167: Bobby Cho – Crypto’s Not Dead (It Just Went Pop)

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Hey, what's up everyone? Welcome to episode 167 of Chat with Traders Podcast, featuring Bobby Cho. So Bobby first appeared on the podcast in August last year. Some of you may recall that episode. He's the global head of trading at Cumberland, which is the crypto arm of Chicago trading firm DRW, and it's one of the largest liquidity providers in the crypto space.

I thought it would be fitting to check in with Bobby again because of the events which have unfolded in cryptocurrency markets over the past 12 months. So our chat actually begins with some of the highlights from the recent Cumberland Summit, which was an industry event for insiders.

Then we discuss Cumberland's international expansion, and from there we get into Bitcoin's sudden rise and decline from twenty K, whether or not crypto markets have matured, decentralized exchanges, crypto's value and use cases, institutional involvement, and the bigger picture as we move forward.

If I happen to miss any topics that some of you diehard crypto fanatics did want to hear about, sorry, please don't be too mad. I would suggest though, going back to episode 139, our first podcast, because we spoke about other topics then. Anyway, without any further delay, let's get into it. Here is my second conversation with the man Bobby Cho.

I mean, I was looking we might as well just get started now, I guess. I mean I was looking at when we actually did the interview last time and it was August last year, I believe, is when we actually spoke and recorded it. I think it came out a a little bit later, but I was looking back at the price of Bitcoin then, it was four thousand dollars. Um, so there's certainly been a lot happening since, uh so we've got a lot to get into but

Before that, um, I just wanted to ask you a a little bit about the Cumberland Summit. Uh I saw some uh photos that you were posting on Twitter. Uh it looked like a bit of fun. How was that? Yeah, it was great. So obviously we we have a number of counterparties, you know, all over the globe. And along with counterparties, we have a number of service providers that that we deal with, you know, exchanges and infrastructure players as well.

And so we said, well, man, why don't we put on an event where our, you know, let's call it our network is able to network with one another, right? And and really the genesis of it came about where

We saw what some of the larger firms were doing with their, you know, either the customer base or the client base or counterparty base, such as like the, you know, the Salesforce Dream Summit or things like that. And so we just basically said, Hey, let's open up um uh uh kind of our our our network to to themselves.

so that they can build synergies and really see that, you know, what we're trying to do here is trying to grow the industry. And and it was not open to any media. I think people had um people really enjoyed kind of the conversations that that that happened there. Yeah, and was that in Singapore or was that in Chi uh sorry. Uh in uh Chicago. No, that that was Singapore. Yeah. So I think part of it was

Um uh we tried to couple it in because it's not very easy to get to Singapore. Um well for you it is. Uh for for most people on this side it it's not that easy. And so we said, well, let's couple this with um some of the conferences and events that were happening in Singapore. And so um we were we were very surprised at the one the R S V P rate of people coming.

Um we had thought, you know, hey, you know, it's a big ask, but um but I think when a few pieces came together, I think everybody felt like it it'd be a worthwhile time. Yeah, it certainly looked as though you had the the kind of the who's who of the crypto world there. Noticed um the the Winkelvoss twins, um the the Binance guy was there and obviously many others. So yeah, no, that's very cool, man.

What was the general sentiment like in the room, like general sentiment on the actual crypto space and and where we're headed from here? You know, since everybody's so tied into the crypto space there, you know, obviously people are very um uh bullish on the outlook of the industry as a whole.

Um we had people from both kind of the crypto asset side along with the blockchain technology side. And so it was good to kind of get both those feelings. And it seems like on the blockchain technology side that it it seems like products are now being delivered and and being tested against, which is which is nice. Um on the crypto side, you know, everybody acknowledges that we are in um a different environment than than we were in Q four, Q one this year.

Um but at the same time I think and I I'll go into this kind of my chat is that it it helped a lot of these companies uh build infrastructure around what they were doing'cause I think If the pace at which the industry was evolving or prices were the way they were in Q four, Q one, it would have been much, much harder.

for those companies to build kind of scalable solutions for their for the customers. So when you're saying companies here, like what sort of companies are you referring to? Um so so the demographic of the people that were there were obviously you named it right, exchange operators. Um you you had funds, which you know are are typical counterparties. You had different protocols or um I guess you can loosely call them, you know, um uh crypto projects.

that we wanted to bring together with investors. Okay. And as you had, you know, such a a great group of people in that room all together, I mean, what were some of the highlights of that for you? Was there anything which was said which was kind of surprising for you or or shocking in some ways like Uh was there any sort of notable topics that were discussed?

