WEBVTT - Roshun Patel on What Really Happened During the Crypto Market Crash 0:00:10.640 --> 0:00:15.000 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.120 --> 0:00:18.840 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, do you 0:00:18.880 --> 0:00:22.880 remember the recent episode that we did with Aaron Lammer 0:00:23.000 --> 0:00:27.800 about Defy trading in the crypto space? How could I forgot, Joe, 0:00:28.240 --> 0:00:31.720 we are all defy all the time. It feels like, Well, 0:00:31.760 --> 0:00:35.320 I made a joke at the beginning of that episode. 0:00:35.440 --> 0:00:37.559 I was like, oh, by the time, like we're covering 0:00:37.880 --> 0:00:40.919 something that's probably the top and we're you know, there's 0:00:40.960 --> 0:00:43.159 probably gonna be a crash right afterwards. And then like 0:00:43.280 --> 0:00:46.920 I think literally two days or a day after that 0:00:46.920 --> 0:00:49.360 that episode came out, we actually did get one of 0:00:49.360 --> 0:00:52.800 the biggest true crashes in the crypto space in a 0:00:52.800 --> 0:00:57.800 long time. I mean, it's that classic UM magazine cover indicator, 0:00:57.840 --> 0:01:00.360 isn't it. Like by the time the mainstream media is 0:01:00.400 --> 0:01:05.120 talking about something, it's probably reaching its zenith in terms 0:01:05.160 --> 0:01:07.959 of popularity. That kind of makes sense. I gotta say 0:01:08.000 --> 0:01:12.080 I was really disappointed, I um I missed the crypto crash. 0:01:12.160 --> 0:01:15.920 So I took a few days off that week, and uh, 0:01:15.959 --> 0:01:17.560 I was out in the country and I wasn't really 0:01:17.560 --> 0:01:20.440 paying attention to either the news or social media, trying 0:01:20.440 --> 0:01:22.640 to take a break, and then I started getting all 0:01:22.640 --> 0:01:25.800 these messages from people going, look at crypto, look at bitcoin. 0:01:26.000 --> 0:01:30.360 It's at thirty dollars. So it seems like it was 0:01:30.400 --> 0:01:33.399 a very dramatic week. But I'm still trying to wrap 0:01:33.440 --> 0:01:37.600 my head around exactly what happened. Yeah, it was. It 0:01:37.640 --> 0:01:40.039 was a really dramatic week. There was already like a 0:01:40.080 --> 0:01:43.080 bunch of like negative stuff. There was the Elon stuff 0:01:43.120 --> 0:01:45.479 and other things going on that we already talked about. 0:01:46.080 --> 0:01:50.000 And then that Sunday, our episode with Aaron Lammer came 0:01:50.000 --> 0:01:53.400 out on a Thursday. That's Sunday, which was just I 0:01:53.400 --> 0:01:57.200 guess three days ago. So we're recording this Wednesday made 0:01:57.240 --> 0:02:00.400 twenty six, so let me I guess that was Sunday, 0:02:00.480 --> 0:02:03.960 the twenty three. We got this like really intense crash 0:02:04.040 --> 0:02:07.960 and bitcoin touch like thirty thousand and ether fill below 0:02:09.240 --> 0:02:11.240 and so forth, really big crash, and I think are 0:02:11.240 --> 0:02:13.679 a bunch of people that were like ready to say, oh, 0:02:13.760 --> 0:02:16.639 this cycle is over, the see you see you all 0:02:16.680 --> 0:02:18.799 of four years when we do the next one. It's 0:02:18.800 --> 0:02:20.799 actually like, I mean, it hasn't come back all the 0:02:20.840 --> 0:02:24.840 way by any stretch, but pretty resilient actually the last 0:02:25.160 --> 0:02:28.920 few days post that crash. I do think it highlights 0:02:28.960 --> 0:02:31.840 something pretty important for the crypto market, though, which is 0:02:32.360 --> 0:02:35.359 this idea that I think there's a tendency to look 0:02:35.400 --> 0:02:38.320 at it and think that it's just a bunch of 0:02:38.320 --> 0:02:42.240 people who are buying crypto on their computers, you know, 0:02:42.320 --> 0:02:45.400 with their own wallets, when in fact, the market has 0:02:45.480 --> 0:02:49.680 changed enormously and there's a whole ecosystem built around it. 0:02:49.760 --> 0:02:53.480 You have the big exchanges, you have people providing financial 0:02:53.520 --> 0:02:57.680 services that are tied to bitcoin. You have derivatives contracts 0:02:57.760 --> 0:03:00.639 in the form of a futures mark it, which seems 0:03:00.639 --> 0:03:02.880 to be playing a huge role. And I don't think 0:03:02.919 --> 0:03:08.080 people have like appreciated enough the change that has overcome 0:03:08.160 --> 0:03:13.280 crypto and how it actually impacts the underlying price absolutely. So, 0:03:13.360 --> 0:03:15.800 you know, I think there's this sort of like crypto 0:03:15.919 --> 0:03:20.079 conversation and then there's the crypto market structure conversation, and 0:03:20.360 --> 0:03:22.440 we're both super interested in that. So today we're gonna 0:03:22.440 --> 0:03:25.359 talk a little bit bit more about market structure. I'm 0:03:25.440 --> 0:03:27.520 very excited about our guest. We're gonna be speaking to 0:03:27.639 --> 0:03:33.040 Roshan Patel. He has the VP of Institutional Lending at Genesis, 0:03:33.360 --> 0:03:37.200 which can be described as basically a crypto prime brokerage. 0:03:37.200 --> 0:03:38.760 And so I think if we want to think about 0:03:38.760 --> 0:03:41.800 the role institutions are playing in the volatility, the role 0:03:41.800 --> 0:03:45.880 of hedge funds, how they're trading this, what caused the liquidations, 0:03:45.920 --> 0:03:47.840 where the money is coming in to buy the dip 0:03:48.320 --> 0:03:51.800 is a great, a great perspective on all this. So Roshan, 0:03:51.960 --> 0:03:55.120 thank you so much for joining us. Hey, Joe Um 0:03:55.200 --> 0:03:56.800 and Tracy, thank you guys so much for having me. 0:03:56.840 --> 0:03:59.480 It's great to be here. So why don't you actually 0:03:59.480 --> 0:04:01.280 just start off before we even get to the crash 0:04:01.400 --> 0:04:03.640 or get to anything like that, why don't you sort 0:04:03.680 --> 0:04:09.040 of talk to us about where Genesis sits within the 0:04:09.120 --> 0:04:13.200 crypto ecosystem and sort of what your role is there 0:04:13.200 --> 0:04:16.280 and how you got to occupy that seat to just speak. 0:04:16.880 --> 0:04:19.760 You know, Genesis broadly speaking is kind of a basically 0:04:19.760 --> 0:04:22.800 a cell side dusk in the crypto ecosystem, similar to 0:04:22.839 --> 0:04:25.599 kind of a bank prime brokerage desk. We facilitate the 0:04:25.600 --> 0:04:28.880 ability for clients of ours to trade as well as 0:04:28.920 --> 0:04:31.240 lend to us, borrow from US, um get yield on 0:04:31.240 --> 0:04:35.320 their holdings. And then recently, as of last year, trade 0:04:35.320 --> 0:04:37.839 derivatives with us BI lad early over the counter, so 0:04:38.279 --> 0:04:41.719 we kind of offer the whole janet of financial services 0:04:41.760 --> 0:04:46.000 in cryptome markets. Genesis has its roots kind of they 0:04:46.040 --> 0:04:48.520 go back to really that kind of mid two thousands 0:04:48.560 --> 0:04:51.480 to a company called Second Market. Without getting too much 0:04:51.520 --> 0:04:55.279 into the details there, that company basically facilitated buying and 0:04:55.320 --> 0:04:59.640 selling I liquid company stock really like Facebook, Twitter, LinkedIn, 0:04:59.720 --> 0:05:02.800 like those kind of things in the mid two thousands 0:05:03.360 --> 0:05:06.560 between buyers and sellers when those companies weren't really public. Eventually, 0:05:06.560 --> 0:05:08.240 I was sold to NAZAC and one of the dusts 0:05:08.279 --> 0:05:11.960 there started trading bitcoin in like two thousand eleven, two 0:05:12.000 --> 0:05:16.560 thousand twelve, and effectively that desk became Genesis and kept 0:05:16.560 --> 0:05:18.960 the broker dealer license, still based out in New York here, 0:05:19.560 --> 0:05:22.800 and we've kind of grown a lot since then. What 0:05:23.000 --> 0:05:26.200 started as just a spot OTC trading desk added lending 0:05:26.240 --> 0:05:28.200 in twenty eighteen, which is kind of when I joined, 0:05:28.760 --> 0:05:33.040 and derivatives in twenty so like we've you know, added 0:05:33.040 --> 0:05:36.159 at a SLEW services and and Genesis now you know, 0:05:36.240 --> 0:05:39.080 facilitates billions of dollars of trades every you know, it 0:05:39.160 --> 0:05:40.800 used to be every month, now it's like every week, 0:05:40.839 --> 0:05:42.760 which is kind of crazy to think. You know, we 0:05:42.760 --> 0:05:44.520 have a pretty large lending book. When I joined in, 0:05:45.440 --> 0:05:47.000 you know, we had a hundred million dollars in active 0:05:47.040 --> 0:05:50.920 loans outstanding. Now that's kind of grown to nine billion 0:05:50.920 --> 0:05:54.040 dollars in active owns outstanding as of now. I think 0:05:54.080 --> 0:05:55.680 prices are rallied a little bit, so maybe it's a 0:05:55.720 --> 0:05:59.360 little bit more. That mention of second market is kind 0:05:59.400 --> 0:06:02.200 of a from the past, and I haven't heard anyone 0:06:02.240 --> 0:06:05.000 mentioned it for a long time. But what was what 0:06:05.080 --> 0:06:10.080 was the sort of like overlap between dealing with UM 0:06:10.120 --> 0:06:13.760 shares in the private market and crypto, Like is there 0:06:14.240 --> 0:06:18.560 a resemblance between the two asset classes or why did 0:06:18.920 --> 0:06:22.720 UM this service that you just describe spring out of 0:06:23.240 --> 0:06:27.760 the private market area second market? What was interesting about 0:06:27.800 --> 0:06:30.560 that is is connecting to sort of different markets, which 0:06:30.640 --> 0:06:33.720 was like you had early investors in tech companies as 0:06:33.720 --> 0:06:36.760 well as employees that wanted to get some liquidity on 0:06:36.800 --> 0:06:39.600 their holdings or shares or options. And then you also 0:06:39.600 --> 0:06:41.719 and and those guys tended to be on the sort 0:06:41.720 --> 0:06:45.000 of West coast, and then you also had like more 0:06:45.120 --> 0:06:48.400 investor focused hedge fun types on the East coast. New 0:06:48.480 --> 0:06:50.560 York base that wanted to kind of get it on 0:06:50.600 --> 0:06:53.560 that and you know, weren't necessarily physically or you know, 0:06:53.920 --> 0:06:58.040 financially close to Silicon Valley. That kind of uh, you know, 0:06:58.279 --> 0:07:02.240 marrying of two differ markets. I think it's it's sort 0:07:02.279 --> 0:07:05.880 of ties into kind of bitcoin and crypto trading generally, 0:07:05.960 --> 0:07:07.920 just because you know that the people on the West 0:07:07.960 --> 0:07:09.600 coast there that were early on tech tended to be 0:07:09.640 --> 0:07:12.040 the ones that were also early in the crypto space. 0:07:12.080 --> 0:07:15.080 And it led Genesis and ultimately our parent company, Digital 0:07:15.080 --> 0:07:17.240 Currency Group, to establish a lot of these good relationships 0:07:17.240 --> 0:07:19.720 with early holders which are now you know, kind of 0:07:20.120 --> 0:07:22.840 larger clients, no showing, so that we have like a 0:07:22.840 --> 0:07:25.920 good asset base and a good client base and as 0:07:25.920 --> 0:07:28.200 well as investor based to kind of lead on to 0:07:28.200 --> 0:07:31.200 to help build our business into into the future. Let's 0:07:31.200 --> 0:07:33.960 talk about that what that base looks like. And one 0:07:34.000 --> 0:07:36.480 thing that's really exhortinary, I mean, the sort of like 0:07:36.720 --> 0:07:41.320 the flora and fauna of crypto holders really diversified a lot. 0:07:41.400 --> 0:07:43.720 So you know, maybe before it's hobbyists on their phones 0:07:43.880 --> 0:07:47.000 or like weirdos, and now you have pension funds and 0:07:47.520 --> 0:07:49.760 your clients, like how many of them are sort of 0:07:49.840 --> 0:07:55.240 like funds that have some allocation to crypto sub strategic 0:07:55.240 --> 0:07:57.640 allocation or how many of them are sort of like 0:07:58.040 --> 0:08:01.960 very crypto focused. That's really the sort of like their 0:08:01.960 --> 0:08:05.480 main energy. Yes, you know, that's really evolved. I would 0:08:05.480 --> 0:08:08.559 say over time, if you ask me, it was pretty 0:08:08.600 --> 0:08:12.160 much the vast majority of our clients were extremely crypto focused, 0:08:12.320 --> 0:08:14.760 a crypto native, and to to this day, I would 0:08:14.760 --> 0:08:17.600 say like a good portion of them still are as 0:08:17.600 --> 0:08:19.400 of late. It's it's evolved a bit where we do 0:08:19.480 --> 0:08:23.800 have more clients that are not necessarily crypto is their 0:08:23.840 --> 0:08:25.760 main thing, but it's sort of an adject thing that 0:08:25.800 --> 0:08:28.960 they've added recently. I would say, are our cliente based 0:08:29.000 --> 0:08:31.040 now is probably like if I had to put like 0:08:31.120 --> 0:08:35.760 percentages on it, like seventy crypto focus, let's say, and 0:08:35.800 --> 0:08:38.880 the rest like more diverse and has uh as like 0:08:38.920 --> 0:08:43.120 a primary businesses outside of crypto. These funds, and I 0:08:43.160 --> 0:08:45.600 guess maybe sort of the crypto focused ones and the 0:08:45.640 --> 0:08:48.800 non crypto focused ones, but I guess the non crypto 0:08:48.800 --> 0:08:51.800 focused ones, how many of them come into it because 0:08:52.320 --> 0:08:55.120 they say, Okay, we want to have some allocation to 0:08:55.240 --> 0:08:58.439 this space because it seems to be diversified or it's 0:08:58.480 --> 0:09:00.320 going up a lot. We want to have some exposure. 0:09:00.800 --> 0:09:03.520 And how many you see come into the space because 0:09:03.960 --> 0:09:07.280 they see a nascent, inefficient market with lots of trading 0:09:07.280 --> 0:09:11.720 opportunities and lots of essentially arabs so to speak, to 0:09:11.880 --> 0:09:16.280 exploit because the space is still, broadly speaking, pretty immature. 