:01,080 --> 00:53:03,440 Speaker 1: really the three main ones um and really you can 1043 00:53:03,440 --> 00:53:06,120 Speaker 1: call it crypto and cash, where you know, we we 1044 00:53:06,160 --> 00:53:08,879 Speaker 1: can position ourselves in a defensive way if we think 1045 00:53:08,880 --> 00:53:11,319 Speaker 1: that market's going to sell off and bitcoin is going 1046 00:53:11,360 --> 00:53:14,200 Speaker 1: to be much more valuable relative to cash and kind 1047 00:53:14,200 --> 00:53:17,000 Speaker 1: of skew our inventory that way. And then when you know, 1048 00:53:17,080 --> 00:53:20,120 Speaker 1: markets bottom out and curves are flat and things are 1049 00:53:20,160 --> 00:53:21,560 Speaker 1: kind of looking like they can go the other way, 1050 00:53:21,560 --> 00:53:24,799 Speaker 1: we'll we'll position the reserves and inventory accordingly. We're we're 1051 00:53:24,800 --> 00:53:27,839 Speaker 1: floating large balances but also thinking ahead. So like going 1052 00:53:27,880 --> 00:53:30,200 Speaker 1: into March of last year, we were well positioned for 1053 00:53:30,239 --> 00:53:32,600 Speaker 1: that because we we're really talking about it on the 1054 00:53:32,640 --> 00:53:34,239 Speaker 1: dusk before we're like, look like, I feel like it 1055 00:53:34,280 --> 00:53:35,920 Speaker 1: makes a lot of sense to hold a lot of 1056 00:53:35,920 --> 00:53:38,160 Speaker 1: bitcoin here. We're probably going to have some sort of 1057 00:53:38,200 --> 00:53:40,600 Speaker 1: move that that we might need it, and even last week, 1058 00:53:40,640 --> 00:53:43,480 Speaker 1: like you know, we're positioned, we're positioned very defensively on 1059 00:53:43,520 --> 00:53:46,759 Speaker 1: the on the reserve front in that nature, and um, yeah, 1060 00:53:46,840 --> 00:53:48,840 Speaker 1: you know, we're always thinking ahead rather than like, you know, 1061 00:53:48,840 --> 00:53:50,759 Speaker 1: we're not reacting, we're kind of like setting up for 1062 00:53:50,760 --> 00:53:53,120 Speaker 1: the future. You know. I want to go back to 1063 00:53:53,160 --> 00:53:55,200 Speaker 1: something that you said early on. I think it might 1064 00:53:55,239 --> 00:53:57,840 Speaker 1: be really important in this idea of like can the 1065 00:53:57,880 --> 00:54:01,600 Speaker 1: crypto market hold up with Bitcoin selling off and with 1066 00:54:01,640 --> 00:54:05,520 Speaker 1: the rise of ethereum this year more talk about the 1067 00:54:05,560 --> 00:54:07,800 Speaker 1: so called flipping ng and maybe a theorium will be 1068 00:54:07,880 --> 00:54:10,799 Speaker 1: a bigger coin this year. Could that happen in a 1069 00:54:10,880 --> 00:54:14,120 Speaker 1: sort of orderly manner. I mean, of course, eventually that 1070 00:54:14,160 --> 00:54:16,759 Speaker 1: could happen, Maybe it could even happen this year. But 1071 00:54:16,840 --> 00:54:18,799 Speaker 1: are we still at this point where there's just so 1072 00:54:18,880 --> 00:54:23,240 Speaker 1: much of the money is Bitcoin related that any Bitcoin 1073 00:54:23,320 --> 00:54:30,319 Speaker 1: decline sort of automatically creates triggers and liquidations across the 1074 00:54:30,320 --> 00:54:33,960 Speaker 1: the across the ecosystem. Yeah, that's an interesting question because 1075 00:54:34,000 --> 00:54:36,880 Speaker 1: I think crypto market it evolves and involves at a 1076 00:54:36,920 --> 00:54:39,560 Speaker 1: pace that's that's that's pretty fast, sort of astounding in 1077 00:54:39,640 --> 00:54:41,759 Speaker 1: manuates in terms of like the narratives and kind of 1078 00:54:41,800 --> 00:54:43,959 Speaker 1: what people are doing and talking about or thinking about 1079 00:54:43,960 --> 00:54:46,440 Speaker 1: it's like you're almost on from one thing to the next. Like, 1080 00:54:46,480 --> 00:54:48,759 Speaker 1: you know, two weeks ago everyone hated Elon Must, now 1081 00:54:48,760 --> 00:54:52,000 Speaker 1: everyone loves Elon Must. Like what's happening? You know, there's 1082 00:54:52,040 --> 00:54:54,560 Speaker 1: like that the shift in the narrative there. But speaking 1083 00:54:54,680 --> 00:54:58,600 Speaker 1: specifically about Bitcoin and its position in the market relative 1084 00:54:58,640 --> 00:55:01,520 Speaker 1: to the others. Um, you know, I think for now, 1085 00:55:01,600 --> 00:55:04,839 Speaker 1: bitcoin it is the it does have like the most 1086 00:55:04,840 --> 00:55:07,640 Speaker 1: common sort of collateral use case all over the all 1087 00:55:07,640 --> 00:55:10,359 Speaker 1: over the place, whether that's at Genesis or even on 1088 00:55:10,400 --> 00:55:13,560 Speaker 1: like the exchanges, where a sell off in bitcoin will 1089 00:55:13,600 --> 00:55:16,920 Speaker 1: always kind of impact other markets because kind of the 1090 00:55:17,160 --> 00:55:20,359 Speaker 1: collateral need for for it to be acquired as well 1091 00:55:20,400 --> 00:55:23,240 Speaker 1: as kind of like alts are usually haircut as collateral 1092 00:55:23,280 --> 00:55:25,080 Speaker 1: even for us, Like you know, the the LTV that 1093 00:55:25,080 --> 00:55:27,759 Speaker 1: we'd lend against bitcoin is very different than the LTV 1094 00:55:27,800 --> 00:55:29,719 Speaker 1: would lend against alts, and where we issue a margin 1095 00:55:29,760 --> 00:55:31,759 Speaker 1: call is different. So like if the alts were to 1096 00:55:31,800 --> 00:55:34,080 Speaker 1: sell off, you know, like it's going to be more 1097 00:55:34,120 --> 00:55:36,080 Speaker 1: likely that those have to kind of move into Bitcoin 1098 00:55:36,120 --> 00:55:40,040 Speaker 1: to support margin and things like that. Um. That being said, 1099 00:55:40,160 --> 00:55:42,239 Speaker 1: I think like we're going back to the fact that 1100 00:55:42,320 --> 00:55:44,759 Speaker 1: narratives can change very quickly. And the flipping being and 1101 00:55:44,840 --> 00:55:48,560 Speaker 1: Eve and whatnot. Like, I think the market is transcending 1102 00:55:48,680 --> 00:55:50,880 Speaker 1: in many ways a lot of the ties to its 1103 00:55:50,920 --> 00:55:54,040 Speaker 1: past that it had before, like even for forgetting bitcoin 1104 00:55:54,120 --> 00:55:56,719 Speaker 1: for a second, but like tying assets to personalities, like 1105 00:55:56,760 --> 00:55:59,080 Speaker 1: you know it really like you know, everyone's like, oh, 1106 00:55:59,440 --> 00:56:01,440 Speaker 1: I think Tracy mentioned this on previous podcasts, like, oh, 1107 00:56:01,480 --> 00:56:04,160 Speaker 1: it's like decentralized. It's like the market's like, you know, 1108 00:56:04,200 --> 00:56:06,560 Speaker 1: so out there and democratic. But like you know, a 1109 00:56:06,640 --> 00:56:09,200 Speaker 1: single tweet from a CEO could like move it right, 1110 00:56:09,560 --> 00:56:12,200 Speaker 1: but as that happens more and more, it could dilute 1111 00:56:12,200 --> 00:56:14,120 Speaker 1: the impact of that, and then the market sort of 1112 00:56:14,160 --> 00:56:17,000 Speaker 1: transcends that. So as you know, mapping that analogy to 1113 00:56:17,400 --> 00:56:20,279 Speaker 1: liquidations and collateral on bitcoin, like as all this stuff 1114 00:56:20,360 --> 00:56:22,680 Speaker 1: moves down quite a bit, and bitcoin you know, has 1115 00:56:22,719 --> 00:56:25,160 Speaker 1: to be used as a collateral last resort. Like over time, 1116 00:56:25,200 --> 00:56:27,960 Speaker 1: I think more and more exchanges and even Genesis will 1117 00:56:28,040 --> 00:56:30,680 Speaker 1: will start using and and and liquidity will improve in 1118 00:56:30,719 --> 00:56:32,760 Speaker 1: other alts where we can use it more as collateral. 