Um not I mean, it it was basically we had created an agenda for people, but at the same time, you know, uh there wasn't anything, you know, let's say recorded or anything like that. Um but it was kind of everything that was going on in the industry at the time. Um, you know, one of the things that we have mentioned was like, you know, some of the panels and topics were like mining verstaking and just kind of the the relevant things that were happening um in the industry.

And and also, you know, we i i it was kind of like a fine balance of basically, hey, well we want people to be feel like they're in an open environment and that they can be transparent with this. uh with this network and and we obviously wanted to to respect that privacy aspect of it as well. Okay. And and maybe similar sort of question, phrased a little differently, was there anything which

Which kinda got you excited. Was there any talk about upcoming developments in the space? It wasn't discussed there, I'll say, but what but what we did see was Uh you know, you think that the crypto industry is, you know, fairly small and uh compared to other asset classes. And then I agree to agree with that, but it was really interesting to see the dialogues and the connections that were happening between different companies.

from Asia versus the US, gathering um information just how things are being done in different parts of the world. And I think getting that cohesion amongst the the network was was something that that for me, that's probably the greatest output that we could've gotten from that event. Mm-hmm. Yeah, no, that's cool, man. So are you guys doing this each year or what's the deal? I think that's that's the um uh idea, but we we haven't put anything down on paper yet, but

Um the hope is that we'll we'll kind of see how the year develops and and um and and maybe that we'll become part of it. Okay. So you said that was in uh Singapore and I I'm pretty sure you guys have opened an office in Singapore since we last spoke. Is is that correct?

Uh yes, that's right. So um I wanna say it was right around October or November of last year. um that we had officially opened Cumberland in Singapore. And that that was kind of a a good natural step for us, mainly because DRW already had a presence. And so infrastructure is already set up and and things like that. Ah, okay. And do you have an office uh anywhere else besides Chicago and Singapore for Cumberland?

So um yeah, we we are we do have different locations um all around the globe which kinda helps One, uh, do our business twenty four seven, which I I'll go into in a little bit. Um but so we're headquartered here in Chicago. We have offices in London and and Singapore, and about three months ago we launched our Tokyo office. Uh and then uh Um uh more recently we launched Seoul, South Korea.

our Japan and Korea office are more of uh in a discovery mode mode, if anything, and just trying to figure out kind of the lay of the land, what's going on there and uh and how we could um, you know, build a business there. So where are you spending most of your time now? It it it is in Chicago. Um, you know, uh everything that I do kind of internally, al although I do manage the trading desk and kind of our operations folks and and the broader business.

Um, you know, my main focus is just making sure that that uh the company as a whole is operating efficiently and and to the caliber that that we hold ourselves to. Right. And what's the idea of having all these various offices in different locations around the globe? Sure, that's a good question.

Um so I'll I'll just say that Singapore and London were kind of natural hubs of whether you want to call it financial activity or, you know, crypto asset activity. Um that was just natural to us and that helps us provide markets to our counterparties on a twenty-four-seven basis.

Right,'cause um, you know, when Chicago leaves for the day, Singapore gets into the office and, you know, London then gets in and then we pick up the book from London. The reason why were looking into uh were mainly because of some of the jur specific jurisdictional, you know, regulatory environments. That crypto lives in in those regions. And so it we realized very quickly that it was hard as you know a company that's not.

boots on the ground there to to get involved and and figure out what's going on. Yeah, okay. And so were you not always a twenty four seven operation?

Uh that's correct. So uh I think it was in Q one of this year that we had launched twenty four seven operations and that means everything from providing markets, quoting, um settlement and uh everything kind of comes along with that, um that's when we had built out that infrastructure in Q one and and a lot of the things that we do at Cumberland are driven by our counterparty feedback.

What we had noticed was that people wanted to trade with us. Um well one, it was a symptom of the underlying market being, you know, uh twenty four seven. But we realized our counterparty base was also wanted to trade twenty four seven. So we said How can we get this going in in a manner that we felt comfortable with in terms of you know risk management and and trading? And so uh we got that up in in Q1.

I I guess I should probably uh ask you just to uh real quick Just to explain actually what Cumblin is, because I'm I'm sure there's people who are gonna be listening to this uh podcast who haven't heard uh our last conversation. Uh and if they haven't, they should go back and listen to it. That was episode one hundred thirty nine.

