Jumping Into Crypto

the collapse of the terra USD stable coin. But undeterred by critics, Cannav Korea believes the current markets volatility is the perfect time to double down. Today you'll hear from Bloomberg reporters Katherine Doherty and Uchi Yang, who went to Chicago to visit Jump's headquarters and hear about what's next for the firm. Uh, Catherine, thank you so much t joining me today. Katherine, before we get started, you go by Kato. That is correct, Katherine Doherty, but Cato is

the informal reference. I love an abbreviated name. So speaking of complicated abbreviations, we are going to talk a little bit about Jump Crypto, which is a firm that folks might have seen make headlines, including those here at Bloomberg News for its involvement with furious, specific and complex parts of defy with there's a big hack that we're going to talk about, and of course with what's been happening

with the collapsed stable coin known as terra USD. But before we talk about any of that, where did this firm come from? So Jump Crypto is born out of Jump Trading, and that is a traditional financial trading firm. It really started back in Chicago, so that's where the firm is still based, in the trading pit, where you would execute a trade through a movement, whether it's like a ignal to another trader or through yelling, just verbal communication.

So this is the image that people might have when they've watched like old timing movies of Wall Street and there's a bunch of men and suits being like by so by. So that's correct. So the two founders of Jump Trading came out of that world, and so they were a part of the transition to electronic trading when things started to move onto computers. So you go from

movements with your hands verbally to your screen. And then there was the second transition to quantitative trading, so using algorithms and and trying to figure out how you could be the smartest trader out there and the fastest and the fastest you're taking advantage of little price movements and profiting off of that um and you're also helping the whole ecosystem function. So that's traditional market making, which jump

trading is at its core. Flash forward to a this firm launched an internship at a school in Illinois, and the primary focus of this internship was on digital assets,

specifically the crypto world. The founders of again this traditional market making firm, they started to see both an interest from the outside and internally from their own employees on the growth of this asset class, and they thought, Wow, what a cool project that we could bring to these interns and have them start to problem solve and see see what they can create, see what they can come

up with. They were able to bridge what they had developed in traditional market making executing trades with stocks and equities in the crypto world. So that brings us to really the start of what I see is like their third chapter. So you have traditional market making. You have electronic quantitative as the second and this is really like their third, the third act. It's almost like the third

leg of the stool. And U is somebody who spends a lot of time at that kind of weird intersection of the traditional Wall Street moving into whatever it is the crypto is up to tell me more about the person who they put in charge of this, who came from that very internship that Kato mentioned. Um So Kina Korea, is the president of jomp Crypto, and he is actually one of the interns that um worked at the U I U S Lab when Jump first created this internship

exploring digital assets. I started as a Jump alding some of the early crypto treating infrastructure. Jump has this like really incredible culture of allowing people to just take opportunities around with them and throwing resources being things that are working. And so when I step into the leadership position, if they're incredibly organic. And he's very young, but he's very

ambitious and very passionate about crypto in general. One thing that many people described to us is they're always impressed by how his knowledge, how deep his knowledge is um when it comes to various cryptal projects, and as we know, there's been hundreds of thousands of projects out there just coming out of the past few years, and he's the one who really knows ins and outs of these projects. And he's now the leader of Drump's cryptal unit, and he played a very important role in coming up with

the business strategy for Jumps cryptal unit. And this strategy is what industry people say really differentiated Jump from other players in the cryptal industry, and specifically DRUMP Cryptal does three things. First, they started with treating, which is the market making for cryptal and that plays into their strengthe historically speaking. Secondly, they're also moving into investing cryptal projects and tokens, and in that sense, they're kind of playing

as the role of the v C investors adventure capitalists. Yes, they're able to get in touch with the projects at very early stage. They're able to buy tokens at early stage, which means they can't get it at a low price, and then as the project takes off as the tokens

value rise um, they're able to benefit from it. And then lastly, they are actually moving into building some of these cryptal projects themselves, just using the engineering and technology talent that they have in house, and then one way they facility this is to come up with the incubator called the Pit, and that's essentially hacker house where they invite engineers and cryptal entrepreneurs to to visit their office spend a certain amount of time there to code and

build on these projects. So it sounds like there is a lot of emphasis on tradition because you know, Kato, you were saying, well, they started in the pits, and I'm like, here's crypto and here's the pit. Why are we talking about them though? Like, what what is the thing that happened since I think it was September one

when Jump first put out this announcement about Jump Crypto two. Now, obviously markets have been more down than up recently, but there were a couple of really specific things that Jump has been involved in that they're still bullish on crypto about, but perhaps they've learned from the first time most people started hearing Jump referenced as a firm was what they did with a project called Wormhole. So Jump was a big backer of Wormhole UM. They were early and helped

really developed the infrastructure behind it UM. But there was a hack a very now infamous hack um that Jump found out about and quickly acted on and essentially they fixed this problem. There was a hole. There was a whole,

a whole in Wormhole. It was over three hundred million dollars worth of assets that had been stolen that they could not locate, and Jump within like a half hour decided, okay, in order to shore up this project so that investors have continued confidence in what we have helped build, we're going to fill that hole, which means they took over three hundred million of their own capital and replaced what

had been stolen so that the whole was fixed. Now, my big question there is why you mentioned investor confidence. But there are lots of players in crypto who were exposed to Wormhole, which we want to go down a rabbit hole talking about wormhole, but it's a kind of you know, it's a it's a protocol in defy that allows people to move crypto around, the most simplified version of that that you'll hear on the podcast today, but it was structurally very important and there were a lot

of people who were exposed. It was also one of the bigger hacks in crypto at the time. You've both spent time a lot of time talking to these folks, Like, from their perspective, why was it so important for them to show up and say it's okay, We've got this under control. Well, warmth Home is one of the projects that Jump really prioritizes on, and it makes sense for them to step in and filling the gaps because they wanted the project to survive and hopefully to thrive going forward.