0:09:17.480 --> 0:09:20.079 Both are both are pretty relevant in terms of the 0:09:20.120 --> 0:09:23.199 inflow that we see. Just kind of given the services 0:09:23.280 --> 0:09:27.040 that we provide, our clients are more focused on the 0:09:27.400 --> 0:09:32.240 trading ur and extracting yields and you know, sort of 0:09:32.320 --> 0:09:33.760 value out of the market side of things. So I 0:09:33.760 --> 0:09:35.679 would say it's a little bit skewed towards that side. 0:09:36.640 --> 0:09:39.040 So since you're talking about the services you provide, when 0:09:39.120 --> 0:09:43.440 I hear prime brokerage, I usually think about investment banks 0:09:43.559 --> 0:09:48.800 UM servicing hedge fund clients specifically by providing money, so 0:09:48.960 --> 0:09:52.000 you know, lending the money to trade. Is that something 0:09:52.000 --> 0:09:55.120 that you do as well? Yeah, definitely. So you know, 0:09:55.400 --> 0:09:58.920 we started our core business really by lending out crypto, 0:09:59.640 --> 0:10:02.440 particular bitcoin for cash collateral in terms of the lending 0:10:02.480 --> 0:10:05.599 side of things, and that trade was you know more 0:10:05.720 --> 0:10:08.480 or that real service was more you know, suited towards 0:10:09.160 --> 0:10:12.240 crypto trading firms that had a reason for borrowing bitcoin 0:10:12.280 --> 0:10:15.240 in the first place. Now, um, you know kind of 0:10:15.280 --> 0:10:18.920 in I would say, like around November of eighteen, stable 0:10:18.960 --> 0:10:22.640 coins started becoming a much more popular and real thing, 0:10:23.240 --> 0:10:26.160 and you know, since we were more crypto native and focus, 0:10:26.200 --> 0:10:28.000 we were thinking, like, you know, why don't we consider 0:10:28.080 --> 0:10:31.200 lending out stable coins against bitcoin as collateral kind of 0:10:31.200 --> 0:10:33.960 doing the inverse of what we were doing prior, And 0:10:34.160 --> 0:10:37.760 that business has ballooned quite a bit where now about 0:10:37.920 --> 0:10:41.280 you know, it's about of our active loan book is 0:10:41.280 --> 0:10:44.600 is actually stable coins right now, So you know, it's 0:10:44.960 --> 0:10:48.480 or cash equivalents like like tether dollar circle dollar packs 0:10:48.520 --> 0:10:50.640 as those kinds of things, as well as USD So 0:10:51.040 --> 0:10:52.839 you know, we do land cash against crypto and and 0:10:52.880 --> 0:10:54.960 a lot of the firms that do borrow that cash, 0:10:55.080 --> 0:10:58.160 you know, are probably clients of prime workers at banks 0:10:58.160 --> 0:11:01.240 as well. So I want to get into, you know, 0:11:01.280 --> 0:11:03.760 the recent volatility, but I actually think this is pretty 0:11:03.760 --> 0:11:06.520 important to just draw this point out a little bit 0:11:06.520 --> 0:11:10.040 more lending stable coins. I mean, you know, we had 0:11:10.120 --> 0:11:13.960 um Sam Bankman freed on several weeks ago. He's the 0:11:13.960 --> 0:11:16.560 founder of f t X and Alimator, research is huge 0:11:16.559 --> 0:11:19.720 in the space. And you know, we talked about various 0:11:19.840 --> 0:11:24.040 arbitrage opportunities. How much is the sort of stable coin 0:11:24.920 --> 0:11:30.040 world essentially about the ability to move money quickly across 0:11:30.280 --> 0:11:33.360 different exchanges in a short period of time to either 0:11:33.440 --> 0:11:37.400 take a take advantage of price differences in spot or 0:11:37.480 --> 0:11:42.440 futures markets and essentially attempt to close various arbitrages. Like 0:11:42.480 --> 0:11:46.840 how closely those two concepts are related. I think, probably speaking, 0:11:46.840 --> 0:11:49.360 this distable coin market, a huge aspect of it is 0:11:49.640 --> 0:11:52.800 sort of efficient settlement and timing on moving assets from 0:11:52.840 --> 0:11:55.599 point A to point B, whether that's for exchanges or 0:11:55.640 --> 0:11:58.800 even just more like settling OTC trades and dealing with dusks. 0:11:59.160 --> 0:12:01.080 I think it's it's all relevant. You know. A good 0:12:01.080 --> 0:12:03.880 example to point to is really the most innovative and 0:12:03.920 --> 0:12:06.800 forward thinking banks I think out there are you know, 0:12:06.880 --> 0:12:10.720 kind of building these seven settlement networks UM, some are 0:12:10.720 --> 0:12:14.800 which are really mirrored on kind of Ethereum itself and 0:12:14.800 --> 0:12:17.439 and kind of like private Ethereum networks. So yeah, table 0:12:17.480 --> 0:12:19.840 coins are really just just frankly just easier to use 0:12:19.880 --> 0:12:24.120 than wire is simply put right, So you've laid out 0:12:24.160 --> 0:12:26.920 what you do UM really well and it feels like 0:12:26.960 --> 0:12:30.720 you're in the perfect position maybe to describe um what 0:12:30.880 --> 0:12:34.880 exactly happened during the big crypto sell off. So there 0:12:34.960 --> 0:12:37.880 was a lot of talk about positions being liquidated. I 0:12:37.880 --> 0:12:41.280 think I saw one number that was like outstanding futures 0:12:41.320 --> 0:12:44.080 contracts fell from I think it was as much as 0:12:44.240 --> 0:12:48.560 twenty eight billion in April to something like billion in 0:12:48.600 --> 0:12:50.640 a matter of days. And then there were all the 0:12:50.679 --> 0:12:55.680 disruptions at the individual exchanges like coin base and cracking 0:12:55.760 --> 0:13:00.280 and things like that. So from your perspective, what actually 0:13:00.520 --> 0:13:04.679 happened and what did you observe into the crypto market. 0:13:04.720 --> 0:13:07.000 You know, over the years, you've seen some some pretty 0:13:07.200 --> 0:13:10.480 wicked crashes to the downside, similar to last week, although 0:13:10.520 --> 0:13:13.720 I will say last week was probably the most brutal 0:13:13.760 --> 0:13:17.400 I've ever seen in the last five years, but even 0:13:17.440 --> 0:13:19.200 even crazier than March. I would say for a couple 0:13:19.200 --> 0:13:21.960 of reasons. But you could point to like a specific 0:13:21.960 --> 0:13:24.520 headline or a specific narrative or specific theme that that 0:13:24.559 --> 0:13:26.680 could be the cause of it. But it's really hard 0:13:26.720 --> 0:13:29.280 to say if that was the ultimate reason why, you know, 0:13:29.320 --> 0:13:31.319 the market sold off. At the end of the day, 0:13:31.600 --> 0:13:34.240 the crypto market is really just a spot order book 0:13:34.280 --> 0:13:37.319 and a derivatives order book. The derivatives order book is 0:13:37.320 --> 0:13:39.319 is very levered, and you know, there's a lot of 0:13:39.600 --> 0:13:42.560 people that take take positions down on futures and swaps 0:13:42.640 --> 0:13:45.079 that that want to get upside but have like tight 0:13:45.120 --> 0:13:48.760 liquidation levels to the downside. And you know, that market 0:13:49.120 --> 0:13:51.640 has liquidity until it doesn't, and then you know it 0:13:51.640 --> 0:13:53.439 could get a little hairy on the downside. And then 0:13:53.559 --> 0:13:56.280 the spot market is the same thing. And the spot 0:13:56.320 --> 0:13:58.839 market is consisted of people that are buying and trading 0:13:58.880 --> 0:14:02.480 the underlying and I think really just what happened last 0:14:02.520 --> 0:14:06.120 week was similar to what you've seen before, where the 0:14:06.720 --> 0:14:08.640 you know, the futures market and the swaps market was 0:14:08.720 --> 0:14:12.800 was pretty leveled up. People were very very long, especially 0:14:12.800 --> 0:14:15.120 in the alt coins, thinking that, like, look, bitcoin has 0:14:15.200 --> 0:14:17.240 kind of found a floor here. The next sort of 0:14:17.280 --> 0:14:20.600 thematic narrative shift that we'll see is a rotation into alts, 0:14:20.640 --> 0:14:22.520 and as long as Bitcoin doesn't fall through the floor, 0:14:23.000 --> 0:14:24.600 the alts will kind of rallies. So a lot of 0:14:24.600 --> 0:14:27.760 the positioning was skewed down the risk curve and in 0:14:28.080 --> 0:14:32.880 more volatile assets, and pretty much the exact opposite happened, 0:14:32.920 --> 0:14:36.880 which was spot Bitcoin started selling off in a significant way, 0:14:37.280 --> 0:14:40.920 and when that happens, there's such a scramble for collateral 0:14:40.960 --> 0:14:42.640 in the market, as well as like kind of getting 0:14:42.640 --> 0:14:45.240 assets back to things that you know aren't really going 0:14:45.280 --> 0:14:47.840 to fall like seventy or eight percent, but you know 0:14:47.880 --> 0:14:49.360 things that are going to fall maybe like twenty or 0:14:49.400 --> 0:14:52.360 thirty percent, like bitcoin. So there's a rotation back into bitcoin, 0:14:53.000 --> 0:14:55.800 and you know when that happens that the liquidations can 0:14:55.840 --> 0:14:58.280 get can get pretty wild on alts, and they kind 0:14:58.280 --> 0:15:01.920 of cascade. And the difference I think with what happened 0:15:02.000 --> 0:15:05.840 last week was usually when that happens once and gets 0:15:05.880 --> 0:15:08.360 to a certain point, it kind of bottoms out in floors. 0:15:08.880 --> 0:15:11.280 What was different last week it kind of just felt 0:15:11.280 --> 0:15:13.640 like it kept going and the pressure for the spots 0:15:13.640 --> 0:15:16.440 selling just sort of continued. You know that that that's 0:15:16.480 --> 0:15:19.360 what made it particularly worse, I would say, relative to 0:15:19.480 --> 0:15:21.120 let's say in March of last year, which was kind 0:15:21.160 --> 0:15:23.160 of a one day thing and then kind of we 0:15:23.280 --> 0:15:25.320 rallied and there was also some solace in knowing that 0:15:25.520 --> 0:15:28.320 other markets were behaving the same way. The fact that 0:15:28.360 --> 0:15:30.240 this was you know, sort of idios and neocratic to 0:15:30.320 --> 0:15:33.000 crypto makes it even a little bit more painful, but 0:15:33.840 --> 0:15:35.240 you know, at the end of the day, I think 0:15:35.440 --> 0:15:38.120 what the takeaway is from it is more impactful than 0:15:38.160 --> 0:15:40.680 like the than the actual sell off itself, which is 0:15:41.200 --> 0:15:43.080 look like, you know, there was no lender of last 0:15:43.080 --> 0:15:45.760 resort that had to step in. We sawraw down. There's 0:15:45.760 --> 0:15:48.640 no you know, injection of capital into the market, no 0:15:48.760 --> 0:15:52.000 firms defaulted, you know genesis. It's you know, on our side, 0:15:52.040 --> 0:15:54.560 we manage our risk really well. All of our clients 0:15:54.880 --> 0:15:57.320 you know, topped up or return loans or you know, 0:15:57.360 --> 0:15:59.800 we didn't have any liquidations or defaults, and and the 0:15:59.840 --> 0:16:01.760 more it kind of just carries on and now you 0:16:01.760 --> 0:16:04.720 know that people left or another layer of survivors onto 0:16:04.720 --> 0:16:06.960 the next uh you know sort of market cycle. So 0:16:07.480 --> 0:16:09.360 it happens from time to time. It's hard to point 0:16:09.360 --> 0:16:13.160 to exactly what it is, but overall market moves on 0:16:13.240 --> 0:16:15.640 and we're in a healthier spot. Now, let's say, so 0:16:15.840 --> 0:16:19.560 you mentioned the fact that we didn't get big defaults 0:16:19.600 --> 0:16:22.520 or failures in the market. Can I ask, like, how 0:16:22.520 --> 0:16:27.200 close do you think some market participants actually came to 0:16:27.920 --> 0:16:31.080 failure in that week? Because I saw some pretty crazy 0:16:31.240 --> 0:16:34.200 rumors flying around and I don't want to name specific 0:16:34.400 --> 0:16:37.520 names for obvious reasons, but it does feel like some 0:16:37.560 --> 0:16:40.880 people thought certain entities got pretty close to the brink. 0:16:41.480 --> 0:16:45.040 I guess I'm I'm asking like, how crazy did it 0:16:45.120 --> 0:16:48.200 get that week? Yeah, it's it's an interesting question because 0:16:48.920 --> 0:16:52.440 it really depends on the entity and the sort of firm, 0:16:52.720 --> 0:16:54.640 the type of firm you're talking about, if you're talking 0:16:54.680 --> 0:16:58.000 about trading firms and art shops like, you know, kind 0:16:58.040 --> 0:17:00.240 of our core client based. It was probably one of 0:17:00.240 --> 0:17:03.120 their better weeks on their direction neutral books of all time, 0:17:03.640 --> 0:17:07.600 primarily because their long spot short futures or short swaps, 0:17:07.920 --> 0:17:11.080 and when a move like that happens, those spreads really collapse, 0:17:11.480 --> 0:17:13.560 and not only do they come back to parity, they 0:17:13.600 --> 0:17:15.680 sometimes go the other way, so like they go into 0:17:15.720 --> 0:17:17.800 negative territories, so you get even more juice out of 0:17:17.800 --> 0:17:20.199 the trade. So a lot of our clients actually, you know, 0:17:20.320 --> 0:17:24.680 did really well that week kind of being positioned appropriately 0:17:24.760 --> 0:17:27.679 for that trade and for that move. You know, if 0:17:27.720 --> 0:17:31.960 you're like a crypto hedge fund that's like aggregating you know, 0:17:32.000 --> 0:17:34.240 assets and kind of just sitting net long, it was 0:17:34.280 --> 0:17:36.560 probably not so fun for you. But you're not you know, 0:17:37.080 --> 0:17:39.359 as long as you're not levered on top of your 0:17:39.400 --> 0:17:41.480 SPOT holdings, it's not really that bad for you. The 0:17:41.520 --> 0:17:44.119 only the only way really I would say firms are 0:17:44.160 --> 0:17:45.840 in a in a tough spot is if they're holding 0:17:46.000 --> 0:17:48.320 just spot, they have no cash and then on top 0:17:48.359 --> 0:17:50.800 of that they've taken leverage out against that. You know, 0:17:50.920 --> 0:17:54.760 in this market, I think the participants that do that 0:17:54.880 --> 0:17:57.760 sort of style of trading are it's just almost like 0:17:57.800 --> 0:17:59.679 a ticking time bomb, right. It's like they're not going 0:17:59.720 --> 0:18:01.600 to a round for that long because you don't really 0:18:01.600 --> 0:18:04.760 need that much leverage to capture this market. And even 0:18:04.800 --> 0:18:07.520 Spot itself is volatile enough where where you know you 0:18:07.680 --> 0:18:10.199 you don't really need to like go crazy with futures 0:18:10.280 --> 0:18:12.760 or swaps. So I think people like to speculate and 0:18:12.800 --> 0:18:14.680 say like, oh, you know, this market sold off like 0:18:14.720 --> 0:18:16.760 all you know, there's X, Y and Z might have 0:18:16.800 --> 0:18:18.480 been in a tough spot. But when you really dig 0:18:18.520 --> 0:18:21.600 into it, it's like, you know, exchanges or fine, you know, 0:18:21.600 --> 0:18:24.160 they're just facilitating trades. Trading firms had a great week 0:18:24.520 --> 0:18:26.640 even if they're long on their core spot or down 0:18:26.640 --> 0:18:29.560 on their core long positions and um, yeah, you know, 0:18:29.600 --> 0:18:32.000 service providers like Genesis, as long as you know, we're 0:18:32.000 --> 0:18:34.120 managing our risk and knowing our clients positions and knowing 0:18:34.240 --> 0:18:36.360 what our clients are are up to in their risk. 0:18:36.520 --> 0:18:39.320 Well we're doing fine as well. So overall I think 0:18:39.320 --> 0:18:41.960 it's you know, the price is probably the scariest part. 0:18:42.119 --> 0:18:44.880 The actual underlying behind it is, it's not so bad. 0:19:00.920 --> 0:19:03.520 Can you talk a little bit more. There's been some 0:19:03.640 --> 0:19:07.399 research done. Josh Younger at JP Morgan put out a 0:19:07.440 --> 0:19:11.720 note about different times when the crypto market seems vulnerable, 0:19:11.760 --> 0:19:14.040 and you noted that US hours seem to be a 0:19:14.080 --> 0:19:16.960 little bit more volatile lately than Asian and europe hours. 