But just so the rest of this uh you know, our conversation here makes sense to everyone, can you just give us a real quick recap on on Cumberland and and what you actually do there? Sure. So Cumberland is the crypto trading arm of DRW. Uh DRW is about a nine hundred person principal trading firm across multiple asset classes. Uh Cumberland's no different. We we um are one of the largest principal liquidity providers in the crypto space.

where we make two sided markets for different institutions, whether you're a fund or or um or a different entity out there that's looking to get access or liquidity in in the crypto asset space. Okay. So like you just said there, your your customer base is mainly institutions, um And sorry I forgot the the other title you gave there, but

Oh I just said I just said entities broadly. Um but so it's not uh not our customer work base per se. Um uh it's more we deal with counterparties. Right. So uh DRW as a whole, um we have no investors, no shareholders, no customers. Um it's uh everything is on a principle basis. Yeah. Have you noticed that the the sort of the people who are coming to you who you're dealing with are different? Um It it's sort of changed over the past year or so.

I think so. Um I think what we saw, especially when we launched Asia in terms of well, the number of funds, crypto specific funds, um, I think it's upwards of about three hundred now. And that, you know, uh evolution really came about you know, I I I wanna say the last time that we had chatted last August.

Um that's when, you know, I think there was a lot of interest pouring into the space. Obviously as the price started to ramp up from you know the August pricing that you mentioned of four thousand. uh you know, hitting the peak kind of in December and January, people started to uh create their own funds and and fundraise.

And so funds are definitely a a profile of counterparties that that we that we make markets for on on a daily basis. Um but aside from that, well, you know, we deal with a number of high network individuals or family offices. um, you know, uh uh in a number of traditional funds that have kind of carved out things on the GP side of things to to trade the asset class.

Can you just uh dumb this down a little bit further? Um so when you're talking about uh making markets for your counterparties, you're talking about making markets in like an OTC type of way? That's correct. So traditionally we we had done um uh you know transactions or quoting or making markets um to our counterparties via voice or by chat.

Um so that was typically done over some sort of communication portal and and that's how we did it. And and as I mentioned before in terms of we we really value the feedback that our our counterparties give us because that That helps us get better. And so two of the developments that that we really started to dig into this year was the idea of how people could interact with us in a non-voice, non-chat way.

And so we looked at how other traditional markets were doing it or how they've evolved. And so we concluded on two things, um, two which uh you know we're really excited about um in terms of uh presenting them to our counterparties, but one, it's it's an API. that people are gonna be able to see our pricing. Uh whether it's on a streaming basis or something like that.

And the other thing is a platform base, or we call it a single DR platform, where people are now able to log in and view all of our markets in a more visual standpoint than the API would. Okay, that's really interesting. Yeah, you know, again, it's it's it's all driven by just what our counterparts are looking for and we really take that to heart because again, that that helps us get better. Yeah. I mean it seems like a much more efficient way to do it, I'd imagine.

It's kind of just like uh there's kind of a method for for an array of different counterparties now and I think it actually helps open up um uh the way that people interact with us um much more wider than than be before.

And why are these counterparties dealing with you specifically or, you know, other desks who do things similar to what you do, uh, instead of just uh interacting with the actual, you know, various exchanges? Sure. So there's kind of like a um uh There is a trust factor involved with uh with that and then there's also an efficiency standpoint with it, and I'll go into both.

So on the trust side of things, obviously DRW's been around for greater than twenty-five years. Um so we leverage a lot of what DRW has done over the past few decades into what we do. on a day in day out basis. And so in terms of being able to manage risk, in terms of be able to

to to provide the markets that we do and and the spreads that we do, um, we wouldn't be able to do it with the w without the infrastructure of the broader organization. And so I think people um people come to respect that and and they like that feature. And um and I obviously balance sheet plays a factor into it as well. Um and then the second part is, you know, in terms of exchanges, we work with a number of exchanges.

Um but but we are a a a risk taking entity. And so what I mean by that is that we can provide um I think a greater level of liquidity for for certain coins that are out there. um than than possibly other other exchanges. Um one of the main features of of efficiency that that we like um dealing with uh on the OTC side of things are Institutions are very mindful of whether it's internal cost of capital or their return on their capital.

And so when we trade, it's on a bilateral basis and settlement have happens after execution. So we don't hold anything in advance of any transaction, uh, whereas in exchange you need to hold the funds there for the time that comes that you actually want to do a transaction.