So I think it is partial partly out of their self interest to keep it alive given that they already have a stake in the project, and then partly I think they're trying to build out their reputation in the crypto world as someone who is a long term believer in the space. They have deep conviction and they want you to play an important role going forward building out

the infrastructure of cryptocurrencies. Was warm hoping one of the most important um bridges that would bridge across different blockchains. That's a big theme with this firm is belief. If they find a project or something that they're passionate about and there's conviction, they they've either put in they've either invested a lot of their own capital, or they've helped build the infrastructure of something. We'll be right back with

more from Katherine Doherty and U H Young. So one of the other things they had a lot of belief in was a little algorithmic stable coin called terra Usd. Terra USD and its sister token, Luna lost their peg to the dollar in the last few weeks. They had a spectacular meltdown, sending prices to ner zero and their market value to a shadow of the combined sixty billion they once commanded, which is now sadly no longer with us.

But you know, talk a little bit about why they had such high conviction in this project and what ultimately was the result. Ultimately, when we when we pose that exact question to Knav and to others at the firm, it became clear that Tara looked different. And I think that there are there are very specific reasons that they saw again in the early days a reason to support

this project, um one being exposure in Asia. Um there there was just like a larger audience that I think that they saw this stable coin reaching right, and Tara was you know, came out of various Korea based investors. A lot of their initial audience were retail investors in in South Korea, so that that absolutely as a market was very meaningful in terms of the original folks who

were excited about this project. That's correct. And when you get in early to these kind of projects, you it's not like the traditional equity investment where you you might get equity in a company or a project. You're actually getting these coins and you're getting the met at discount. So there again is some value to finding these things that early days you see promise and it might give you what could be the bank for your buck. But

it is a bit with crypto. Part of the challenge for being perceived as a role model is most people have barely been around right like this. One of the reasons where we're having this conversation is because crypto is an asset class. Yes, it's you know, a decade and a bit old, but this is one of the most prolonged, and I would argue most complicated types of downturns that

various of these firms have had to experience. And it is a very difficult leadership challenge to go from intern to president to crisis manager in an extremely short amount

of time. In your conversations with with can in your conversations with like Jump Crypto, was there anything that came across to you about how they might have just like experienced this right, so they sort of launched into a bull market where crypto prices were hitting all time highs, and then sort of six months into his tenure, it's like, wow,

we're having a very different conversation. I think there's definitely moments of what I refer to as all hands on deck, whether it's late night phone calls or days spent in the office where you might even you know, stay over in the office. Who knows their office is open floor plan? You can't, You can barely unless someone explains it to you. Distinguished between the traditional market making side and the crypto unit.

It's all just one big open floor. And often people from traditional market making might even go into the crypto business they like formally or informally. An important thing to note about Jump is that, again, they have the backing of their traditional market making business. So you bring up a really good point about the newness of the crypto ecosystem that they're growing in and want to be a

leader in. There afforded the ability to try things in a way that other just crypto businesses can't well, they haven't yet made it's their first birthday, and I would be interested U in your perspective on, you know, anything that they said about what they expect the next six or so wants to look like. You know. Do they see this as a prolonged crypto winter as folks have taken to calling it, or it's just just another example of crypto as an asset class that folks have to

write through. I think we asked Jump to reflect on what has happened with Tara Luna and other projects. One thing that they told us is even though things don't always pan out the way they expected, they are really a believer in the process and they think that you shouldn't let your You should have an emotional discipline towards

the process or your decision making approach. And they said that, um, regardless of the outcomes, there are still a believer of their own process, which is too to invest, to trade and to build in crypto, and the winter is something that they have long expected and they kind of see this as another opportunity to double down to be able to invest in projects now hopefully at the even better variation because prices are going down and then to build

out the infrastructure when and if the cryptal spring eventually arrives. Thank you. You can find more of Catherine and u ag is reporting on the Bloomberg Terminal, on Bloomberg dot com and on Twitter. Katherine is at cat Lee Doherty that's d O H E R T Y, and uh is at u H Underscore Yang on the next episode of Bloomberg Crypto. What makes crypto so enticing? Depending on who you ask, cryptos volatility is either a bug or

a feature. Wild unexpected or aggressive price wings make this an asset class that's still suited to anyone who's less experienced than managing risk. But what about the folks who find those risks and those swings to be a major source of benefits. We're going to talk to Bloomberg opinion columnist Leonel Laurent to discuss whether there's any value to cryptos volatility. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto,

a daily podcast from Bloomberg and I Heart Radio. For more shows from I heart Radio, visit the i heart Radio app, Apple Podcasts, or wherever you get your podcast. Email your questions, comments or suggestions for the show to Crypto at Bloomberg dot net, and you'll find us on Twitter at Crypto. The supervising producer of Bloomberg Crypto is Vicky very Galina, our associate producers of Sanam Suddiki and Moses and um Dasta wonder Ad is our engineer. Original music by Leo Sidron