1119 00:56:32,800 --> 00:56:35,200 Speaker 1: And then you know, maybe bitcoin doesn't have to be 1120 00:56:35,360 --> 00:56:38,719 Speaker 1: that sort of de facto collateral piece um that's used 1121 00:56:38,719 --> 00:56:41,200 Speaker 1: in the market sort of transcends that nature. It's just 1122 00:56:41,200 --> 00:56:43,880 Speaker 1: gonna take time, and I think the fact that bitcoin 1123 00:56:43,960 --> 00:56:47,040 Speaker 1: is like the sort of underlying based layer denomination of 1124 00:56:47,080 --> 00:56:49,600 Speaker 1: everything will probably stick around for a bit. But I 1125 00:56:49,640 --> 00:56:52,640 Speaker 1: do think don't be surprised if it changes and change 1126 00:56:52,680 --> 00:56:56,240 Speaker 1: as faster than we think. Right. Wait, can I push 1127 00:56:56,239 --> 00:56:58,560 Speaker 1: you just slightly on that, because this is something I've 1128 00:56:58,560 --> 00:57:01,040 Speaker 1: been thinking about as well. But like, the bitcoin is 1129 00:57:01,080 --> 00:57:04,120 Speaker 1: almost designed to what it is designed to sort of 1130 00:57:04,120 --> 00:57:08,440 Speaker 1: be this static, stable pool of value, and it's the 1131 00:57:08,520 --> 00:57:11,440 Speaker 1: supply is like destined to reach a certain amount. I 1132 00:57:11,480 --> 00:57:13,480 Speaker 1: can't remember exactly how much it is right now, but 1133 00:57:13,640 --> 00:57:16,400 Speaker 1: then it will stay at that forever. Is there a 1134 00:57:16,440 --> 00:57:22,160 Speaker 1: point at which there's a mismatch between bitcoin the size 1135 00:57:22,160 --> 00:57:25,720 Speaker 1: of the market and it's usefulness as collateral versus the 1136 00:57:25,800 --> 00:57:29,160 Speaker 1: size of the overall crypto market, Like, is there just 1137 00:57:29,200 --> 00:57:34,200 Speaker 1: a point at which crypto could outgrow bitcoin? Yeah? I 1138 00:57:34,240 --> 00:57:37,000 Speaker 1: know you're you guys are getting really into the weeds 1139 00:57:37,040 --> 00:57:40,000 Speaker 1: of the questions here, which I actually love because it's funny, 1140 00:57:40,000 --> 00:57:43,480 Speaker 1: like when you talk about long term bitcoin security and 1141 00:57:43,520 --> 00:57:45,840 Speaker 1: kind of the concerns that might be there, Like a 1142 00:57:45,840 --> 00:57:47,680 Speaker 1: lot of people that are involved in the bitcoin space 1143 00:57:47,720 --> 00:57:50,800 Speaker 1: will like really just shun you, like kind of dismiss it. 1144 00:57:50,880 --> 00:57:53,400 Speaker 1: So maybe I'll get some hate for this response, but 1145 00:57:54,200 --> 00:57:56,160 Speaker 1: I will say that you bring up a good point, 1146 00:57:56,280 --> 00:57:59,520 Speaker 1: which is like, yes, bitcoin does have a finality to it, 1147 00:57:59,600 --> 00:58:03,440 Speaker 1: where if actively the the subsidy that's issued for you know, 1148 00:58:03,480 --> 00:58:07,400 Speaker 1: the blocks have to sort of ways of paying miners 1149 00:58:07,440 --> 00:58:10,640 Speaker 1: for securing the network. One is the block subsidy and 1150 00:58:10,640 --> 00:58:15,120 Speaker 1: the other is transaction fees. So the block subsidies is 1151 00:58:15,160 --> 00:58:17,840 Speaker 1: the one that's declining in half every four years, and 1152 00:58:17,920 --> 00:58:22,000 Speaker 1: eventually it's going to asmotically approach zero, where it's basically nothing. 1153 00:58:22,120 --> 00:58:24,920 Speaker 1: So and and bitcoin is proof of work where miners 1154 00:58:24,960 --> 00:58:27,720 Speaker 1: have to spend energy and real you know, sort of 1155 00:58:28,240 --> 00:58:31,680 Speaker 1: uh power to secure the network, where they're going to 1156 00:58:31,800 --> 00:58:34,160 Speaker 1: have to be compensated in some way. And at that point, 1157 00:58:34,240 --> 00:58:36,360 Speaker 1: the way that it's going to the conversation occurs is 1158 00:58:36,720 --> 00:58:39,280 Speaker 1: through the transaction fee, which is like the people that 1159 00:58:39,320 --> 00:58:41,520 Speaker 1: are trading or the people that have