0:19:17.320 --> 0:19:19.359 And there's been a number of people who have observed 0:19:19.680 --> 0:19:22.840 that weekends tend to be more volatile, maybe there's less 0:19:22.880 --> 0:19:25.560 liquidity than the weeks. And in fact I saw some 0:19:25.600 --> 0:19:29.199 people talking about that on Thursday and Friday before all this, 0:19:29.359 --> 0:19:31.439 like this could be an interesting weekend, and then of 0:19:31.480 --> 0:19:33.919 course it turned out to be. Can you talk a 0:19:33.920 --> 0:19:36.320 little bit more about the texture of markets in different 0:19:36.359 --> 0:19:41.720 times and the way, say, traditional finance wires and institutions 0:19:41.920 --> 0:19:44.600 taking a break for the weekend has an effect on crypto, 0:19:44.680 --> 0:19:49.480 which obviously trades seven. Yeah, there is definitely a case 0:19:49.600 --> 0:19:51.720 of the market depending on the hours, depending on the 0:19:51.800 --> 0:19:53.560 day of the week. I think there's a couple of 0:19:53.600 --> 0:19:56.200 reasons for that. One is like there's like a sort 0:19:56.240 --> 0:20:00.920 of Western market and in an Asian market, um they 0:20:00.960 --> 0:20:03.879 have different Sometimes they're very in line and doing the 0:20:03.920 --> 0:20:07.560 same thing. Other times they have different risk taking proclivities 0:20:07.600 --> 0:20:11.520 and preferences, and you know, they could sometimes be um 0:20:11.560 --> 0:20:13.159 fighting each other in a sense. So like you know, 0:20:13.200 --> 0:20:15.320 you can see different price action in the Asia session 0:20:15.440 --> 0:20:17.920 versus the U S session just because the user base 0:20:18.160 --> 0:20:21.359 is positioned differently and then moving in a different sense, 0:20:21.400 --> 0:20:24.679 like you know, last summer, for example, in May, or 0:20:24.720 --> 0:20:27.720 really after the March crash, a lot of the minors 0:20:27.760 --> 0:20:30.320 and a lot of the sort of very long Asian 0:20:30.320 --> 0:20:33.320 firms had a little bit of concern after the way 0:20:33.400 --> 0:20:36.760 March moved that they were more inclined to hedge, So 0:20:36.800 --> 0:20:38.679 a lot of the cell pressure came out of Asia, 0:20:39.160 --> 0:20:41.720 whereas the U S side of things had more of 0:20:41.760 --> 0:20:44.320 a bid, especially in the spot market. So those kind 0:20:44.359 --> 0:20:46.720 of flows were competing against each other a bit, you know, 0:20:46.760 --> 0:20:50.119 regarding weekends and volatility on the weekends, I think a 0:20:50.200 --> 0:20:52.880 huge part of that is really the market is still 0:20:53.840 --> 0:20:58.120 very human driven it's not like everything is extremely algorithmic 0:20:58.160 --> 0:21:01.000 and high frequency trading and super qui pentative at the 0:21:01.080 --> 0:21:02.439 end of the day, that this is more of a 0:21:02.840 --> 0:21:06.920 speculative marketplace where there's you know, there's leverage, of course, 0:21:06.960 --> 0:21:08.880 but also a lot of humans just kind of clicking 0:21:09.480 --> 0:21:12.840 buying and selling and on the weekend of course, like yeah, 0:21:12.960 --> 0:21:15.280 you know, no wires is definitely a part of it, 0:21:15.320 --> 0:21:18.560 but also like the larger liquidity providers might just be 0:21:18.600 --> 0:21:22.840 a little bit more wide on the screens, so you know, 0:21:22.920 --> 0:21:26.120 you'll kind of have like a easy way to like 0:21:26.119 --> 0:21:28.239 like there's just like a high chance that like a 0:21:28.280 --> 0:21:31.200 small amount of capital could could wipe through a lot 0:21:31.240 --> 0:21:33.360 of levels of the book, so you kind of get 0:21:33.400 --> 0:21:35.760 those sort of drawn out moves. So I think it's 0:21:35.800 --> 0:21:37.720 really just the human element of it and the fact 0:21:37.720 --> 0:21:41.040 that Asia and the West are sort of two different 0:21:41.040 --> 0:21:45.040 markets and have their own little tendencies. So you mentioned 0:21:45.080 --> 0:21:48.719 algorithmic trading, just then why isn't there more algorithmic trading 0:21:48.800 --> 0:21:52.119 in crypto Because when you look at the space, you 0:21:52.119 --> 0:21:55.520 see a lot of fragmentation, a lot of inefficiencies um 0:21:55.520 --> 0:22:00.000 and pricing discrepancies like could in theory um that someone 0:22:00.000 --> 0:22:02.840 had a lot of profits. Why hasn't that happened more? 0:22:03.480 --> 0:22:05.400 Don't get me wrong here, Like I think there's there's 0:22:05.440 --> 0:22:07.440 definitely a lot of algo trade and going out a crypto, 0:22:07.520 --> 0:22:09.600 especially on the art of it at exchange side. Um 0:22:09.760 --> 0:22:13.800 really since since when when March or kind of January 0:22:13.840 --> 0:22:17.560 to February where those spreads were really wild, the very 0:22:17.600 --> 0:22:20.919 smart art trading firms out there definitely started looking at 0:22:20.920 --> 0:22:23.080 the space or and got involved in a big way. 0:22:23.560 --> 0:22:26.320 I just think the way the market is structured leads 0:22:26.320 --> 0:22:28.720 to like some ways that you know, it's it's more 0:22:28.760 --> 0:22:30.760 difficult to be an art shop in crypto. You have 0:22:30.800 --> 0:22:34.119 to manage a lot more nuanced than say like uh 0:22:34.119 --> 0:22:37.439 an exchange or et F art shop. One example is 0:22:37.440 --> 0:22:40.000 really just the blockchain itself. You know, there's a men pool, 0:22:40.400 --> 0:22:43.720 there's different chains. You know, it could be clogged with transactions. 0:22:43.720 --> 0:22:46.440 Things could be slower on chain, so it's like physically 0:22:46.440 --> 0:22:48.960 more difficult to get assets from point A to point B. 0:22:49.680 --> 0:22:52.800 Even service providers like Genesis, you know, we we settle 0:22:52.840 --> 0:22:55.560 trades as fast as we possibly can, but when you 0:22:55.560 --> 0:22:57.840 know the network is clogged, there's really not much that 0:22:57.880 --> 0:22:59.720 we can do other than kind of put put in 0:22:59.800 --> 0:23:02.639 high our fees and wait for transactions to go through. 0:23:03.040 --> 0:23:06.360 So all those sorts of elements make make our nuances 0:23:06.760 --> 0:23:09.160 more prevalent, so you know, you do see a little 0:23:09.200 --> 0:23:12.359 bit of widening there. And then there's also like limits 0:23:12.359 --> 0:23:14.800 on how much you can withdraw from certain places and 0:23:15.119 --> 0:23:17.439 liquidity constraints in terms of how much size can be 0:23:17.480 --> 0:23:20.120 actually thrown at this, where like people that have really 0:23:20.160 --> 0:23:23.960 big balance sheets and really big our trading capabilities might 0:23:24.000 --> 0:23:27.160 not be looking at a specific small art because it's 0:23:27.160 --> 0:23:29.760 not worth their time just notionally what they can make. 0:23:30.160 --> 0:23:33.080 So you know, for all those reasons, I think you 0:23:33.119 --> 0:23:35.879 know you're gonna see these spreads sort of persists for 0:23:35.880 --> 0:23:38.240 a while and and it's a good opportunity I would 0:23:38.240 --> 0:23:41.840 say for like more like nimble, smaller size firms to 0:23:41.840 --> 0:23:45.639 to to really take advantage of. So just out of curiosity, 0:23:45.720 --> 0:23:48.879 what we're settlement times actually like um, the week of 0:23:48.920 --> 0:23:53.359 the big sell off, um, you know, settlement times specifically 0:23:53.359 --> 0:23:55.640 for Genesis. I mean, we we were pretty good about them, 0:23:55.640 --> 0:23:58.080 you know, we we got through all of them totally fine. 0:23:58.240 --> 0:24:00.959 I think on the exchange there are some delays here 0:24:00.960 --> 0:24:02.639 and they're like kind of t plus one, which is 0:24:02.720 --> 0:24:06.159 really just an eternity in crypto, which you know normally 0:24:06.160 --> 0:24:08.240 in traditional finance, it's like T plus three and it's 0:24:08.240 --> 0:24:11.960 like wow, arrives on time. And I think you know, 0:24:12.000 --> 0:24:14.000 there was a little bit of clogging of the ethereum 0:24:14.040 --> 0:24:17.040 mem pool where gas fees went super high, and oh, 0:24:17.080 --> 0:24:19.800 I forgot to mention this earlier. You know that that 0:24:19.880 --> 0:24:21.880 causes it so that it's basically really hard to move 0:24:21.880 --> 0:24:24.280 assets on ethereum. And there is a lot of collateralized 0:24:24.359 --> 0:24:26.880 lending going on on Etherium, like you know, people are 0:24:26.880 --> 0:24:30.439 posting the RC twenty tokens or eth as collateral to 0:24:30.480 --> 0:24:33.400 borrow like stable coins from protocols. When a sell off 0:24:33.440 --> 0:24:36.400 like that happens in spot moves so significantly, all those 0:24:36.400 --> 0:24:40.240 sort of on chain deposits are very difficult to top up, 0:24:40.280 --> 0:24:43.000 both from a collateral perspective or returning the loan perspective. 0:24:43.240 --> 0:24:46.480 So you get this cascade of on chain liquidations where 0:24:46.480 --> 0:24:50.560 the prices of things on decentralized exchanges might be vastly 0:24:50.640 --> 0:24:54.160 different than the price on centralized exchanges. And it's really 0:24:54.200 --> 0:24:57.240 just a product of difficulty actually, you know, coming in 0:24:57.320 --> 0:24:58.879 to support the bid and then and then it all 0:24:58.920 --> 0:25:01.080 sorts of normalizes and then and then it kind of 0:25:01.080 --> 0:25:03.800 builds back from there. But yeah, that that the pace 0:25:03.880 --> 0:25:07.040 of that is difficult, right, and I want to go 0:25:07.080 --> 0:25:08.919 back to the crash, But just from a sort of 0:25:08.920 --> 0:25:13.120 market structure standpoint, speaking of the d the defy exchanges, 0:25:13.760 --> 0:25:17.359 they don't go down, but the fees absolutely sore. The 0:25:17.440 --> 0:25:21.120 gas fees, the sort of the the block space that's 0:25:21.160 --> 0:25:24.720 required to execute your trades, everyone rushing through the door, 0:25:24.840 --> 0:25:28.320 it all, it all holds up structurally, but you could 0:25:28.359 --> 0:25:30.240 it's I guess it's easy to imagine and I'm thinking 0:25:30.280 --> 0:25:34.719 about algorithmic trading, how in periods of high vall are 0:25:34.880 --> 0:25:38.840 opportunities just completely disappear when the sort of I guess 0:25:38.880 --> 0:25:41.440 you could say the de facto commission of the trade 0:25:41.440 --> 0:25:45.600 absolutely sours. Yeah, I mean it depends on the size 0:25:45.600 --> 0:25:48.560 of the art. But in a sense like sort of 0:25:48.640 --> 0:25:51.000 because like people can still pay really high gas fees 0:25:51.000 --> 0:25:53.840 and jam themselves into the into the pool and get 0:25:53.880 --> 0:25:56.520 top priority from miners. It's just a matter of like 0:25:56.600 --> 0:25:59.399 what if the opportunity you're looking at is worth that, 0:26:00.160 --> 0:26:02.720 Like a lot of like the smaller things aren't really 0:26:02.720 --> 0:26:04.600 worth that, so they just kind of hang for a bit, 0:26:05.400 --> 0:26:08.600 so just to go back to uh Sunday for a 0:26:08.600 --> 0:26:11.119 second or that that crash And by the time people 0:26:11.160 --> 0:26:13.479 listen to this, I think it'll be two Sundays from now, 0:26:13.480 --> 0:26:16.119 but everyone should know we're talking about going back to 0:26:16.200 --> 0:26:20.480 that crash. Who bought the dip and you? Was it institutions? 0:26:20.680 --> 0:26:23.560 Was it funds? Was it retail? I actually had someone 0:26:23.960 --> 0:26:26.000 talked to me like, I bought my first crypto today 0:26:26.000 --> 0:26:28.040 after the big crash. I know there was at least 0:26:28.119 --> 0:26:30.679 I know there was at least one retail buyer, probably 0:26:30.400 --> 0:26:33.239 many more. But I'm curious, like what your senses in 0:26:33.359 --> 0:26:35.879 terms of like what what put the floor under the 0:26:35.920 --> 0:26:38.320 market and sort of what contributed to what's actually been 0:26:38.359 --> 0:26:40.840 a very strong bounce back as of right now. Yeah, 0:26:40.880 --> 0:26:42.840 it's it's so funny. I mean, I was working on 0:26:42.880 --> 0:26:45.119 Sunday and kind of on shot with the desk, and 0:26:45.560 --> 0:26:48.280 the amount of times I said, like, who is selling? 