Well, that tends to not be an efficient way to manage your capital. And so, you know, just the way that we we trade and settle, it it tends to be a little bit more efficient for for certain funds out there because of whether it's size or or just capital efficiency. And what markets are you dealing in now? I know uh sorry, not what markets, what um what products? I know obviously Bitcoin, uh but Yeah Yeah.

I I I believe you've you've kind of expanded the products that you're dealing in as well, the different coins and that sort of thing since we last spoke as well. Yeah, that's right. So we trade upwards of about thirty five different cryptocurrencies. Um you know, most of the the the top you know, uh uh coins by market cap, um and you know, other ERC twenty tokens as well. Um and then along with that we also trade, you know, whether it's cash settled or physically settled futures as well.

So it's not just the number of coins has expanded, but kind of also the product set at which crypto assets are traded in. Yeah. What how do you feel about the the introduction of Bitcoin futures? Like is that something which was welcomed by you guys? I think so. We we were there day one um on the CME and the in the SIBO launch.

We've seen those markets continue to grow over time. I think you're seeing kind of more volume going into the CME market. Uh I think mainly because of its its uh its access and reach to uh uh to the broader kind of futures market. Um but I think I think it gave an opportunity for those that wanted to participate in the market in terms of whether speculating on price or putting on a position uh without actually having to hold the underlying or deal with kind of that side of of of the trick.

And so I think it's all it's all net positive. Um but at the same time, you know, I think um you know there there are more and more infrastructure providers out there that are building products that um that that may be better in the future, but that's kind of where we are today.

I guess we should uh we should get into um talking about the big run up towards the end of last year. Like I said earlier, um Bitcoin was around about four thousand dollars when we last spoke, uh August twenty seventeen.

How was the run up to twenty thousand? Like what was that like for you to be trading and making markets during that time? Uh, you know, uh along with working in um an environment where kind of the uh the land around you continues to shift whether it's because of different uh movements that are happening on the regulation side of things or infrastructure side of things, you know, then you then you add on um kind of the the volatility of the market.

Um and so I'll just say every day was was an adventure for us. Um we got a lot smarter at what we're doing. It helped um uh make us realize um how we can scale better as a business. And and also just how we can manage risk better as well. And so I think um obviously those were very volatile. very adventurous times. Um, and so I I think we're in a much more sustainable kind of um pattern in the industry right now.

As a market maker, that type of environment, is that is that a good thing for you or is that um put you to the test a little bit? Uh I I definitely think it it puts you to the test. I think it it it tests your your ability to manage risk. It tests your ability to provide markets and be accurate on everything that you're doing. Um I mean Іно працює.

Um, it makes you become super efficient on how you're managing your coins and cash, making sure you're getting, you know, the return that you'd like on every single dollar that's on exchange or every single dollar that's out the door or every single coin that you're trading, it makes you be much more mindful.

about every part of your business because things are happening so quickly and you need to have a pulse on everything that's going on. Um and and it and and it definitely it definitely stress tests uh things uh your own operations internally. Was there a point during all of this where it sort of clicked that this was all becoming very bubble like?

I think very early on we we said that the the markets had um bubble like characteristics. Um and so I I think the the broader audience or the community recognize it this was not the velocity with the was not sustainable. Um and so really when you started to see prices kinda come off in, you know, in later Q one and and and the subsequent months, you know, I I think that actually gave the industry an opportunity to take everything that they had learned from the previous quarters.

um in terms of you know stress testing their operations, things like that, and we're no different. Um and gave them opportunity to actually build scalable solutions for the marketplace. Um and that's where you're seeing a number of different Uh infrastructure pri providers.

come out, um whether they're new entrants or or uh older entrants, whether they're, you know, building out their current offerings or offering new things. So I think that that really helped uh the industry figure out kind of where they were at and how things could end up going um uh down the line. And when you sort of sensed that, you know, we were entering a bubble or this was becoming uh very bubble like, was there anything which you had to do to kind of prepare for the backside of this move?

It's a good question. I would say that, you know, we we try to approach every single opportunity by just looking at the broader picture, not just kind of living in the moment. And so you obviously have to, from a risk management standpoint, understand that.

things don't always go up and to the right forever. And so you have to understand that, well, you need to be mindful of all your open settlements. You need to be mindful of all the transactions that you're doing. And so um so I'll just say that, you know, we we we kind of Uh

anticipated that um you know pricing could correct and I think I think any any trader out there would have recognized that as well. It was just, you know, when was that going to happen? Was that going to happen at twenty thousand or was that going to happen at at forty thousand? And what about when it did, you know, turn around uh on the flip side?