transactions in the 1160 00:58:41,560 --> 00:58:44,520 Speaker 1: block are effectively paying the miners a certain amount. So 1161 00:58:44,560 --> 00:58:46,880 Speaker 1: what needs to develop them the long term for bitcoin 1162 00:58:47,520 --> 00:58:51,000 Speaker 1: is a robust market for block space um so that 1163 00:58:51,040 --> 00:58:54,720 Speaker 1: the miners are compensated to pay for it. What's happened 1164 00:58:54,800 --> 00:58:58,520 Speaker 1: now empirically in the past two years is you know, 1165 00:58:58,960 --> 00:59:01,600 Speaker 1: there's a robust mark it for blocks based on Ethereum, 1166 00:59:01,720 --> 00:59:04,160 Speaker 1: and people are paying to be included in transactions quite 1167 00:59:04,160 --> 00:59:07,560 Speaker 1: a bit there on Bitcoin less. So part of that 1168 00:59:07,640 --> 00:59:09,360 Speaker 1: is because you know, it is sort of a store 1169 00:59:09,480 --> 00:59:11,880 Speaker 1: value narrative now less so than a medium exchange. And 1170 00:59:12,480 --> 00:59:16,320 Speaker 1: it's not like it doesn't really have robust decentralized finance 1171 00:59:16,400 --> 00:59:19,880 Speaker 1: protocols in it yet. So what I think would have 1172 00:59:19,920 --> 00:59:22,200 Speaker 1: to change there in order for that market to develop 1173 00:59:22,240 --> 00:59:24,480 Speaker 1: appropriately is like this type of stuff you see on 1174 00:59:24,520 --> 00:59:27,280 Speaker 1: ethereum where you can like borrow of lend even trade 1175 00:59:27,280 --> 00:59:29,280 Speaker 1: like you need swap deck style, like Bitcoin needs to 1176 00:59:29,280 --> 00:59:32,600 Speaker 1: figure out in many ways to incorporate that into its 1177 00:59:32,640 --> 00:59:36,720 Speaker 1: on chain layer one sort of status the way I 1178 00:59:36,760 --> 00:59:38,360 Speaker 1: see it, And this is like, you know, maybe there's 1179 00:59:38,400 --> 00:59:40,760 Speaker 1: some cryptographers out there that are going to argue with 1180 00:59:40,760 --> 00:59:42,480 Speaker 1: me on this point in some ways, but I do 1181 00:59:42,560 --> 00:59:44,400 Speaker 1: think like at the end of the day, you're gonna 1182 00:59:44,400 --> 00:59:47,880 Speaker 1: need like applications built on bitcoin where people are paying 1183 00:59:48,480 --> 00:59:51,200 Speaker 1: to use them so that the miners can be compensated 1184 00:59:51,200 --> 00:59:53,720 Speaker 1: when there's no block reward. And I think how that 1185 00:59:53,760 --> 00:59:55,560 Speaker 1: develops in the future, like you know, in the past 1186 00:59:55,560 --> 00:59:58,080 Speaker 1: few years, it's it's really been ethereum show there. Could 1187 00:59:58,160 --> 01:00:00,680 Speaker 1: that change? I do think so? And do I think 1188 01:00:00,720 --> 01:00:02,320 Speaker 1: it has to change at some point? Yeah, Like I 1189 01:00:02,320 --> 01:00:04,240 Speaker 1: think you know it's going to have to that market's 1190 01:00:04,280 --> 01:00:08,120 Speaker 1: gonna have to develop in many ways. I guess I 1191 01:00:08,160 --> 01:00:10,320 Speaker 1: just have one last question, and I just want to 1192 01:00:10,320 --> 01:00:13,960 Speaker 1: say I enjoy these conversations a lot because talk about 1193 01:00:13,960 --> 01:00:16,959 Speaker 1: market structured and future it doesn't hurt my head quite 1194 01:00:16,960 --> 01:00:20,360 Speaker 1: as much as the conversations about like staking and all 1195 01:00:20,400 --> 01:00:22,400 Speaker 1: that stuff, And I need to learn more about that. 1196 01:00:22,880 --> 01:00:25,880 Speaker 1: Do you worry or is there concerned about like this 1197 01:00:26,000 --> 01:00:29,000 Speaker 1: sort of like whether the future of crypto is entirely 1198 01:00:29,600 --> 01:00:33,240 Speaker 1: on chane trading at some point, I mean, Genesis is 1199 01:00:33,280 --> 01:00:38,560 Speaker 1: a regulated financial institution, point bases, all