0:26:48.760 --> 0:26:51.200 Was that it was kind of crazy because the only 0:26:51.240 --> 0:26:54.160 thing we're seeing on dips like that are our net buyers. 0:26:54.280 --> 0:26:57.639 And granted, our our flow is very skewed and biased 0:26:57.680 --> 0:26:59.960 towards the buy side because it kind of the new 0:27:00.040 --> 0:27:02.359 Sure the clients were dealing with, but we were seeing 0:27:02.400 --> 0:27:04.560 institutions come in buying the dip, like you know, large 0:27:04.560 --> 0:27:08.200 hedge funds, trading firms, as well as ultra high networth individuals. 0:27:08.280 --> 0:27:10.840 Like really every single piece of flow that we saw 0:27:10.960 --> 0:27:14.200 in like the sub two k eight range and sub 0:27:14.240 --> 0:27:16.720 thirty five k bitcoin range was just net buyers. So 0:27:16.840 --> 0:27:19.240 like we were supporting the bid in many ways there, 0:27:19.760 --> 0:27:22.359 and the question was really like, why the heck is 0:27:22.520 --> 0:27:24.960 you know kind of selling off so hard? So you know, 0:27:25.240 --> 0:27:27.400 we we've just seen a lot of net buyers there. Well, 0:27:27.520 --> 0:27:29.359 what's the answer to that question? Like when you were 0:27:29.400 --> 0:27:32.199 asking that, why, so what is the answer? Because I 0:27:32.200 --> 0:27:34.600 feel like we haven't really correct It's like who where 0:27:34.600 --> 0:27:37.120 did the selling pressure come from? And who wasn't Yeah, 0:27:37.119 --> 0:27:39.600 I mean it's like the billion dollar age old question, right, 0:27:39.600 --> 0:27:40.879 It's like I think it's just at the end of 0:27:40.920 --> 0:27:42.280 the day, you kind of just have to look at 0:27:42.800 --> 0:27:45.560 the activity on exchanges and the sort of the trading 0:27:45.560 --> 0:27:49.040 that that occurred. And there was large spots selling on 0:27:49.240 --> 0:27:53.040 certain exchanges. So someone out there with a lot of inventory, 0:27:53.320 --> 0:27:56.600 um basically, and maybe it's not someone. I don't think 0:27:56.600 --> 0:27:59.040 it's definitely one person or anything. Like that. It's just 0:27:59.119 --> 0:28:01.320 like there was just a lot of exiting from the 0:28:01.320 --> 0:28:04.200 market in spots. So you know, we don't know who 0:28:04.280 --> 0:28:06.359 who that was because it's not really the flow that 0:28:06.400 --> 0:28:12.720 we see, but it definitely existed. So you mentioned UM 0:28:13.119 --> 0:28:16.280 leverage right at the very start of this conversation and 0:28:16.480 --> 0:28:19.680 UM more recently, you you mentioned this idea of people 0:28:20.119 --> 0:28:25.000 borrowing in ethere um too and using that to borrow 0:28:25.280 --> 0:28:27.919 UM stable coins and then do something else with them. 0:28:27.960 --> 0:28:30.440 I mean, this is something that has come up again 0:28:30.440 --> 0:28:33.719 and again in all our podcasts on Defy, and I 0:28:33.760 --> 0:28:36.840 know Joe has been asking this question of like where 0:28:36.920 --> 0:28:40.719 is the yield actually coming from? And why is it 0:28:40.800 --> 0:28:45.560 all crypto doing stuff with crypto? I guess it just 0:28:45.600 --> 0:28:48.280 feels very circular or sort of like crypto all the 0:28:48.280 --> 0:28:52.840 way down, Like somehow crypto is generating money from other crypto, 0:28:52.960 --> 0:28:57.000 but like what is the underlying mechanations of like how 0:28:57.040 --> 0:29:01.400 that yield is generated. Yeah, now I've been watching I've 0:29:01.400 --> 0:29:03.800 been listening to kind of the recent podcast and it's 0:29:03.840 --> 0:29:05.400 it's it's it's a question that comes up so off 0:29:05.440 --> 0:29:07.320 and the Aaron one was great, by the way, you know, 0:29:07.360 --> 0:29:09.640 I think there's two there's two sort of aspects of 0:29:09.640 --> 0:29:11.560 that yield that comes from the table point. One is 0:29:11.560 --> 0:29:14.000 the more the one that makes more sense, and the 0:29:14.000 --> 0:29:16.760 one that's easier to understand. It's really just the basis trade, 0:29:16.760 --> 0:29:19.760 which is of course retail and leverage traders want to 0:29:19.760 --> 0:29:22.800 be long. They bid up the market in futures. There 0:29:22.840 --> 0:29:25.000 was a good tweet actually by Sam Bank and Free 0:29:25.040 --> 0:29:27.600 who was on this podcast, that kind of described why 0:29:27.720 --> 0:29:30.360 that exists, and in a nutshell, it's basically like, if 0:29:30.400 --> 0:29:32.360 the crypto market is worth you know, one or two 0:29:32.360 --> 0:29:36.240 trillion dollars, and the sort of traders in the market 0:29:36.280 --> 0:29:39.000 wanted to be worth four trillion dollars, but only five 0:29:39.360 --> 0:29:41.920 billion dollars is being lent to the market as spot 0:29:42.480 --> 0:29:46.560 sort of cash leverage to use. The remaining difference is 0:29:46.600 --> 0:29:48.920 sort of bid up in interest rates, and that causes 0:29:48.920 --> 0:29:53.040 derivatives and futures, you know, to kind of go bid 0:29:53.120 --> 0:29:56.480 relative to spot, and then that's reflected in interest rates, 0:29:56.480 --> 0:29:58.960 and then of course you get good yields on cash 0:29:59.000 --> 0:30:00.640 for coming into the other out of that trade and 0:30:00.680 --> 0:30:03.120 trying to help close it, which you know, it's not 0:30:03.640 --> 0:30:07.240 completely free money in any sense, but it's it's very 0:30:07.360 --> 0:30:09.680 simple to understand why you could earn yield on your 0:30:09.720 --> 0:30:12.680 castion that way, and it makes sense like from an 0:30:12.760 --> 0:30:17.800 end to end non circular crypto perspective. The crypto circular 0:30:17.800 --> 0:30:19.600 perspective is, I think where you're gonna get as more 0:30:19.640 --> 0:30:23.239 on the yield farming side of things, which you know 0:30:23.640 --> 0:30:27.480 that that aspect of the market is game theory psychology 0:30:27.480 --> 0:30:29.880 in terms of kind of getting in getting out yields 0:30:29.920 --> 0:30:32.520 like kind of delta risk and an impermanent loss and 0:30:32.600 --> 0:30:34.880 thinking about all the ways that you know you can 0:30:34.920 --> 0:30:38.120 actually extract the yield but also walk away in notional 0:30:38.160 --> 0:30:40.960 dollar terms in a decent sense without having to take 0:30:41.400 --> 0:30:43.840 uh sort of large bosses there. I would say the 0:30:43.840 --> 0:30:47.200 main reason why those yields exist is really protocols are 0:30:47.200 --> 0:30:52.320 formed which have an native token. That token contributes to 0:30:52.360 --> 0:30:55.760 governance or has some sort of value tied to the protocol, 0:30:55.840 --> 0:30:58.520 either through like a burn mechanism or some sort of 0:30:58.520 --> 0:31:02.520 fee generation mechanism. Basically it's somewhat valuable if the protocol 0:31:02.600 --> 0:31:06.600 is valuable, and then to incentivize people to use the protocol, 0:31:07.120 --> 0:31:10.560 especially at the start of the protocol's launch, the protocol 0:31:10.600 --> 0:31:15.160 will emit sort of that token. Two people that contribute 0:31:15.160 --> 0:31:18.720 to providing liquidity on on the protocol, and that causes 0:31:19.240 --> 0:31:23.360 you to have good yield opportunities in crypto. But you know, 0:31:23.400 --> 0:31:24.760 a lot of what I just said there was like 0:31:24.800 --> 0:31:26.800 you know, at the start and at the beginning, and 0:31:27.320 --> 0:31:29.880 you know that eventually dies down, so like it's not 0:31:29.960 --> 0:31:34.760 really something for like the passive yield yield seeking investor 0:31:34.840 --> 0:31:36.160 to kind of just be like, oh, I'll just park 0:31:36.240 --> 0:31:37.880 this here for a bit, And you can do that 0:31:37.880 --> 0:31:40.240 in many ways on chain, but the sort of the 0:31:40.600 --> 0:31:43.000 crazy yields that you're talking about, you know, you wouldn't 0:31:43.000 --> 0:31:45.080 you wouldn't quite see if you were just so passive. 0:31:45.120 --> 0:31:47.920 It takes a little bit of understanding as well as 0:31:47.920 --> 0:31:50.560 like nimbleness and willingness to be able to move around. 0:31:51.080 --> 0:31:54.400 And also like the fact that Ethereum has like two 0:31:54.520 --> 0:31:57.760 pretty large side chains now. One is called Matic it 0:31:57.880 --> 0:32:01.719 rebranded to Polygon, and the other is Antum, where you know, 0:32:01.800 --> 0:32:05.600 though you're basically if you're willing to go change up 0:32:05.680 --> 0:32:08.000 the change you're looking at, you know, you can be 0:32:08.040 --> 0:32:09.880 compensated in a way because a lot of people aren't 0:32:09.920 --> 0:32:11.840 just going to go do that, so like less people 0:32:11.880 --> 0:32:13.840 are looking at it. And then you get into other 0:32:14.080 --> 0:32:16.520 sort of layer ones like Salana and things like that, 0:32:17.000 --> 0:32:20.160 and you know you're compensated effectively for dealing with crypto, 0:32:20.200 --> 0:32:23.600 but then also going further down the rabbit hole and 0:32:23.640 --> 0:32:25.600 into into areas where you know a lot of people 0:32:25.640 --> 0:32:28.960 might not be looking. So yeah, you know, the first 0:32:29.000 --> 0:32:31.280 time Roe, you and I connected, we were talking about 0:32:31.320 --> 0:32:33.920 the basis trade and I want to get to that 0:32:34.000 --> 0:32:36.320 in a minute, but before we do, just you know, 0:32:36.400 --> 0:32:41.360 one of the theories going into the crash, and you know, 0:32:41.440 --> 0:32:43.560 you were sort of racically questions like who is selling, 0:32:43.560 --> 0:32:47.680 who is selling, and there's some One of the headlines 0:32:47.720 --> 0:32:51.720 that initially hit the market was China climbing down on 0:32:51.800 --> 0:32:55.040 mining activity. And I know there's so many rumors in 0:32:55.080 --> 0:32:58.680 this area and it's always contradictory headlines and very opaque. 0:32:59.200 --> 0:33:05.280 But minors have Fiat obligations. Their liabilities are in FIAT, 0:33:05.320 --> 0:33:07.880 either in the form of electricity or acquiring new hardware 0:33:07.880 --> 0:33:11.760 in the form of chips. How much could that have contributed? 0:33:11.800 --> 0:33:14.520 And I saw a bunch again on Twitter and things 0:33:14.560 --> 0:33:19.000 that are translated out of Chinese like multiple times and reinterpreted. 0:33:19.280 --> 0:33:21.680 But this sort of like miners having to pick up 0:33:21.680 --> 0:33:25.120 their stakes, so to speak, pay off their bills, liquidate 0:33:25.320 --> 0:33:29.600 any holdings of coins that they had generated before winding down. 0:33:30.040 --> 0:33:33.320 How much plausibly could that have been a catalyst. And 0:33:33.360 --> 0:33:35.880 I'm just curious, like sort of more broadly, I know, 0:33:35.960 --> 0:33:39.080 like Genesis, I think you have a mining cousin or 0:33:39.200 --> 0:33:42.600 sister company out there, Genesis Mining. Correct me if I'm wrong, 0:33:42.800 --> 0:33:44.920 But how much does that play into you know, sort 0:33:44.960 --> 0:33:48.280 of like that fit into the ecosystem. Yeah, so our 0:33:48.320 --> 0:33:51.400 our sister company is actually a DCG foundry, which is 0:33:51.520 --> 0:33:54.920 uh it is effectively a mining and staking company that's 0:33:54.960 --> 0:33:56.960 it also has like a core mission to help bring 0:33:57.360 --> 0:34:00.440 pass rate to North America and also do it in 0:34:00.440 --> 0:34:04.360 a more conscious renewable way. But you know, the mining thing, 0:34:04.360 --> 0:34:06.400 and I've talked to to Mike Colier. They're a bunch 0:34:06.640 --> 0:34:09.200 who's kind of runs that business and it's very very 0:34:09.280 --> 0:34:12.680 in tune with with the mining ecosystem. And you know, 0:34:12.719 --> 0:34:15.520 we have fins that are that are miners as as well. 0:34:15.560 --> 0:34:18.960 I think it's it's less likely that the whole cash 0:34:19.000 --> 0:34:23.040 obligation uh woe was like it was a reason for 0:34:23.040 --> 0:34:26.200 this most recent sell off, mostly because the break evens 0:34:26.200 --> 0:34:28.480 for miners in terms of like the prices they need 0:34:28.560 --> 0:34:31.920 these assets to be apt to sustain their electricity costs 0:34:31.920 --> 0:34:35.759 and operational costs are significantly lower than where spot was. 0:34:35.920 --> 0:34:38.160 It was more of the relevant concern, I would say 0:34:38.440 --> 0:34:41.440 in like the March of crash where we saw a 0:34:41.560 --> 0:34:44.200 move past like four k and kind of into the 0:34:44.239 --> 0:34:47.080 five K range on bitcoin, because at those levels you're 0:34:47.080 --> 0:34:51.200 getting really close to this sort of cost of mining, 0:34:51.280 --> 0:34:53.040 and and like you know, it gets a little harrier 0:34:53.120 --> 0:34:56.280 down there in terms of miners staying profitable if prices 0:34:56.280 --> 0:34:59.359 were to sustain in the lows they're here at like 0:34:59.440 --> 0:35:02.120 you know, over third k, miners are doing fine in 0:35:02.239 --> 0:35:06.279 terms of operational expenses relatives revenue. So I don't think 0:35:06.320 --> 0:35:08.800 like a sudden urge for like you know, oh, you know, 0:35:08.880 --> 0:35:10.480 we have to pay our bills, you know, cause the 0:35:10.520 --> 0:35:13.680 sell off. Just on a related note, I mean, even 0:35:13.760 --> 0:35:17.160 before the massive sell off that we saw in May, 0:35:17.239 --> 0:35:20.440 