How was the decline for you? I mean, was that I I presume that was probably interesting times as well. Um, did that have any greater impact on your business as opposed to when it was ramping up? No, I don't think so. I think if anything, um, you know, well we w we are in the market every single day providing two sided um two sided quotes. So whether the market is going up or whether the market is going down, we are gonna step in and provide you a quote or quotes.

Um and so there it was kind of no different. It was just the reverse basically. Um and so even even today where you see kind of pricing trading in a fairly tight range over the last few months. Um, you know, we're we're still being very, very active um and aggressive out there.

This whole thing where, you know, Bitcoin's gone from well, depends how far back you want to go, but let's just talk about let's just talk about from um you know, August last year it was four thousand dollars. Everyone thought it was really high then. uh well I shouldn't say everyone. There were many people who were who were saying that Uh we saw it go all the way up to twenty thousand and it's come back and it's sort of

flown a r just above that six thousand dollar mark for a while now. For someone like yourself who's been active in the crypto market since I think it was around about two thousand twelve you Might have been earlier that you uh Yeah, right around thirteen, I'd say, right around thirteen. Okay. So you've been doing this for a while.

Are there some things you've learned or some things which have been confirmed over and over for you about, you know, how markets work, how markets move and and how market participants think? I would just say probably the the biggest takeaway uh that I try to instill kind of everybody on the desk. uh everybody that works for Cumberland is is in this market especially because it's still growing and it's still very new and infrastructure is still being built out and still very early.

never assume anything. Um always do the work. Um that comes down to, you know, uh you know, the the addresses that you're sending coins to um in terms of double checking that. Um I mean just never assume anything in this market and and make sure to validate kind of everything that you're doing um over and over again. And and I I try to kind of beat that into the the team every day just because Things just change and um and you just have to adapt to to what's happening around you.

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And what do you make of the fact that Bitcoin's kind of fluctuating around the six thousand dollar mark? Like it seems to have almost found a little bit of support there. Is there anything which you read into from that? Not too much. what that provides to the marketplace. And I I'll just go back to the fact that it it allows people to kind of go back and focus on building scalable products and solutions for the marketplace.

And um and and granted we are kind of in this low vol, low volume environment. Um, but you know, that really provides an opportunity for companies to reassess what they're doing and and to some degree. You know, there is there is a a level of consolidation that's been happening in this in this uh in this environment and in this market.

And so that makes one, it makes uh business plans of a lot of these companies have to be much more bulletproof than they were, you know, in the run up of Q four last year. Right. I think even whether it's an ICO or a different protocol that's out there, I mean I mean people have gotten smarter over the past year.

They know the right questions asked. So you better believe that the economics b behind your token offering, that the economics behind uh the token that you're launching needs to be much more soundproof Um because people have seen the boom and kind of, you know, if you want to call it the bust of a lot of these projects. Yeah. Would you say also the how volatility has uh decreased over the last sort of little while, that it's possibly a sign that the market has matured a little bit as well?

Yes, I think I think that that can be a safe assumption along with the other products that have been um uh uh launched out there in terms of futures and and other products like that, allowing people to participate um on both sides. of of um of their perspective. Yeah, and and what about the altcoin space? How has that been affected by all of this?

Yeah, I mean I think I think you're seeing it in in the numbers. A few months ago I kind of looked at uh one of the articles and said that, you know, sixty percent of all ICOs have uh have kind of um uh have gone away and and and they're not they're not relevant anymore.

And so again, going back to the whole, you know, sound business models, they need to be tougher today than they were a year ago. Um, you know, I think, you know, the altcoin market, volumes have definitely dried up. Things have become very, very uh e liquid, even more e liquid than than some of the other cryptos out there. Um and and there's been sort of this

Whether you want to call it like flight to quality or flight to safety, but um it's kinda gone gone back to Bitcoin a little bit. The interesting dynamic kind of that we've seen out of Asia is that um you know, more than ten percent uh of the transactions that we do during Asia hours are actually um Ethereum based.

More so than the US hours. And so that was an interesting dynamic for us, mainly because it gave us an idea of kind of what our Asian uh uh the folks that are trading with us in Asia are are doing and and transacting in and and excited about and involved with.

Now, I guess just taking a little step back, you know, that that run up to twenty thousand. I don't know, maybe you can share your thoughts on this, but I think You know, if we were just to make a general assumption, it was it was a lot of it was driven or fueled by people thinking that Bitcoin and and some of the other coins could possibly become widely accepted as a possibly a form of currency.