these are. Is 1200 01:00:38,600 --> 01:00:41,800 Speaker 1: there like a threat long term to these sort of 1201 01:00:41,880 --> 01:00:45,400 Speaker 1: like I guess middle ground companies that handle what you do, 1202 01:00:45,440 --> 01:00:47,640 Speaker 1: which is like you're dealing on the chain and dealing 1203 01:00:47,720 --> 01:00:51,360 Speaker 1: with wires and traditional finance companies. And do you think 1204 01:00:51,400 --> 01:00:54,360 Speaker 1: about like risk of getting squeezed by more activity just 1205 01:00:54,480 --> 01:01:00,000 Speaker 1: people trading directly on the decentralized exchanges without the knee 1206 01:01:00,000 --> 01:01:03,920 Speaker 1: need for a GENEFF. I think, you know, in the 1207 01:01:03,960 --> 01:01:05,880 Speaker 1: long term, there's going to be more of a harmony 1208 01:01:06,560 --> 01:01:09,440 Speaker 1: between centralized finance and decentralized finance. They're gonna have to 1209 01:01:09,480 --> 01:01:12,280 Speaker 1: work together in many ways, um more so than they 1210 01:01:12,280 --> 01:01:15,440 Speaker 1: are now in order to kind of provide services to 1211 01:01:15,440 --> 01:01:17,880 Speaker 1: the broader marketplace. I do think the future, you know, 1212 01:01:18,320 --> 01:01:20,840 Speaker 1: broadly and like ultimate finality speaking, is going to have 1213 01:01:21,120 --> 01:01:23,520 Speaker 1: a lot of more on chain activity than it does now. 1214 01:01:24,000 --> 01:01:26,320 Speaker 1: But I think the way, you know, kind of bringing 1215 01:01:26,320 --> 01:01:28,560 Speaker 1: this more high level back to kind of like the 1216 01:01:28,640 --> 01:01:31,240 Speaker 1: user and the participant in the marketplace, at the end 1217 01:01:31,280 --> 01:01:33,080 Speaker 1: of the day, they're they're humans, right, like you know, 1218 01:01:33,120 --> 01:01:36,080 Speaker 1: we're all we're all humans. We we view counterparty risk 1219 01:01:36,160 --> 01:01:40,720 Speaker 1: to protocols, to exchanges, um to to to really banks 1220 01:01:40,720 --> 01:01:42,960 Speaker 1: whatever in different ways you know, f d i C 1221 01:01:43,160 --> 01:01:45,640 Speaker 1: non f d i C, things like that. There's always 1222 01:01:45,680 --> 01:01:48,640 Speaker 1: going to be in need and desire for market participants 1223 01:01:48,920 --> 01:01:51,960 Speaker 1: to have things that are not completely bearer because like 1224 01:01:52,120 --> 01:01:55,200 Speaker 1: you want that as like a as an asset holder, 1225 01:01:55,320 --> 01:01:58,960 Speaker 1: as like a diversified and responsible whether you're an individual 1226 01:01:59,080 --> 01:02:01,480 Speaker 1: or a family office, hedge fund or whatever, Like you 1227 01:02:01,480 --> 01:02:04,800 Speaker 1: shouldn't have everything be in your control or nothing be 1228 01:02:04,880 --> 01:02:06,960 Speaker 1: in your control. There should be a balance in a ratio, 1229 01:02:07,360 --> 01:02:10,040 Speaker 1: and I think a lot of services like Genesis and 1230 01:02:10,520 --> 01:02:12,520 Speaker 1: other companies in space, you're going to kind of be 1231 01:02:12,600 --> 01:02:15,000 Speaker 1: there to help marry that that difference and and and 1232 01:02:15,080 --> 01:02:18,560 Speaker 1: provide that diversification that holders want. But I do think 1233 01:02:18,560 --> 01:02:20,240 Speaker 1: of course that yes, DeFi is going to be it's 1234 01:02:20,240 --> 01:02:21,560 Speaker 1: it's going to be big in the future, and there's 1235 01:02:21,600 --> 01:02:23,640 Speaker 1: gonna be a lot of stuff going on chain. I 1236 01:02:23,680 --> 01:02:26,240 Speaker 1: think another thing to think about when thinking when like 1237 01:02:26,320 --> 01:02:28,200 Speaker 1: kind of looking at the outlook, there is like the 1238 01:02:28,240 --> 01:02:30,240 Speaker 1: pie is growing right now year over year, a day 1239 01:02:30,240 --> 01:02:33,200 