there was a sharp dip in bitcoin. I think it 0:35:20.480 --> 0:35:24.160 was a few weeks before where some people were blaming 0:35:24.200 --> 0:35:27.879 it on a power outage in Shenjong where there are 0:35:27.920 --> 0:35:31.120 supposed to be a bunch of miners. Can you maybe 0:35:31.160 --> 0:35:35.760 just talk more generally about how the miners and changes 0:35:35.760 --> 0:35:38.759 in hash rates and things like that actually feed into 0:35:38.880 --> 0:35:43.000 pricing and the market, because it seems like when like 0:35:43.040 --> 0:35:47.040 every time Bitcoin does something that people can't quite explain, 0:35:47.560 --> 0:35:50.400 the miners often come up. And it's unclear to me 0:35:50.440 --> 0:35:53.560 whether that's just a convenient thing for people to point 0:35:53.600 --> 0:35:58.960 to or whether it's something that actually matters for the market. Yeah, 0:35:58.960 --> 0:36:00.560 I think I think you actually that they're and you know, 0:36:00.600 --> 0:36:03.239 I'll speak broadly on this because I'm by no means 0:36:03.400 --> 0:36:05.399 a mining expert or anything like that, but I think 0:36:06.200 --> 0:36:10.120 from a psychological perspective and a trading perspective and markets perspective, 0:36:10.320 --> 0:36:13.520 and our markets sell off drastically and suddenly all of 0:36:13.560 --> 0:36:16.080 a sudden, there's like a there's a feeling that like 0:36:16.120 --> 0:36:18.879 who is responsible for this? Like where do I point 0:36:18.880 --> 0:36:21.279 the finger? Like someone has to there's something that you know, 0:36:21.600 --> 0:36:24.480 can can bear the blame here. I think miners just 0:36:24.560 --> 0:36:29.200 kind of given there maybe like elusive nature and activity 0:36:29.280 --> 0:36:32.759 are easy to point to, but in reality, like it's 0:36:32.800 --> 0:36:35.360 not really you know, it's not really the cause of 0:36:35.360 --> 0:36:37.480 like you know, like the electricity concerns and the capex 0:36:37.480 --> 0:36:40.600 concerns or the or the or the outages and shen 0:36:40.840 --> 0:36:43.200 and like, you know, those things relative to the actual 0:36:43.640 --> 0:36:46.080 blows in the market, I think are are pretty small 0:36:46.080 --> 0:36:48.880 and and don't don't matter as much. But people like to, 0:36:48.960 --> 0:36:51.600 you know, paint narratives and and find a way to 0:36:51.680 --> 0:36:53.759 like be like why is this happening? So that I 0:36:53.800 --> 0:36:55.439 think you kind of nailed it with like why people 0:36:55.480 --> 0:36:57.440 do it? It's just because people want a reason, and 0:36:57.640 --> 0:37:00.960 miners are conveniently, you know, not that public about what 0:37:01.000 --> 0:37:02.600 they do, so it's easy to kind of say, like, oh, 0:37:02.600 --> 0:37:06.320 it must be the minor. Alright, one last miners question, 0:37:06.560 --> 0:37:08.440 But this is something I've wondered about, and I'm kind 0:37:08.440 --> 0:37:10.680 of guessing the answer is no, because there is, as 0:37:10.719 --> 0:37:14.480 you say, this huge gap currently between spot and UM 0:37:14.640 --> 0:37:19.080 cost for most of them. Do minors currently participate in 0:37:19.120 --> 0:37:22.080 the futures market and use them as hedging instruments at all? 0:37:22.200 --> 0:37:24.840 Kind of the same way oil companies locked in prices? 0:37:25.200 --> 0:37:27.520 And if not, do you see a future in which 0:37:27.560 --> 0:37:32.000 the futures market serves a commercial purpose for miners? If 0:37:32.000 --> 0:37:35.719 that spread word to compress and it became and the 0:37:35.719 --> 0:37:38.640 they had a need to hedge volatility, So they definitely 0:37:38.680 --> 0:37:41.040 do they definitely do they used UM, They use futures 0:37:41.080 --> 0:37:44.480 the use options, I think really after March of last year, 0:37:44.640 --> 0:37:46.279 with with that sell off, I think a lot of 0:37:46.280 --> 0:37:48.600 them are even more inclined to do so, which is 0:37:48.640 --> 0:37:51.920 kind of why you saw us rally from the lows 0:37:51.920 --> 0:37:54.000 of like let's say four four K on bitcoin to 0:37:54.080 --> 0:37:57.799 ten k in June on pretty much a pancake forward curve, 0:37:57.920 --> 0:38:01.520 Like the June futures were barely above or the September 0:38:01.520 --> 0:38:04.560 futures were barely above Spot throughout that whole move up, 0:38:04.840 --> 0:38:07.680 which is historically very different from than what you've seen 0:38:07.719 --> 0:38:09.680 in the crypto market, where like if the market swings 0:38:09.719 --> 0:38:12.080 bullish and like two X is, you know, usually you 0:38:12.120 --> 0:38:14.359 see a bit up in premiums. But the futures were 0:38:14.400 --> 0:38:17.160 really tight relative to Spot. So the prevailing theory is 0:38:17.200 --> 0:38:18.680 there is that, like, you know, there must have been 0:38:18.680 --> 0:38:21.640 a tight offer on futures. Who is selling those futures? 0:38:21.880 --> 0:38:23.520 You know, I think a lot of that people that 0:38:23.600 --> 0:38:26.440 have you know, sort of forward receivables in crypto and 0:38:26.520 --> 0:38:28.560 want to be able to hedge that, and and so 0:38:28.680 --> 0:38:29.800 you know, that's why you saw a little bit of 0:38:29.800 --> 0:38:33.319 pressure there. So there's definitely a sophisticated, you know, participant 0:38:33.800 --> 0:38:37.520 in derivatives by miners. So I want to get to 0:38:37.680 --> 0:38:40.839 We talked about this um several weeks ago Row, and 0:38:40.920 --> 0:38:42.640 you know, I think this trade is still out there, 0:38:42.640 --> 0:38:44.480 and you sort of hinted at it. But there is 0:38:44.520 --> 0:38:48.240 this sort of like I called it in a newsletter, 0:38:48.320 --> 0:38:51.120 the sort of like free money bitcoin trade. And you know, 0:38:51.239 --> 0:38:53.719 nothing is free money, there's nothing guaranteed, but there is 0:38:53.760 --> 0:38:58.440 this big arbitrage opportunity that exists that more and more 0:38:58.440 --> 0:39:00.560 people are talking about, which is that there is a 0:39:00.640 --> 0:39:04.719 huge gap, at least there was between bitcoin spot on 0:39:04.760 --> 0:39:08.719 the various exchanges and the various flavors of futures, whether 0:39:08.719 --> 0:39:11.560 we're talking about CMME futures or some of them more 0:39:12.080 --> 0:39:14.840 exotic futures on the exchanges like f t X and 0:39:14.920 --> 0:39:18.240 cracking and so forth. And a lot of people seem 0:39:18.320 --> 0:39:21.880 to be interested in this opportunity to centrally by bitcoin 0:39:22.000 --> 0:39:25.440 now short the futures because they're trading so much higher, 0:39:25.480 --> 0:39:28.000 and then over time and theory they converge and you 0:39:28.040 --> 0:39:30.920 get free money. And these sort of basis trades are 0:39:30.960 --> 0:39:33.880 like common in commodities, but they tend to be like 0:39:34.320 --> 0:39:37.640 way narrower and rarer than they are, and usually there's 0:39:37.640 --> 0:39:40.120 a cost of carrying. So can you quickly sort of 0:39:40.160 --> 0:39:44.359 like describe this opportunity and the degree to which sort 0:39:44.360 --> 0:39:48.879 of like non crypto interested money is sensing this opportunity 0:39:48.960 --> 0:39:53.040 and interested in exploiting it. Yes, I mean on the 0:39:53.040 --> 0:39:54.960 interest side, there's definitely a lot of more eyes on 0:39:55.000 --> 0:39:57.960 it right now than I would say there ever had been. Um, 0:39:58.040 --> 0:39:59.799 you know, it's it's a lot more popular, it's talked 0:39:59.840 --> 0:40:01.960 abou a lot more. You know, in a nutshell, I 0:40:01.960 --> 0:40:04.279 think you know, you described it pretty well. But you know, 0:40:04.320 --> 0:40:07.839 derivatives traded a premium to spot primarily because people want 0:40:07.920 --> 0:40:10.200 leverage and people bid up those interest rates similar to 0:40:10.239 --> 0:40:12.439 kind of I was talking about what the market cap 0:40:12.760 --> 0:40:15.200 should be worth in the eyes of traders relative to 0:40:15.239 --> 0:40:17.600 what it is versus the amount of cash that's been 0:40:17.840 --> 0:40:20.759 that's being lent to those traders. So you know, all 0:40:20.760 --> 0:40:24.120 those parameters slide around, and I think you know, in 0:40:24.120 --> 0:40:27.960 in February and May and March and April, you had 0:40:28.000 --> 0:40:31.839 a pretty wide gap between where the market cap was 0:40:32.200 --> 0:40:34.920 trading and versus where people thought it was going to go. 0:40:35.520 --> 0:40:38.320 But that is a you know, that is an emotional difference, 0:40:38.360 --> 0:40:40.440 I think, and and it and it ebbs and flows 0:40:40.480 --> 0:40:43.160 over time. So if that gap narrows, which it actually 0:40:43.239 --> 0:40:46.359 has right now as we're talking right now on this date, 0:40:46.760 --> 0:40:48.400 you know, the futures are much more in line with 0:40:48.480 --> 0:40:51.280 Spot because after the whole sell off, all of a sudden, 0:40:51.280 --> 0:40:52.920 people think that the market is not going to go 0:40:53.320 --> 0:40:55.040 up as much and they don't really have a desire 0:40:55.080 --> 0:40:57.440 to own the curve as much. So to the spreads 0:40:57.440 --> 0:41:00.480 and the sort of yields have compressed there in terms 0:41:00.480 --> 0:41:04.680 of the difference between the two. But the underlying market 0:41:04.760 --> 0:41:07.719 is so volatile in crypto like the spot market, where 0:41:08.239 --> 0:41:10.560 you know, the the interest rate market, which is basically 0:41:10.560 --> 0:41:14.120 the basis market, is equally as volatile. So these these 0:41:14.160 --> 0:41:17.680 annualized rates swing all over the place like they were 0:41:17.680 --> 0:41:20.800 pretty much negative the whole way through really since nineteen 0:41:20.840 --> 0:41:23.200 twenty they've been positive, and then you have these like 0:41:23.320 --> 0:41:27.240 really really wild moves where the rates are super positive 0:41:27.280 --> 0:41:29.160 because they're so bit up, and then they kind of 0:41:29.239 --> 0:41:31.040 usually come down. And I would say it's actually a 0:41:31.360 --> 0:41:33.480 in many ways, it's a it's a leading indicator as 0:41:33.520 --> 0:41:36.759 to where kind of spot could move next, because and 0:41:36.920 --> 0:41:39.359 traders talk about this all the time. It's like, as 0:41:39.360 --> 0:41:41.280 these rates kind of get bit up and these curves 0:41:41.320 --> 0:41:44.680 are very blown out. You know, it could indicate that, like, 0:41:44.800 --> 0:41:47.080 look like there's there's some sort of wash up coming 0:41:47.120 --> 0:41:49.400 up next, because you know, things are just a little 0:41:49.400 --> 0:41:51.360 out of control right now and it's way too profitable 0:41:51.400 --> 0:41:53.520 to just buy spots sell future, where like I kind 0:41:53.520 --> 0:41:55.160 of just have to do it, and you know, the 0:41:55.239 --> 0:41:57.759 unwinding of that trade, you know, kind of going back 0:41:57.800 --> 0:41:59.840 to talking about, oh, why is the sell off happening? 0:42:00.239 --> 0:42:01.960 I forgot to mention this then, but I'll mention it 0:42:01.960 --> 0:42:04.440 now because it came up when you unwind this trade 0:42:04.480 --> 0:42:06.400 that the action you have to perform in the market 0:42:06.480 --> 0:42:10.200 is buying future and but more importantly selling spot at 0:42:10.239 --> 0:42:13.880 the same time. So when markets sell off, the basis 0:42:13.880 --> 0:42:16.440 traders that are involved in the market are going to 0:42:16.480 --> 0:42:19.440 have to sell spot and buy future, adding to the 0:42:19.480 --> 0:42:21.560 spot pressure that you see on the order book. So 0:42:22.040 --> 0:42:24.880 that is definitely a huge portion of the of the 0:42:24.920 --> 0:42:28.120 offer you see right after a liquidation sell off. So 0:42:28.360 --> 0:42:30.440 you know, I would say those are kind of the 0:42:30.920 --> 0:42:33.600 things to consider there. But also the margin on the 0:42:33.600 --> 0:42:37.160 futures leg is a concern generally for all traders and 0:42:37.520 --> 0:42:40.200 part of the reason why potentially these markets blow out 0:42:40.239 --> 0:42:42.800 so wide because you don't really want to be in 0:42:42.840 --> 0:42:45.480 a position where you buy spots sell future, but then 0:42:45.520 --> 0:42:48.279 the underlying ten xes or five x is from there. 0:42:48.800 --> 0:42:50.600 You know, it's it's a it's a very tough position 0:42:50.640 --> 0:42:52.879 to be. And like last summer, for example, if you'ring 0:42:53.000 --> 0:42:57.360 was probably trading around, and the September and December futures 0:42:57.360 --> 0:42:59.239 were trading, and even the March futures were trading at 0:42:59.239 --> 0:43:01.560 a pretty good annual eyes basis yield where you would 0:43:01.560 --> 0:43:04.160 be very comfortable to buy spot self future, but then 0:43:04.160 --> 0:43:08.160 ethereum teleports all of a sudden, you're scrambling for margin 0:43:08.239 --> 0:43:10.400 on your future's leg and you know, it gets a 0:43:10.440 --> 0:43:13.200 little harrier. So it's not it's not totally cut and 0:43:13.280 --> 0:43:15.719 dry and and as riskless as as it might seem 0:43:15.760 --> 0:43:18.880 on the surface. This is gonna be a weird question, 0:43:19.160 --> 0:43:24.200 but how much does cryptos allure sort of depend on 0:43:24.320 --> 0:43:28.960 these inefficiencies and having a fragmented market, because it does 0:43:29.000 --> 0:43:31.160 feel like a lot of people are clearly in the space. 0:43:31.560 --> 0:43:33.880 You know, they might talk about blockchain technology and changing 0:43:33.920 --> 0:43:36.000 the world, but there is a big chunk of people 0:43:36.040 --> 0:43:39.480 who just want to make money. Bitcoin is really volatile. 