You know, is it safe to say that the majority of people no longer believe that this is still the case? I I actually wanna say that the run up in Q four and Q one or kind of the broader tail end of last year um was was driven mostly by retail. And I think most would would agree with that. And I think you actually saw a number of places, uh, you know, different jurisdictions, different regions where being able to trade crypto became more accessible. And so that's why you had

you know, premiums on various different um uh exchanges that were maybe servicing, you know, people in Japan or servicing people in Korea or in India or different places like that. So you you basically had pockets of retail um investors and traders that now were accessing a market that kind of um, you know, they were able to kind of play off of the market side of things, but also there's this technology aspect to a lot of these coins that that they can express their views on.

Um and so I think I think that was kind of a big catalyst to the run-up. I still think the whole uh use case aspect of whether it's Bitcoin or other um crypto technologies out there, it it still lives today, it's still being built on and iterated on. But I think a lot of that was kind of trumped by just the the price action that you saw day to day. Yeah, but I mean why was retail buying this up? I mean

Uh wha what was their motivation for buying into this? Was it just to try and get try and get rich, try and get a Lamborghini? You know, I I I I don't know the exact answer, but I can look back at history a little bit in terms of uh you know, brief history. You know, w the run up for Bitcoin going into, you know, let's call it a thousand dollars or fifteen hundred a few years back. I mean, a lot of that was driven by China.

Well, why was that driven by China? Well it's because it gave them an outlet to um uh or an access for for for loosening capital controls. And so people realize that there was this vehicle or this asset that they can get into and they can then go ahead and and send funds all around the world however they'd like. And so I would actually look at the regions during the run up of Q four that they had very similar profiles of just um capital controls in place.

And and how how they were able to access those markets uh that they couldn't before. Yeah, okay. So I guess, you know, if we go into this a little more, what I'm sort of trying to get at here is Where's the value in Bitcoin? Like where do you see the value in it now? You know, I know a lot of people are asking this. I I posted in the the chat with Traders Facebook group and mentioned that I was gonna be having you back on and this question sort of came up a few times.

You know, what is the real purpose is a lot of is a question that a lot of people are asking, like What purpose does crypto serve beyond just speculation? Sure. Um so I think I think the bottom line um to level set everything is that it's still very early on. And so what you have are you have a number of entrepreneurs, whether it's in Bitcoin or other s other other crypto assets or even new tokens.

Everybody in that in that uh in that space is still trying to figure out the killer app or the killer use case for cryptocurrencies. So that's where we're at today. But when I look at kind of whether it's like, you know, you want to put a valuation on Bitcoin or anything like that, you know, if you were really to to take a poll uh and all around the world and say, well, what what's what's Bitcoin good for?

you are gonna get an array of different answers out there, mainly because it's gonna mean something different to different people. And what I mean by that is so uh uh uh just by our counterparty base in general, you know, people look at Bitcoin as almost a store of value, right? Especially with pricing being where it is, right? So Gold two point oh. Well the critics of that use case said, Well, Bitcoin's too volatile.

It can't be a store of value. Well, now Bitcoin is an S bottle, so maybe people are considering that it could be a store of value. Um, you know, uh that's that's one way people can look at it. Other people look at it as a way of payment. Um and and we deal with corporates um every single day that use Bitcoin um for their service uh where they get paid in Bitcoin because it's quicker, faster, easier than traditional channels. So that's another use case.

Um and so people are interacting with, you know, I'll just say Bitcoin directly um in in in different ways than than the next person. And so I think that's where kind of the uh the difference comes about in terms of how people are looking at the space because They know the world that they grew up in and the the the rules and regulations that they they live within and that's how they're gonna view Bitcoin uh versus somebody who may have grown up in a very capital controlled environment.

um and and where kind of governments can control a lot of the aspects of what they're doing. And they may look at Bitcoin very, very differently than than the other person. So uh hopefully that that helps kinda round out the view of the yeah.

why there are so many differing views on on the price of Bitcoin and what it's worth and what people are using it for. The bottom line is people are using it for a lot of different reasons. Um and so I think I think that's also one of the fascinating parts about it.

One of those reasons you sort of briefly touched on earlier was the the technology aspect of it. Being as involved in the space as you are, have you seen any notable applications of blockchain being used in in the real world? I think people are still um well there's this whole concept of like private blockchains versus public blockchains. But I think um on like the private blockchain side, I mean that's

That's kind of going full full steam ahead. There are a lot of enterprise companies out there that are building products for a number of institutions out there, whether it's on, you know, the uh the financial services side or or anything like that. Um and on the on the crypto asset side where where you actually have a native token traveling within these blockchains, um that's still being built out. Um obviously Bitcoin is is the most inherent one that everybody knows about.