Speaker 1: over a day really where like nothing is cannibalizing into 1240 01:02:33,240 --> 01:02:35,760 Speaker 1: each other quite yet. Where it's like as long as 1241 01:02:35,760 --> 01:02:38,080 Speaker 1: the market is growing, there's more and more stuff to 1242 01:02:38,080 --> 01:02:41,000 Speaker 1: to to do in trade, and more clients are entering 1243 01:02:41,040 --> 01:02:44,280 Speaker 1: and more participants are entering. So you know that that 1244 01:02:44,440 --> 01:02:46,560 Speaker 1: as long as that's going on, that's going to be 1245 01:02:46,760 --> 01:02:49,800 Speaker 1: you know, not very competitive and more like sort of collaborative. 1246 01:02:49,960 --> 01:02:52,560 Speaker 1: Of course, like once Crypto is that it's like finals, 1247 01:02:52,600 --> 01:02:54,800 Speaker 1: they were like every single human on the planet is 1248 01:02:54,840 --> 01:02:58,040 Speaker 1: like involved in it, and there's now like three thousand 1249 01:02:58,080 --> 01:03:00,680 Speaker 1: exchanges like yes, then then gets a little bit more 1250 01:03:00,720 --> 01:03:03,760 Speaker 1: competitive and cannibalistic. But like there's like a lot of 1251 01:03:03,920 --> 01:03:05,320 Speaker 1: room there right, Like you know, it's like not that 1252 01:03:05,320 --> 01:03:07,720 Speaker 1: many people are using this stuff just yet, like you 1253 01:03:08,080 --> 01:03:10,040 Speaker 1: we talked about it. But when you look at like 1254 01:03:10,080 --> 01:03:12,320 Speaker 1: this sheer number of people out there. I was listening 1255 01:03:12,320 --> 01:03:14,840 Speaker 1: to like CNBC this morning or wherever, it's like, you know, 1256 01:03:14,880 --> 01:03:17,120 Speaker 1: they're like asking people that have never used Defy if 1257 01:03:17,160 --> 01:03:19,680 Speaker 1: they think Defies the future or or on Chaine is 1258 01:03:19,680 --> 01:03:21,600 Speaker 1: the future, and they're like no, and then then everyone's agreeing, 1259 01:03:21,600 --> 01:03:23,000 Speaker 1: like yeah, like look at this guy brings up a 1260 01:03:23,000 --> 01:03:25,160 Speaker 1: good point. It's like no one's using this yet, Like 1261 01:03:25,160 --> 01:03:27,040 Speaker 1: you know, you're asking people that aren't using it if 1262 01:03:27,280 --> 01:03:29,360 Speaker 1: if they think it's real. So I think there's a 1263 01:03:29,400 --> 01:03:30,960 Speaker 1: lot more room to grow. And you know, CFI and 1264 01:03:31,040 --> 01:03:33,640 Speaker 1: d FI will have a lot of sort of harmony 1265 01:03:33,680 --> 01:03:38,200 Speaker 1: in the future. Broh. That was great. That was a 1266 01:03:38,240 --> 01:03:41,640 Speaker 1: fantastic conversation, Super helpful both on the sort of what 1267 01:03:41,800 --> 01:03:44,480 Speaker 1: just happened over the last several days, but also the 1268 01:03:44,480 --> 01:03:47,040 Speaker 1: big picture and the long picture. I love talking to 1269 01:03:47,080 --> 01:03:49,240 Speaker 1: you and thanks for coming out on a lot. Yeah, 1270 01:03:49,280 --> 01:03:51,120 Speaker 1: thank you guys so much for having me. This is awesome. 1271 01:03:51,760 --> 01:03:53,800 Speaker 1: Thanks for that was so good. All right, take care 1272 01:03:53,840 --> 01:04:14,640 Speaker 1: of man. You know, I sort of got got there 1273 01:04:14,640 --> 01:04:18,200 Speaker 1: in my last question. But I do find like, you know, 1274 01:04:18,280 --> 01:04:20,760 Speaker 1: like I know we have some DeFi episodes coming up, 1275 01:04:21,120 --> 01:04:24,320 Speaker 1: but some of these questions about market structure and futures 1276 01:04:24,360 --> 01:04:28,280 Speaker 1: trading and arbitrage and hedge funds and prime brokerages, it's 1277 01:04:28,320 --> 01:04:31,040 Speaker 1: just like I feel like like I've been a cozy 1278 01:04:31,120 --> 01:04:34,640 Speaker 1: like blanket or like hoodie we're talking about it. I 1279 01:04:34,720 --> 