0:43:39.760 --> 0:43:43.160 It's fun to trade. Stuff is happening every day, but 0:43:43.360 --> 0:43:48.960 it does feel like as the market matures, the potential 0:43:49.239 --> 0:43:53.520 for those sort of big discrepancies in things like spot 0:43:53.680 --> 0:43:56.600 versus futures, like maybe that starts to go away a 0:43:56.600 --> 0:44:02.000 little bit and that attracts and starts to wait. I 0:44:02.040 --> 0:44:04.880 don't know if that's I'm having a hard time putting 0:44:04.880 --> 0:44:07.680 this intowards but hopefully you understand what I mean. Yeah, 0:44:07.920 --> 0:44:09.279 I think I get what you're saying, which is like 0:44:09.920 --> 0:44:11.520 a lot of people will be a lot of market 0:44:11.520 --> 0:44:15.200 participants are here for the the inefficiencies of the market, 0:44:15.200 --> 0:44:17.920 and once the market becomes super efficient, it's like, Okay, 0:44:17.920 --> 0:44:21.000 onto the next thing. What's next? Right, It kind of 0:44:21.000 --> 0:44:24.520 gets to the the yield farming idea that you mentioned earlier, right, 0:44:24.600 --> 0:44:26.360 Like a lot of it depends on the new the 0:44:26.400 --> 0:44:28.880 new coins, and that's where the opportunities are. But sorry, 0:44:28.880 --> 0:44:31.480 go ahead, no, I agree with you. I mean, like 0:44:31.920 --> 0:44:33.719 broadly speaking, like, yes, the market is going to get 0:44:33.719 --> 0:44:37.400 more efficient over time, and the amount of very blown 0:44:37.400 --> 0:44:42.000 out or you know, high yield arbitrage opportunities and similar 0:44:42.080 --> 0:44:45.800 kind of are are smaller. At the same time, though, 0:44:46.040 --> 0:44:48.840 I do think the tailwind of the fact that like 0:44:48.840 --> 0:44:50.759 a new asset class is born here, which is like 0:44:50.760 --> 0:44:53.360 pretty rare for anyone to see in their lifetimes. Like 0:44:53.400 --> 0:44:56.120 you know, you don't really get like a new asset class, right, 0:44:56.160 --> 0:44:57.880 Like it's like, okay, you know, you have assets and 0:44:58.080 --> 0:45:00.960 they kind of exist like stocks, realistic a gold, but like, 0:45:01.000 --> 0:45:03.120 you know, now there's a new asset class. It's called crypto, 0:45:03.239 --> 0:45:05.080 whether people like it or not, Like it's here to 0:45:05.120 --> 0:45:07.160 stay that it's like Pandora's boxes open, like you know, 0:45:07.200 --> 0:45:09.160 you can't just put this back and like end it. 0:45:09.239 --> 0:45:11.200 So it's gonna be around in some form of the other. 0:45:11.640 --> 0:45:14.279 And and given the difference between the crypto market and 0:45:14.320 --> 0:45:16.560 the traditional market, which I think the key difference really 0:45:16.640 --> 0:45:20.120 is access, Like there's really low barriers to entry for 0:45:20.280 --> 0:45:22.719 someone and and individuals to kind of come in and 0:45:22.719 --> 0:45:25.200 trade and and you know, do leverage or whatever they 0:45:25.200 --> 0:45:28.279 want to do. Where um, it's going to be much 0:45:28.280 --> 0:45:31.520 more tied into like the nature of like the way 0:45:31.600 --> 0:45:34.200 humans are are trading, and the emotional aspect of and 0:45:34.200 --> 0:45:36.880 then the psychological aspect of markets more so than like 0:45:36.960 --> 0:45:39.560 let's say the stock market and the you know, the 0:45:39.560 --> 0:45:42.000 commodities markets, out there. And on top of that, there's 0:45:42.000 --> 0:45:44.680 no sort of blender of rap last resort or or 0:45:44.800 --> 0:45:47.000 or similar in crypto, where like you know, liquidations can 0:45:47.040 --> 0:45:49.879 happen and markets can can go really really south and 0:45:49.880 --> 0:45:51.600 and no one's really gonna no one really has to 0:45:51.600 --> 0:45:53.799 come in and step in and be like a designated 0:45:53.800 --> 0:45:56.160 market maker. Similar like you know on the CME there 0:45:56.160 --> 0:45:58.360 are designated market makers and a lot of these products 0:45:58.360 --> 0:45:59.920 out there which are forced to be on the bid 0:46:00.040 --> 0:46:02.040 if markets sell off a certain amount. You don't have 0:46:02.080 --> 0:46:04.680 that in crypto. So the democratic nature of the market, 0:46:04.719 --> 0:46:06.319 the fact that it's a new asset class, I think 0:46:06.440 --> 0:46:09.520 it's going to cause these opportunities to almost persist a 0:46:09.560 --> 0:46:12.480 lot longer than we think. So, you know, maybe some 0:46:12.719 --> 0:46:15.560 very very future hyper efficient state like crypto has just 0:46:15.719 --> 0:46:18.920 used as colloquially as as as cash or or you know, 0:46:19.000 --> 0:46:21.440 venomo or stable clans, whatever, But I think we're long 0:46:21.480 --> 0:46:24.000 ways away and these inefficiencies should persist for some time. 0:46:40.320 --> 0:46:42.400 I just want to go back real quickly to the 0:46:42.960 --> 0:46:46.400 orb the spot futures are. I mean, you mentioned the 0:46:46.560 --> 0:46:49.759 risk that can happen even if the trade should close profitably. 0:46:50.200 --> 0:46:52.799 We get this sort of teleportation higher, which happens all 0:46:52.840 --> 0:46:55.560 the time in crypto, and so even if eventually the 0:46:55.600 --> 0:46:58.399 spread does close, you have to put up a lot 0:46:58.440 --> 0:47:02.960 of cash. Potentially. Is anyone working on or you know, 0:47:03.080 --> 0:47:07.000 just solving the problem of using your spot as as 0:47:07.040 --> 0:47:09.759 your collateral. Josh Younger has done that work. It's like 0:47:09.800 --> 0:47:11.640 if there was an e t F, then it would 0:47:11.680 --> 0:47:14.480 be super simple because then you'd have this liquid product 0:47:14.560 --> 0:47:17.160 that traded on all the normal exchanges, just let you know, 0:47:17.320 --> 0:47:19.680 on a desk, and then the futures trade on a desk, 0:47:19.719 --> 0:47:21.440 and then the e t F becomes your collateral and 0:47:21.480 --> 0:47:23.760 you don't have to worry about putting up new cash. 0:47:23.920 --> 0:47:27.160 Like how much could that you know, could that be 0:47:27.239 --> 0:47:30.719 made easier? But basically yeah, I mean you know one 0:47:30.719 --> 0:47:33.560 example of this is and it's very relevant, is really 0:47:33.960 --> 0:47:37.880 Genesis started our registrating desk in May. We've seen explosive 0:47:37.960 --> 0:47:40.080 volumes there. I think that's actually kind of why I'm 0:47:40.080 --> 0:47:42.279 on this podcast. Anyways, Joe I shared you that that 0:47:42.360 --> 0:47:46.240 report on Q one which had a huge options and forwards, 0:47:46.480 --> 0:47:49.640 uh sort of trading section. Genesis is one of those 0:47:49.719 --> 0:47:53.080 venues where you can post spot bitcoin against a short 0:47:53.120 --> 0:47:55.720 futures position. You could face this bilatterally over the counter, 0:47:56.200 --> 0:47:58.040 or you know, we can cross you on CME or 0:47:58.400 --> 0:48:00.839 a different exchange of your choice. But you know, well 0:48:00.880 --> 0:48:02.839 we'll we'll do that for you because like we think 0:48:02.880 --> 0:48:05.000 it's good collateral. We know that your short future is 0:48:05.040 --> 0:48:08.000 long spot. It's a place that you know, it makes 0:48:08.040 --> 0:48:09.640 sense to us and we're happy to Can we just 0:48:09.680 --> 0:48:12.160 set that up after the podcast? Can I just go 0:48:12.239 --> 0:48:14.880 do a Genesis account to like do that because it 0:48:14.920 --> 0:48:17.840 seems pretty easy. Yeah, just onward and yeah, shoot me 0:48:17.920 --> 0:48:19.799 a message and I'll get I'll get you also have 0:48:19.920 --> 0:48:23.640 very very simple and straightforward but in all seriousness, um, 0:48:23.920 --> 0:48:26.960 the Genesis is one. But but also more exchanges are 0:48:27.120 --> 0:48:29.680 are getting involved in that too. I think what Josh 0:48:29.719 --> 0:48:33.520 Younger brings up is really like a liquid point of 0:48:33.560 --> 0:48:37.359 access for similar in the brokerage model, like the CMME model, 0:48:37.400 --> 0:48:39.640 the ETF model needs to have that sort of be 0:48:39.719 --> 0:48:42.759 a thing to to really close the spread. That is 0:48:42.760 --> 0:48:44.359 true in the sense that we would we would need 0:48:44.400 --> 0:48:47.399 that to see like that the trade be much more 0:48:47.480 --> 0:48:50.640 in line with like the traditional cash financing. Great in 0:48:50.680 --> 0:48:53.120 the market. I think the closest thing honestly you can 0:48:53.160 --> 0:48:55.280 see to that you know not financial advice or anything, 0:48:55.320 --> 0:48:59.319 but like if hypothetically, you know, g BTC was used 0:48:59.360 --> 0:49:01.640 as collateral, which is not actually you know, how to 0:49:01.680 --> 0:49:03.799 discount to NAV, Like you know that that's something where 0:49:03.840 --> 0:49:06.600 like you know, long GBTC short features is like a 0:49:06.600 --> 0:49:08.640 trade where you get the discount to NAV and then 0:49:08.680 --> 0:49:11.480 also the collapse of the curve as well. So there's like, 0:49:11.719 --> 0:49:14.319 if you're prime broker, even where to take that and 0:49:14.360 --> 0:49:15.840 maybe some out there to do. I'm not I'm not 0:49:15.880 --> 0:49:17.800 actually quite sure, but you know, those are kind of 0:49:17.920 --> 0:49:19.960 things you have to see for it to be more 0:49:20.000 --> 0:49:22.040 of a point of access from those sort of brokerage 0:49:22.040 --> 0:49:26.879 accounts into the marketplace. So yeah, wait, the idea of 0:49:27.440 --> 0:49:30.400 Joe transacting with you actually reminds me of a question 0:49:30.440 --> 0:49:32.360 that I wanted to ask, which is how do you 0:49:32.400 --> 0:49:36.080 manage your counterparty risk? Because you know there are a 0:49:36.120 --> 0:49:40.560 lot of i would say sketchy players in the crypto space. Um, 0:49:40.560 --> 0:49:44.120 there's a huge question mark over doing due diligence and 0:49:44.400 --> 0:49:47.040 how you do that and avoid money laundering and things 0:49:47.080 --> 0:49:52.319 like that. Joe clearly sketchy guy. Um No, but like 0:49:52.520 --> 0:49:54.600 how would you how would you go about like doing 0:49:54.719 --> 0:49:57.399 due diligence? On a potential client, and how does it 0:49:57.560 --> 0:50:03.040 differ from investment than doing due diligence for prime brokerage 0:50:03.040 --> 0:50:07.000 services for something more traditional like a hedge fund. I 0:50:07.040 --> 0:50:08.800 mean to start regarding the m L and ky C 0:50:09.160 --> 0:50:11.960 we we actually Genesis is in the New York entity. 0:50:12.000 --> 0:50:14.360 The broker dealer is kind of the point of access 0:50:14.400 --> 0:50:17.080 for all the onboarding. So we're SEC and FINN are regulated, 0:50:17.400 --> 0:50:19.640 and our onboarding is the same that you'd see for 0:50:19.760 --> 0:50:22.720 onboarding to any broker dealer, which you know, in short, 0:50:22.760 --> 0:50:25.640 means that it's a long process and very thorough. Then 0:50:25.680 --> 0:50:28.319 we do kind of warren clients before they onboard, like 0:50:28.360 --> 0:50:30.239 look like you know, set aside thirty minutes to fill 0:50:30.280 --> 0:50:32.600 out the app and then also expect some questions from 0:50:32.680 --> 0:50:36.000 compliance if anything isn't perfectly right, so you know they're 0:50:36.000 --> 0:50:38.399 The onboarding is I would say, as robust as any 0:50:38.400 --> 0:50:41.000 bank out there in terms of the other part of 0:50:41.000 --> 0:50:44.200 the risk, which is the counterparty and credit risk. And 0:50:44.239 --> 0:50:46.000 this is kind of I think what makes Genesis a 0:50:46.160 --> 0:50:48.320 pretty unique player in the space because of the client 0:50:48.360 --> 0:50:51.040 base we've chose to to have at this point, you know, 0:50:51.080 --> 0:50:54.040 there's definitely a lot of variety of players out there 0:50:54.040 --> 0:50:55.879 in the crypto market. What we do is we kind 0:50:55.920 --> 0:50:59.319 of are facing not that many borrowers really, you know, 0:50:59.360 --> 0:51:01.239 we're not a type of shop where you know, any 0:51:01.320 --> 0:51:04.000 sort of retail client can just post bitcoin is collateral, 0:51:04.040 --> 0:51:06.000 borrow cash, go do whatever with it. But then like 0:51:06.040 --> 0:51:08.719 if the price sells off, there's no like human interaction there, 0:51:08.719 --> 0:51:11.440 and like we're just gonna liquidate that collateral across thousands 0:51:11.440 --> 0:51:14.400 and thousands of customer accounts right now as at a 0:51:14.480 --> 0:51:17.920 nine billion dollar it's probably ten billion now active loan 0:51:18.000 --> 0:51:20.680 book outstanding, you know, we have I would say less 0:51:20.719 --> 0:51:24.040 than a hundred and fifty active borrowers, which is, you know, 0:51:24.080 --> 0:51:27.400 not that many considering the size. And also like the 0:51:27.960 --> 0:51:30.040 top ones, the top trading firms, you know, like our 0:51:30.160 --> 0:51:32.760 our core clients that we've known for years. But also 0:51:32.800 --> 0:51:35.560 we understand the nature of the risk they're taking, the 0:51:35.680 --> 0:51:38.640 nature of the of the markets they're participating and the 0:51:38.680 --> 0:51:40.960 and the trades that they're involved in. So when an 0:51:41.000 --> 0:51:44.400 event like March happens and bitcoin goes from like eight 0:51:44.480 --> 0:51:47.680 K to five K, like rather than liquidating a bunch 0:51:47.680 --> 0:51:50.799 of retail accounts across thousands and thousands of clients, like 0:51:50.840 --> 0:51:53.520 what we're doing is like, hey, like we understand that 0:51:53.560 --> 0:51:55.799 the bitcoin or the ethereum collateral you've posted with us 0:51:55.920 --> 0:51:58.600 is has fallen in value significantly, Like how fast can 