Um but I still think people are very, very excited about what this can do, right?'Cause the way I look at it is, you know, there's this public ledger that gets reconciled every ten minutes. Just talking about Bitcoin. Um I mean just the sheer possible applications of that you're seeing play out in the market where you have entrepreneurs trying to build

And and you know, who knows if if it's the right business model or not, but they're trying to build, you know, uh medical records on top of Bitcoin. They're trying to build, you know, uh real estate transactions on top of blockchain technologies. They're trying to

figure out ways that they can leverage this technology. And again, it's still early days where people are kind of throwing things against the wall and trying to figure out what sticks because I think they realize that if they're able to leverage a different market along with crypto, that could be kind of the killer use case that that people see out there. But I actually don't see it as

one killer use case to trump them all. It's I think there's gonna be a number of different applications and ways that people interact with it. And and maybe in the future people aren't even going to know that they're interacting with it and they're just gonna be using it. Just to pick on one of the examples you gave there, I think it was health records being stored on a sort of a blockchain. I mean, what would be the the benefits of that?

You know, I I don't work directly in that field, but I would just say that, you know, I think it's this idea that you have um a ledger that's timestamped that's immutable. That is also global in distribution and decentralized. So I think all of those attributes kind of help. Not just medical industry, but but any industry that has differing sets of information at different times. Um and it kind of level sets all of that um onto an even playing field for everybody involved.

All right, so let's talk a little bit about some of the trading opportunities. Um, you know, last time I remember we spoke a bit about our being the various price discrepancies between various exchanges. And you sort of spoke about how it's a bit more difficult than what most people um think it is on the surface.

Where do you see possible opportunity for your average kind of independent silf back trader? You know, I'm talking about things which aren't necessarily worthwhile for a bigger player like Cumberland. But might be worthwhile for smaller participants to sort of look into. Like is there anything which you think is interesting, worthwhile investigating?

Um, I I'd say definitely on kind of the major exchanges or major coins out there that the opportunity is is is is is not there. You you've had a number of entrants into the market where spreads have come in. and markets have tightened and any opportunities that may have presented themselves years prior, um, you know, though they are kind of getting uh taken up and the space is getting a little bit more crowded there.

Um but in terms of I guess other opportunities that maybe, you know, other other people can be looking at, you know, I think Uh one of the interesting things and developments of this year is the idea of like decentralized exchanges. Um although we don't participate on any of the decentralized exchanges. I can see that being an interesting uh arbitrage opportunity for different folks who who can. Granted those markets are mainly focused on retail sized transactions.

And uh and they have their own nuances, but you know, that's definitely an interesting development as more and more of these decentralized exchanges kind of come about. So what is a a decentralized exchange? A decentralized exchange is ba almost just like a a a peer to peer exchange where people are trading with uh one another um on kind of a uh a singular network that allows them to kind of uh um tran transfer and trade um different crypto assets for one another.

And are these decentralized exchanges, are these just a recent development? Um I I'd say so, probably in the last uh year or two. Uh but more so today as as more people started to um figure out kind of uh the interestingness of about it. Okay. And do you think this is possibly a way that Uh, you know, these sorts of exchanges are gonna

Overpower's probably not the right word. Um But do you think this is sort sort of something that might catch on and sort of be a serious competition for the other exchanges that are already um sort of running the game? You know, I think that there are the ideas very fascinating. Um, but a as we've seen it play out over the last few years in terms of well

you know, Bitcoin adoption or Ethereum adoption or things like that, it's it's always gonna be slower than what what do you think is gonna actually happen. And so I think it's probably too far to tell exactly how these are going to impact. um the way that traditional exchanges work, but I'll just say that the idea is out there now that someone has built this thing or built mo multiple things. Um and this idea of decentralized um clearing decentralized trading is is

is now an idea out there that that's working in practice. Um but again I I still see it kind of more within the retail circles. Um I I don't at this point I I'm not sure if if there's gonna be any institutional involvement just yet. So so how come you mention this? Because it's uh a very new thing, you feel like there could be um some inefficiencies which traders could uh take advantage of. Is that why you sort of thought to bring that up?