01:04:36,680 Speaker 1: still like sort of like feels like I kind of 1280 01:04:36,720 --> 01:04:39,800 Speaker 1: get it in a way, you know what I'm saying. Absolutely, 1281 01:04:39,840 --> 01:04:43,240 Speaker 1: I definitely feel more comfortable having these kind of conversations 1282 01:04:43,280 --> 01:04:46,720 Speaker 1: than they old farming one with Um Aaron for instance, 1283 01:04:46,800 --> 01:04:49,120 Speaker 1: that was a bit tough. Um. But I gotta say, 1284 01:04:49,200 --> 01:04:51,520 Speaker 1: like the thing that jumps out at me, the thing 1285 01:04:51,560 --> 01:04:53,600 Speaker 1: that jumps out at me is just this idea of 1286 01:04:53,640 --> 01:04:57,200 Speaker 1: how far the market has actually come. So I think 1287 01:04:57,240 --> 01:05:00,680 Speaker 1: there are people, you know, probably my self included, but 1288 01:05:00,720 --> 01:05:03,160 Speaker 1: I think of a bitcoin minor, and you know, it's 1289 01:05:03,160 --> 01:05:06,840 Speaker 1: some guy that maybe has a few computers hooked up 1290 01:05:07,040 --> 01:05:10,920 Speaker 1: somewhere slightly cold, um, with good temperatures and cheap energy, 1291 01:05:11,320 --> 01:05:14,080 Speaker 1: and he's sort of like doing it in his basement 1292 01:05:14,200 --> 01:05:18,280 Speaker 1: or backyard or whatever. But the way Row was describing 1293 01:05:18,320 --> 01:05:22,480 Speaker 1: the ecosystem, now, you know, you have huge miners basically 1294 01:05:23,000 --> 01:05:27,320 Speaker 1: computer farms doing this and taking out futures to hedge 1295 01:05:27,320 --> 01:05:31,080 Speaker 1: their exposure. Like that is such a sea change from 1296 01:05:31,120 --> 01:05:33,920 Speaker 1: where we were at the beginning of all of this, 1297 01:05:34,080 --> 01:05:36,720 Speaker 1: and I think it's still kind of like, I don't know, 1298 01:05:37,040 --> 01:05:41,040 Speaker 1: it's really noteworthy, I have to say, like my misconceptions 1299 01:05:41,040 --> 01:05:43,360 Speaker 1: of it are probably the flip. Like I feel like 1300 01:05:43,400 --> 01:05:46,560 Speaker 1: I've been like conceiving of miners for quite a long time, 1301 01:05:47,200 --> 01:05:53,080 Speaker 1: as these like super industrial operations largely out of China 1302 01:05:53,200 --> 01:05:55,560 Speaker 1: and other or not even largely out of China, but 1303 01:05:55,640 --> 01:05:57,439 Speaker 1: it's sort of all around the world where there's cheap 1304 01:05:57,520 --> 01:06:00,760 Speaker 1: energy and good temperatures and stuff like that, and that 1305 01:06:01,040 --> 01:06:03,760 Speaker 1: like that that's been this industrial thing. But the speed 1306 01:06:03,840 --> 01:06:07,200 Speaker 1: with which, like the sort of like pure financialization of it, 1307 01:06:07,240 --> 01:06:12,320 Speaker 1: and the the existence of crypto prime brokerages and the 1308 01:06:12,360 --> 01:06:16,000 Speaker 1: popularity of stable coins to move money in a way 1309 01:06:16,040 --> 01:06:18,200 Speaker 1: that's in many ways, I actually do think it's probably 1310 01:06:18,400 --> 01:06:21,680 Speaker 1: much better than the traditional wire system. That's the part 1311 01:06:21,760 --> 01:06:24,840 Speaker 1: that I would say in recent you know, not now 1312 01:06:24,840 --> 01:06:28,320 Speaker 1: but it's sort of like thinking about mentally updating my 1313 01:06:28,440 --> 01:06:31,920 Speaker 1: model of the space, the swaps market, the derivatives market. 