0:51:58.640 --> 0:52:00.000 you get me the p m L from the future 0:52:00.120 --> 0:52:02.920 is leg to close up this margin gap, like whereas 0:52:02.960 --> 0:52:04.600 it is it on CMME, is it on some of 0:52:04.600 --> 0:52:07.080 the more faster settlement exchanges. And we kind of have 0:52:07.160 --> 0:52:09.960 that conversation and we work with our clients to to 0:52:10.040 --> 0:52:12.880 understand their risk and and and bring bring the assets 0:52:12.880 --> 0:52:15.080 back into line with with where they should be on 0:52:15.160 --> 0:52:17.200 collateral levels. So that's kind of the main thing. And 0:52:17.200 --> 0:52:19.520 then really just like in terms of managing our book, 0:52:19.560 --> 0:52:22.080 I think we've done a really good job of understanding 0:52:22.480 --> 0:52:25.239 you know, liquidity and duration and and creating like a 0:52:25.360 --> 0:52:27.880 very good internal platform which we spent a lot of 0:52:27.880 --> 0:52:31.879 time in nineteen developing to help us have very good 0:52:31.960 --> 0:52:35.400 visibility into purve risk and things like that, so a 0:52:35.480 --> 0:52:37.560 very good picture of kind of how assets are going 0:52:37.600 --> 0:52:39.520 to move in and out of the firm. And then 0:52:39.600 --> 0:52:42.120 also lastly on this point, I'll bring up kind of 0:52:42.120 --> 0:52:45.239 like reserves and balances, like banks have to obviously keep 0:52:45.280 --> 0:52:47.839 like reserves on their balance sheet for outflows and things 0:52:47.880 --> 0:52:50.680 like that. We're really good at like kind of thinking 0:52:50.719 --> 0:52:53.799 about the interest rate market and kind of how the 0:52:53.840 --> 0:52:56.600 market is position from a demand perspective and supply perspective 0:52:56.600 --> 0:52:59.600 in terms of Bitcoin, ethery UM, and cash and then 0:52:59.640 --> 0:53:01.080 all the other or altos of course, but those are 0:53:01.080 --> 0:53:03.440 really the three main ones um and really you can 0:53:03.440 --> 0:53:06.120 call it crypto and cash, where you know, we we 0:53:06.160 --> 0:53:08.879 can position ourselves in a defensive way if we think 0:53:08.880 --> 0:53:11.319 that market's going to sell off and bitcoin is going 0:53:11.360 --> 0:53:14.200 to be much more valuable relative to cash and kind 0:53:14.200 --> 0:53:17.000 of skew our inventory that way. And then when you know, 0:53:17.080 --> 0:53:20.120 markets bottom out and curves are flat and things are 0:53:20.160 --> 0:53:21.560 kind of looking like they can go the other way, 0:53:21.560 --> 0:53:24.799 we'll we'll position the reserves and inventory accordingly. We're we're 0:53:24.800 --> 0:53:27.839 floating large balances but also thinking ahead. So like going 0:53:27.880 --> 0:53:30.200 into March of last year, we were well positioned for 0:53:30.239 --> 0:53:32.600 that because we we're really talking about it on the 0:53:32.640 --> 0:53:34.239 dusk before we're like, look like, I feel like it 0:53:34.280 --> 0:53:35.920 makes a lot of sense to hold a lot of 0:53:35.920 --> 0:53:38.160 bitcoin here. We're probably going to have some sort of 0:53:38.200 --> 0:53:40.600 move that that we might need it, and even last week, 0:53:40.640 --> 0:53:43.480 like you know, we're positioned, we're positioned very defensively on 0:53:43.520 --> 0:53:46.759 the on the reserve front in that nature, and um, yeah, 0:53:46.840 --> 0:53:48.840 you know, we're always thinking ahead rather than like, you know, 0:53:48.840 --> 0:53:50.759 we're not reacting, we're kind of like setting up for 0:53:50.760 --> 0:53:53.120 the future. You know. I want to go back to 0:53:53.160 --> 0:53:55.200 something that you said early on. I think it might 0:53:55.239 --> 0:53:57.840 be really important in this idea of like can the 0:53:57.880 --> 0:54:01.600 crypto market hold up with Bitcoin selling off and with 0:54:01.640 --> 0:54:05.520 the rise of ethereum this year more talk about the 0:54:05.560 --> 0:54:07.800 so called flipping ng and maybe a theorium will be 0:54:07.880 --> 0:54:10.799 a bigger coin this year. Could that happen in a 0:54:10.880 --> 0:54:14.120 sort of orderly manner. I mean, of course, eventually that 0:54:14.160 --> 0:54:16.759 could happen, Maybe it could even happen this year. But 0:54:16.840 --> 0:54:18.799 are we still at this point where there's just so 0:54:18.880 --> 0:54:23.240 much of the money is Bitcoin related that any Bitcoin 0:54:23.320 --> 0:54:30.319 decline sort of automatically creates triggers and liquidations across the 0:54:30.320 --> 0:54:33.960 the across the ecosystem. Yeah, that's an interesting question because 0:54:34.000 --> 0:54:36.880 I think crypto market it evolves and involves at a 0:54:36.920 --> 0:54:39.560 pace that's that's that's pretty fast, sort of astounding in 0:54:39.640 --> 0:54:41.759 manuates in terms of like the narratives and kind of 0:54:41.800 --> 0:54:43.959 what people are doing and talking about or thinking about 0:54:43.960 --> 0:54:46.440 it's like you're almost on from one thing to the next. Like, 0:54:46.480 --> 0:54:48.759 you know, two weeks ago everyone hated Elon Must, now 0:54:48.760 --> 0:54:52.000 everyone loves Elon Must. Like what's happening? You know, there's 0:54:52.040 --> 0:54:54.560 like that the shift in the narrative there. But speaking 0:54:54.680 --> 0:54:58.600 specifically about Bitcoin and its position in the market relative 0:54:58.640 --> 0:55:01.520 to the others. Um, you know, I think for now, 0:55:01.600 --> 0:55:04.839 bitcoin it is the it does have like the most 0:55:04.840 --> 0:55:07.640 common sort of collateral use case all over the all 0:55:07.640 --> 0:55:10.359 over the place, whether that's at Genesis or even on 0:55:10.400 --> 0:55:13.560 like the exchanges, where a sell off in bitcoin will 0:55:13.600 --> 0:55:16.920 always kind of impact other markets because kind of the 0:55:17.160 --> 0:55:20.359 collateral need for for it to be acquired as well 0:55:20.400 --> 0:55:23.240 as kind of like alts are usually haircut as collateral 0:55:23.280 --> 0:55:25.080 even for us, Like you know, the the LTV that 0:55:25.080 --> 0:55:27.759 we'd lend against bitcoin is very different than the LTV 0:55:27.800 --> 0:55:29.719 would lend against alts, and where we issue a margin 0:55:29.760 --> 0:55:31.759 call is different. So like if the alts were to 0:55:31.800 --> 0:55:34.080 sell off, you know, like it's going to be more 0:55:34.120 --> 0:55:36.080 likely that those have to kind of move into Bitcoin 0:55:36.120 --> 0:55:40.040 to support margin and things like that. Um. That being said, 0:55:40.160 --> 0:55:42.239 I think like we're going back to the fact that 0:55:42.320 --> 0:55:44.759 narratives can change very quickly. And the flipping being and 0:55:44.840 --> 0:55:48.560 Eve and whatnot. Like, I think the market is transcending 0:55:48.680 --> 0:55:50.880 in many ways a lot of the ties to its 0:55:50.920 --> 0:55:54.040 past that it had before, like even for forgetting bitcoin 0:55:54.120 --> 0:55:56.719 for a second, but like tying assets to personalities, like 0:55:56.760 --> 0:55:59.080 you know it really like you know, everyone's like, oh, 0:55:59.440 --> 0:56:01.440 I think Tracy mentioned this on previous podcasts, like, oh, 0:56:01.480 --> 0:56:04.160 it's like decentralized. It's like the market's like, you know, 0:56:04.200 --> 0:56:06.560 so out there and democratic. But like you know, a 0:56:06.640 --> 0:56:09.200 single tweet from a CEO could like move it right, 0:56:09.560 --> 0:56:12.200 but as that happens more and more, it could dilute 0:56:12.200 --> 0:56:14.120 the impact of that, and then the market sort of 0:56:14.160 --> 0:56:17.000 transcends that. So as you know, mapping that analogy to 0:56:17.400 --> 0:56:20.279 liquidations and collateral on bitcoin, like as all this stuff 0:56:20.360 --> 0:56:22.680 moves down quite a bit, and bitcoin you know, has 0:56:22.719 --> 0:56:25.160 to be used as a collateral last resort. Like over time, 0:56:25.200 --> 0:56:27.960 I think more and more exchanges and even Genesis will 0:56:28.040 --> 0:56:30.680 will start using and and and liquidity will improve in 0:56:30.719 --> 0:56:32.760 other alts where we can use it more as collateral. 0:56:32.800 --> 0:56:35.200 And then you know, maybe bitcoin doesn't have to be 0:56:35.360 --> 0:56:38.719 that sort of de facto collateral piece um that's used 0:56:38.719 --> 0:56:41.200 in the market sort of transcends that nature. It's just 0:56:41.200 --> 0:56:43.880 gonna take time, and I think the fact that bitcoin 0:56:43.960 --> 0:56:47.040 is like the sort of underlying based layer denomination of 0:56:47.080 --> 0:56:49.600 everything will probably stick around for a bit. But I 0:56:49.640 --> 0:56:52.640 do think don't be surprised if it changes and change 0:56:52.680 --> 0:56:56.240 as faster than we think. Right. Wait, can I push 0:56:56.239 --> 0:56:58.560 you just slightly on that, because this is something I've 0:56:58.560 --> 0:57:01.040 been thinking about as well. But like, the bitcoin is 0:57:01.080 --> 0:57:04.120 almost designed to what it is designed to sort of 0:57:04.120 --> 0:57:08.440 be this static, stable pool of value, and it's the 0:57:08.520 --> 0:57:11.440 supply is like destined to reach a certain amount. I 0:57:11.480 --> 0:57:13.480 can't remember exactly how much it is right now, but 0:57:13.640 --> 0:57:16.400 then it will stay at that forever. Is there a 0:57:16.440 --> 0:57:22.160 point at which there's a mismatch between bitcoin the size 0:57:22.160 --> 0:57:25.720 of the market and it's usefulness as collateral versus the 0:57:25.800 --> 0:57:29.160 size of the overall crypto market, Like, is there just 0:57:29.200 --> 0:57:34.200 a point at which crypto could outgrow bitcoin? Yeah? I 0:57:34.240 --> 0:57:37.000 know you're you guys are getting really into the weeds 0:57:37.040 --> 0:57:40.000 of the questions here, which I actually love because it's funny, 0:57:40.000 --> 0:57:43.480 like when you talk about long term bitcoin security and 0:57:43.520 --> 0:57:45.840 kind of the concerns that might be there, Like a 0:57:45.840 --> 0:57:47.680 lot of people that are involved in the bitcoin space 0:57:47.720 --> 0:57:50.800 will like really just shun you, like kind of dismiss it. 0:57:50.880 --> 0:57:53.400 So maybe I'll get some hate for this response, but 0:57:54.200 --> 0:57:56.160 I will say that you bring up a good point, 0:57:56.280 --> 0:57:59.520 which is like, yes, bitcoin does have a finality to it, 0:57:59.600 --> 0:58:03.440 where if actively the the subsidy that's issued for you know, 0:58:03.480 --> 0:58:07.400 the blocks have to sort of ways of paying miners 0:58:07.440 --> 0:58:10.640 for securing the network. One is the block subsidy and 0:58:10.640 --> 0:58:15.120 the other is transaction fees. So the block subsidies is 0:58:15.160 --> 0:58:17.840 the one that's declining in half every four years, and 0:58:17.920 --> 0:58:22.000 eventually it's going to asmotically approach zero, where it's basically nothing. 0:58:22.120 --> 0:58:24.920 So and and bitcoin is proof of work where miners 0:58:24.960 --> 0:58:27.720 have to spend energy and real you know, sort of 0:58:28.240 --> 0:58:31.680 uh power to secure the network, where they're going to 0:58:31.800 --> 0:58:34.160 have to be compensated in some way. And at that point, 0:58:34.240 --> 0:58:36.360 the way that it's going to the conversation occurs is 0:58:36.720 --> 0:58:39.280 through the transaction fee, which is like the people that 0:58:39.320 --> 0:58:41.520 are trading or the people that have transactions in the 0:58:41.560 --> 0:58:44.520 block are effectively paying the miners a certain amount. So 0:58:44.560 --> 0:58:46.880 what needs to develop them the long term for bitcoin 0:58:47.520 --> 0:58:51.000 is a robust market for block space um so that 0:58:51.040 --> 0:58:54.720 the miners are compensated to pay for it. What's happened 0:58:54.800 --> 0:58:58.520 now empirically in the past two years is you know, 0:58:58.960 --> 0:59:01.600 there's a robust mark it for blocks based on Ethereum, 0:59:01.720 --> 0:59:04.160 and people are paying to be included in transactions quite 0:59:04.160 --> 0:59:07.560 a bit there on Bitcoin less. So part of that 0:59:07.640 --> 0:59:09.360 is because you know, it is sort of a store 0:59:09.480 --> 0:59:11.880 value narrative now less so than a medium exchange. And 0:59:12.480 --> 0:59:16.320 it's not like it doesn't really have robust decentralized finance 0:59:16.400 --> 0:59:19.880 protocols in it yet. So what I think would have 0:59:19.920 --> 0:59:22.200 to change there in order for that market to develop 0:59:22.240 --> 0:59:24.480 appropriately is like this type of stuff you see on 0:59:24.520 --> 0:59:27.280 ethereum where you can like borrow of lend even trade 0:59:27.280 --> 0:59:29.280 like you need swap deck style, like Bitcoin needs to 0:59:29.280 --> 0:59:32.600 figure out in many ways to incorporate that into its 0:59:32.640 --> 0:59:36.720 on chain layer one sort of status the way I 0:59:36.760 --> 0:59:38.360 see it, And this is like, you know, maybe there's 0:59:38.400 --> 0:59:40.760 some cryptographers out there that are going to argue with 0:59:40.760 --> 0:59:42.480 me on this point in some ways, but I do 0:59:42.560 --> 0:59:44.400 think like at the end of the day, you're gonna 0:59:44.400 --> 0:59:47.880 need like applications built on bitcoin where people are paying 0:59:48.480 --> 0:59:51.200 to use them so that the miners can be compensated 0:59:51.200 --> 0:59:53.720 when there's no block reward. And I think how that 0:59:53.760 --> 0:59:55.560 develops in the future, like you know, in the past 0:59:55.560 --> 0:59:58.080 few years, it's it's really been ethereum show there. Could 0:59:58.160 --> 1:00:00.680 that change? I do think so? And do I