No, I just think that it's an interesting development that kinda happened over this year and and you know, when you had mentioned just well, what are the opportunities for other traders that may be out there, you know, in on the you know, quote unquote the traditional markets of the The crypto exchanges, I mean the arbitrage opportunities are are few and far between. But um decentralized exchanges may be maybe something that's that's more interesting. Yeah, okay. Okay, cool.

Um Bobby You know, obviously I'm not Uh I don't follow the crypto market too closely. Uh I I do follow it with a little bit of interest, um and a little bit of skin in the game, but I don't um I'm not as um involved in it as you are, obviously.

You know, are there things which you feel as though I should be asking you about which I haven't? Are there any topics which you think uh are worthwhile discussing? Sure. I mean there's like this Yeah, and and and people brought this up a lot last year. They continue to bring it up this year. It's you know, when's this institutionalization of crypto going to happen? And, you know, uh how's it gonna play out? Um I think I think you're actually seeing it kind of play out in in two ways this year.

Um, I think there's been like an infrastructure play that I mentioned before. You know, you have more custodians today than you had last year. You have more venues, traditional venues, um, that have announced that they're gonna get involved in the crypto um asset space. crypto exchanges that are trying to bolster their businesses and and make things better on on their side. Um you have a number of aggregator platforms out there that have emerged. Um and so all of that to me shows that

The framework is being built, whereas last year that that framework didn't even exist. Um and so so this framework is being built, which I think is helpful for institutions to get more comfortable with the space. That's sort of something you hear a little bit like obviously being spoken about is

Is like you said, when are the institutions gonna be getting involved in and more heavily involved in the space? It seems as though people kinda like the idea that institutions are gonna be getting involved in in cryptocurrency markets. Yeah, why do you think people like that idea? Uh you know, I think it it provides some level of validation to the market.

that um some of the most sophisticated investors um or investment teams out there have now, you know, whether they want to look at it as like a a a stamp or uh a stamp on the industry or something like that that provides them some level of comfort that hey, even these folks are are now involved in cryptocurrencies that that um that wow that that means that that it's it's now mainstream.

But I I'll just say that, you know, I think there has been a misconception over the past few years of what involvement looks like or adoption looks like. I think a lot of people had speculated and and me to a degree as well that These institutions are gonna come to the market and they're basically just gonna buy coins and the price is gonna kinda run up over time. I think I think you've seen it actually play out differently.

And, you know, people say, Well, the institutions aren't involved and I'll say, you know, I just don't think they're involved in the way that you're you're looking at it. You know, and I think the Yale announcement was something very, very interesting, right? These these investors and uh and institutions are now participating in not just the coin aspect of it, but they're looking at it from a vehicle perspective of different

You know, whether it's a fund um that's investing in things and and they're investing in in hybrid models as well. They're investing in funds that are also investing in coins but also taking a more VC style approach towards protocols and things like that and and other infrastructure plays.

Bobby, you were recently uh featured in a a Financial Times article and Uh, you said something to the extent of, you know, we're not in this just for a year or two. Uh we see a bigger picture down the line uh in regard to cryptocurrency markets. You know, for you, uh what does that picture look like? I think uh what I mentioned earlier just about uh whether it's uh or I guess mainly it it's the the idea that we're going into to new territory, new markets.

Um and and for for me that's obviously that's that's a bet that we're doing on on the industry in terms of helping it grow, helping it adopt and taking our best practices that we've done here in the US to to uh to Asia and then and then even broader to you know to Japan and Korea.

And so I think for us it's it's bringing kind of a level of sophistication and and standards that we've seen in other markets that that are traded at DRW and trying to instill those practices into into still this very growing um asset class. Very good, man. Very good. Um all right, we can probably leave it there, I think, unless there's anything else you wanted to um bring up.

Uh no, I I think thought this was great, yeah. Okay, cool. So you're on Twitter. Uh what is your Twitter handle, Bobby? It's uh Robert J. Cho. Robert the Lair Jersey Cho. Yep. Okay, cool. And if someone's interested in learning a little bit more about Cumberland, uh, where's the best place to go? You know, our our website is probably the best place, www.cumberland.io. Um and that that's probably the best information they're gonna be able to get. Okay. Very good.

Cool, man. Well, I appreciate you uh coming on the podcast for the second time. It was really great to um speak again. Obviously, there's been a bit happening since last time, so I'm glad we could do this. Yeah, I appreciate it. And and I'm gonna have to check in with on the uh on the merch store that that you have, see if you have any any new stuff going on. I'll send you a tea. I'll send you a tea. You can write around the office. All right, thanks a lot, man. I appreciate it.

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