1314 01:06:31,920 --> 01:06:34,360 Speaker 1: How big that's gotten is the part where I've like 1315 01:06:34,440 --> 01:06:36,720 Speaker 1: sort of most needed to sort of like update my 1316 01:06:36,760 --> 01:06:39,600 Speaker 1: mental model, so to speak. That's a really good way 1317 01:06:39,600 --> 01:06:42,360 Speaker 1: of putting it, updating mental models. I gotta say the 1318 01:06:42,400 --> 01:06:45,280 Speaker 1: point about you know, um crypto sort of getting worried 1319 01:06:45,400 --> 01:06:48,200 Speaker 1: over settlement times that are something like T plus one 1320 01:06:48,400 --> 01:06:52,560 Speaker 1: when most of the traditional financial market deals with something 1321 01:06:52,600 --> 01:06:54,800 Speaker 1: like T plus two or T plus three, and I 1322 01:06:54,880 --> 01:06:57,320 Speaker 1: think some parts of the corporate ball market like still 1323 01:06:57,360 --> 01:07:01,080 Speaker 1: send trade settlements by facts and things like that. It's 1324 01:07:01,640 --> 01:07:04,480 Speaker 1: it's pretty amazing, and it does speak to really interesting 1325 01:07:04,520 --> 01:07:08,360 Speaker 1: things happening in the space that could potentially be applicable 1326 01:07:08,600 --> 01:07:13,240 Speaker 1: to more traditional finance. Yeah. Also Rose just like so 1327 01:07:13,280 --> 01:07:16,880 Speaker 1: good at uh so clear um and I love like 1328 01:07:17,000 --> 01:07:18,640 Speaker 1: just sort of like getting the full lay of the 1329 01:07:18,840 --> 01:07:20,720 Speaker 1: land from him, in the full picture and sort of 1330 01:07:20,760 --> 01:07:24,640 Speaker 1: like going back and forth between translating crypto speak to 1331 01:07:24,880 --> 01:07:28,320 Speaker 1: traditional finance speak. Uh is. It's a real treat to 1332 01:07:28,320 --> 01:07:30,960 Speaker 1: get to speak with someone like that. Absolutely, and I 1333 01:07:30,960 --> 01:07:35,200 Speaker 1: gotta say I appreciate his um willingness to risk the 1334 01:07:35,240 --> 01:07:40,240 Speaker 1: ire of the Bitcoin maximalists by talking about potential downsides there. 1335 01:07:40,800 --> 01:07:45,800 Speaker 1: It's a it's a risky strategy as I personally know. Yes, exactly. 1336 01:07:45,920 --> 01:07:49,040 Speaker 1: Wait Tracy before we go, Uh, how do you enjoy 1337 01:07:49,080 --> 01:07:53,520 Speaker 1: blogging these days? Um? It's fun. I've had a like 1338 01:07:53,920 --> 01:07:57,760 Speaker 1: a slightly difficult time getting back into it, but I 1339 01:07:57,800 --> 01:08:00,160 Speaker 1: am starting to ratch it up my volume, so I'm 1340 01:08:00,200 --> 01:08:02,600 Speaker 1: looking forward to that. How about you. I love it. 1341 01:08:02,680 --> 01:08:04,920 Speaker 1: I love getting to write. I'm super excited. And I 1342 01:08:04,960 --> 01:08:07,439 Speaker 1: don't just say this as a plug, but people should 1343 01:08:07,480 --> 01:08:09,880 Speaker 1: go check out the Low Odd Lots blog because I'm 1344 01:08:10,120 --> 01:08:13,280 Speaker 1: I feel like I'm home again, getting to uh to 1345 01:08:13,360 --> 01:08:17,040 Speaker 1: be a blogger again, and I'm really enjoying it. Shall 1346 01:08:17,080 --> 01:08:19,680 Speaker 1: we leave it there? Yeah, let's leave it there? All right? 1347 01:08:19,880 --> 01:08:22,679 Speaker 1: This has been another episode of the All Thoughts Podcast. 1348 01:08:22,760 --> 01:08:25,840 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 1349 01:08:25,880 --> 01:08:28,280 Speaker 1: Tracy Alloway and I'm Joe Why isn't all? You can 1350 01:08:28,400 --> 01:08:32,439 Speaker 1: follow me on Twitter at the start? Everyone should go 1351 01:08:32,479 --> 01:08:35,880 Speaker 1: follow our guest on Twitter, Roshan Patel. He's at Roshan Patel, 1352 01:08:36,000 --> 01:08:39,920 Speaker 1: the VP of lending at Genesis Trading. Very clear, very great. 1353 01:08:40,000 --> 01:08:43,840 Speaker 1: Follow on this whole crypto space. Follow our producer on Twitter, 1354 01:08:43,960 --> 01:08:47,639 Speaker 1: Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg 1355 01:08:47,680 --> 01:08:51,720 Speaker 1: head of podcast, Francesca Levie at Francesca Today. And check 1356 01:08:51,720 --> 01:08:55,000 Speaker 1: out all of our podcasts at Bloomberg under the handle 1357 01:08:55,360 --> 01:09:14,040 Speaker 1: at podcasts. Thanks for listening to