think 1:00:00.720 --> 1:00:02.320 it has to change at some point? Yeah, Like I 1:00:02.320 --> 1:00:04.240 think you know it's going to have to that market's 1:00:04.280 --> 1:00:08.120 gonna have to develop in many ways. I guess I 1:00:08.160 --> 1:00:10.320 just have one last question, and I just want to 1:00:10.320 --> 1:00:13.960 say I enjoy these conversations a lot because talk about 1:00:13.960 --> 1:00:16.959 market structured and future it doesn't hurt my head quite 1:00:16.960 --> 1:00:20.360 as much as the conversations about like staking and all 1:00:20.400 --> 1:00:22.400 that stuff, And I need to learn more about that. 1:00:22.880 --> 1:00:25.880 Do you worry or is there concerned about like this 1:00:26.000 --> 1:00:29.000 sort of like whether the future of crypto is entirely 1:00:29.600 --> 1:00:33.240 on chane trading at some point, I mean, Genesis is 1:00:33.280 --> 1:00:38.560 a regulated financial institution, point bases, all these are. Is 1:00:38.600 --> 1:00:41.800 there like a threat long term to these sort of 1:00:41.880 --> 1:00:45.400 like I guess middle ground companies that handle what you do, 1:00:45.440 --> 1:00:47.640 which is like you're dealing on the chain and dealing 1:00:47.720 --> 1:00:51.360 with wires and traditional finance companies. And do you think 1:00:51.400 --> 1:00:54.360 about like risk of getting squeezed by more activity just 1:00:54.480 --> 1:01:00.000 people trading directly on the decentralized exchanges without the knee 1:01:00.000 --> 1:01:03.920 need for a GENEFF. I think, you know, in the 1:01:03.960 --> 1:01:05.880 long term, there's going to be more of a harmony 1:01:06.560 --> 1:01:09.440 between centralized finance and decentralized finance. They're gonna have to 1:01:09.480 --> 1:01:12.280 work together in many ways, um more so than they 1:01:12.280 --> 1:01:15.440 are now in order to kind of provide services to 1:01:15.440 --> 1:01:17.880 the broader marketplace. I do think the future, you know, 1:01:18.320 --> 1:01:20.840 broadly and like ultimate finality speaking, is going to have 1:01:21.120 --> 1:01:23.520 a lot of more on chain activity than it does now. 1:01:24.000 --> 1:01:26.320 But I think the way, you know, kind of bringing 1:01:26.320 --> 1:01:28.560 this more high level back to kind of like the 1:01:28.640 --> 1:01:31.240 user and the participant in the marketplace, at the end 1:01:31.280 --> 1:01:33.080 of the day, they're they're humans, right, like you know, 1:01:33.120 --> 1:01:36.080 we're all we're all humans. We we view counterparty risk 1:01:36.160 --> 1:01:40.720 to protocols, to exchanges, um to to to really banks 1:01:40.720 --> 1:01:42.960 whatever in different ways you know, f d i C 1:01:43.160 --> 1:01:45.640 non f d i C, things like that. There's always 1:01:45.680 --> 1:01:48.640 going to be in need and desire for market participants 1:01:48.920 --> 1:01:51.960 to have things that are not completely bearer because like 1:01:52.120 --> 1:01:55.200 you want that as like a as an asset holder, 1:01:55.320 --> 1:01:58.960 as like a diversified and responsible whether you're an individual 1:01:59.080 --> 1:02:01.480 or a family office, hedge fund or whatever, Like you 1:02:01.480 --> 1:02:04.800 shouldn't have everything be in your control or nothing be 1:02:04.880 --> 1:02:06.960 in your control. There should be a balance in a ratio, 1:02:07.360 --> 1:02:10.040 and I think a lot of services like Genesis and 1:02:10.520 --> 1:02:12.520 other companies in space, you're going to kind of be 1:02:12.600 --> 1:02:15.000 there to help marry that that difference and and and 1:02:15.080 --> 1:02:18.560 provide that diversification that holders want. But I do think 1:02:18.560 --> 1:02:20.240 of course that yes, DeFi is going to be it's 1:02:20.240 --> 1:02:21.560 it's going to be big in the future, and there's 1:02:21.600 --> 1:02:23.640 gonna be a lot of stuff going on chain. I 1:02:23.680 --> 1:02:26.240 think another thing to think about when thinking when like 1:02:26.320 --> 1:02:28.200 kind of looking at the outlook, there is like the 1:02:28.240 --> 1:02:30.240 pie is growing right now year over year, a day 1:02:30.240 --> 1:02:33.200 over a day really where like nothing is cannibalizing into 1:02:33.240 --> 1:02:35.760 each other quite yet. Where it's like as long as 1:02:35.760 --> 1:02:38.080 the market is growing, there's more and more stuff to 1:02:38.080 --> 1:02:41.000 to to do in trade, and more clients are entering 1:02:41.040 --> 1:02:44.280 and more participants are entering. So you know that that 1:02:44.440 --> 1:02:46.560 as long as that's going on, that's going to be 1:02:46.760 --> 1:02:49.800 you know, not very competitive and more like sort of collaborative. 1:02:49.960 --> 1:02:52.560 Of course, like once Crypto is that it's like finals, 1:02:52.600 --> 1:02:54.800 they were like every single human on the planet is 1:02:54.840 --> 1:02:58.040 like involved in it, and there's now like three thousand 1:02:58.080 --> 1:03:00.680 exchanges like yes, then then gets a little bit more 1:03:00.720 --> 1:03:03.760 competitive and cannibalistic. But like there's like a lot of 1:03:03.920 --> 1:03:05.320 room there right, Like you know, it's like not that 1:03:05.320 --> 1:03:07.720 many people are using this stuff just yet, like you 1:03:08.080 --> 1:03:10.040 we talked about it. But when you look at like 1:03:10.080 --> 1:03:12.320 this sheer number of people out there. I was listening 1:03:12.320 --> 1:03:14.840 to like CNBC this morning or wherever, it's like, you know, 1:03:14.880 --> 1:03:17.120 they're like asking people that have never used Defy if 1:03:17.160 --> 1:03:19.680 they think Defies the future or or on Chaine is 1:03:19.680 --> 1:03:21.600 the future, and they're like no, and then then everyone's agreeing, 1:03:21.600 --> 1:03:23.000 like yeah, like look at this guy brings up a 1:03:23.000 --> 1:03:25.160 good point. It's like no one's using this yet, Like 1:03:25.160 --> 1:03:27.040 you know, you're asking people that aren't using it if 1:03:27.280 --> 1:03:29.360 if they think it's real. So I think there's a 1:03:29.400 --> 1:03:30.960 lot more room to grow. And you know, CFI and 1:03:31.040 --> 1:03:33.640 d FI will have a lot of sort of harmony 1:03:33.680 --> 1:03:38.200 in the future. Broh. That was great. That was a 1:03:38.240 --> 1:03:41.640 fantastic conversation, Super helpful both on the sort of what 1:03:41.800 --> 1:03:44.480 just happened over the last several days, but also the 1:03:44.480 --> 1:03:47.040 big picture and the long picture. I love talking to 1:03:47.080 --> 1:03:49.240 you and thanks for coming out on a lot. Yeah, 1:03:49.280 --> 1:03:51.120 thank you guys so much for having me. This is awesome. 1:03:51.760 --> 1:03:53.800 Thanks for that was so good. All right, take care 1:03:53.840 --> 1:04:14.640 of man. You know, I sort of got got there 1:04:14.640 --> 1:04:18.200 in my last question. But I do find like, you know, 1:04:18.280 --> 1:04:20.760 like I know we have some DeFi episodes coming up, 1:04:21.120 --> 1:04:24.320 but some of these questions about market structure and futures 1:04:24.360 --> 1:04:28.280 trading and arbitrage and hedge funds and prime brokerages, it's 1:04:28.320 --> 1:04:31.040 just like I feel like like I've been a cozy 1:04:31.120 --> 1:04:34.640 like blanket or like hoodie we're talking about it. I 1:04:34.720 --> 1:04:36.680 still like sort of like feels like I kind of 1:04:36.720 --> 1:04:39.800 get it in a way, you know what I'm saying. Absolutely, 1:04:39.840 --> 1:04:43.240 I definitely feel more comfortable having these kind of conversations 1:04:43.280 --> 1:04:46.720 than they old farming one with Um Aaron for instance, 1:04:46.800 --> 1:04:49.120 that was a bit tough. Um. But I gotta say, 1:04:49.200 --> 1:04:51.520 like the thing that jumps out at me, the thing 1:04:51.560 --> 1:04:53.600 that jumps out at me is just this idea of 1:04:53.640 --> 1:04:57.200 how far the market has actually come. So I think 1:04:57.240 --> 1:05:00.680 there are people, you know, probably my self included, but 1:05:00.720 --> 1:05:03.160 I think of a bitcoin minor, and you know, it's 1:05:03.160 --> 1:05:06.840 some guy that maybe has a few computers hooked up 1:05:07.040 --> 1:05:10.920 somewhere slightly cold, um, with good temperatures and cheap energy, 1:05:11.320 --> 1:05:14.080 and he's sort of like doing it in his basement 1:05:14.200 --> 1:05:18.280 or backyard or whatever. But the way Row was describing 1:05:18.320 --> 1:05:22.480 the ecosystem, now, you know, you have huge miners basically 1:05:23.000 --> 1:05:27.320 computer farms doing this and taking out futures to hedge 1:05:27.320 --> 1:05:31.080 their exposure. Like that is such a sea change from 1:05:31.120 --> 1:05:33.920 where we were at the beginning of all of this, 1:05:34.080 --> 1:05:36.720 and I think it's still kind of like, I don't know, 1:05:37.040 --> 1:05:41.040 it's really noteworthy, I have to say, like my misconceptions 1:05:41.040 --> 1:05:43.360 of it are probably the flip. Like I feel like 1:05:43.400 --> 1:05:46.560 I've been like conceiving of miners for quite a long time, 1:05:47.200 --> 1:05:53.080 as these like super industrial operations largely out of China 1:05:53.200 --> 1:05:55.560 and other or not even largely out of China, but 1:05:55.640 --> 1:05:57.439 it's sort of all around the world where there's cheap 1:05:57.520 --> 1:06:00.760 energy and good temperatures and stuff like that, and that 1:06:01.040 --> 1:06:03.760 like that that's been this industrial thing. But the speed 1:06:03.840 --> 1:06:07.200 with which, like the sort of like pure financialization of it, 1:06:07.240 --> 1:06:12.320 and the the existence of crypto prime brokerages and the 1:06:12.360 --> 1:06:16.000 popularity of stable coins to move money in a way 1:06:16.040 --> 1:06:18.200 that's in many ways, I actually do think it's probably 1:06:18.400 --> 1:06:21.680 much better than the traditional wire system. That's the part 1:06:21.760 --> 1:06:24.840 that I would say in recent you know, not now 1:06:24.840 --> 1:06:28.320 but it's sort of like thinking about mentally updating my 1:06:28.440 --> 1:06:31.920 model of the space, the swaps market, the derivatives market. 1:06:31.920 --> 1:06:34.360 How big that's gotten is the part where I've like 1:06:34.440 --> 1:06:36.720 sort of most needed to sort of like update my 1:06:36.760 --> 1:06:39.600 mental model, so to speak. That's a really good way 1:06:39.600 --> 1:06:42.360 of putting it, updating mental models. I gotta say the 1:06:42.400 --> 1:06:45.280 point about you know, um crypto sort of getting worried 1:06:45.400 --> 1:06:48.200 over settlement times that are something like T plus one 1:06:48.400 --> 1:06:52.560 when most of the traditional financial market deals with something 1:06:52.600 --> 1:06:54.800 like T plus two or T plus three, and I 1:06:54.880 --> 1:06:57.320 think some parts of the corporate ball market like still 1:06:57.360 --> 1:07:01.080 send trade settlements by facts and things like that. It's 1:07:01.640 --> 1:07:04.480 it's pretty amazing, and it does speak to really interesting 1:07:04.520 --> 1:07:08.360 things happening in the space that could potentially be applicable 1:07:08.600 --> 1:07:13.240 to more traditional finance. Yeah. Also Rose just like so 1:07:13.280 --> 1:07:16.880 good at uh so clear um and I love like 1:07:17.000 --> 1:07:18.640 just sort of like getting the full lay of the 1:07:18.840 --> 1:07:20.720 land from him, in the full picture and sort of 1:07:20.760 --> 1:07:24.640 like going back and forth between translating crypto speak to 1:07:24.880 --> 1:07:28.320 traditional finance speak. Uh is. It's a real treat to 1:07:28.320 --> 1:07:30.960 get to speak with someone like that. Absolutely, and I 1:07:30.960 --> 1:07:35.200 gotta say I appreciate his um willingness to risk the 1:07:35.240 --> 1:07:40.240 ire of the Bitcoin maximalists by talking about potential downsides there. 1:07:40.800 --> 1:07:45.800 It's a it's a risky strategy as I personally know. Yes, exactly. 1:07:45.920 --> 1:07:49.040 Wait Tracy before we go, Uh, how do you enjoy 1:07:49.080 --> 1:07:53.520 blogging these days? Um? It's fun. I've had a like 1:07:53.920 --> 1:07:57.760 a slightly difficult time getting back into it, but I 1:07:57.800 --> 1:08:00.160 am starting to ratch it up my volume, so I'm 1:08:00.200 --> 1:08:02.600 looking forward to that. How about you. I love it. 1:08:02.680 --> 1:08:04.920 I love getting to write. I'm super excited. And I 1:08:04.960 --> 1:08:07.439 don't just say this as a plug, but people should 1:08:07.480 --> 1:08:09.880 go check out the Low Odd Lots blog because I'm 1:08:10.120 --> 1:08:13.280 I feel like I'm home again, getting to uh to 1:08:13.360 --> 1:08:17.040 be a blogger again, and I'm really enjoying it. Shall 1:08:17.080 --> 1:08:19.680 we leave it there? Yeah, let's leave it there? All right? 1:08:19.880 --> 1:08:22.679 This has been another episode of the All Thoughts Podcast. 1:08:22.760 --> 1:08:25.840 I'm Tracy Alloway. You can follow me on Twitter at 1:08:25.880 --> 1:08:28.280 Tracy Alloway and I'm Joe Why isn't all? You can 1:08:28.400 --> 1:08:32.439 follow me on Twitter at the start? Everyone should go 1:08:32.479 --> 1:08:35.880 follow our guest on Twitter, Roshan Patel. He's at Roshan Patel, 1:08:36.000 --> 1:08:39.920 the VP of lending at Genesis Trading. Very clear, very great. 1:08:40.000 --> 1:08:43.840 Follow on this whole crypto space. Follow our producer on Twitter, 1:08:43.960 --> 1:08:47.639 Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg 1:08:47.680 --> 1:08:51.720 head of podcast, Francesca Levie at Francesca Today. And check 1:08:51.720 --> 1:08:55.000 out all of our podcasts at Bloomberg under the handle 1:08:55.360 --> 1:09:14.040 at podcasts. Thanks for listening to