251: Kasper Vandeloock - High School Dropout Turned Quant Trader, Entrepreneur (Pre & Post FTX Collapse)

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251. I'm Tessa, co-host on Chat with Traders. Happy New Year, happy 2023, everyone. May you have a fruitful trading year and more. In this episode, Ian interviews Caspar Vandeloup. A young and talented arbitrage and quant trader and programmer in the cryptocurrencies market, Casper received his first Bitcoin at 16 years old as payment for his programming skills.

At the time, cryptocurrencies opportunities were emerging, and he followed his strong instincts to drop out of high school to become a full-time trader and dive deep into learning everything he could. about this fast paced new type of finance and medium of exchange. He went on to write his own programs based on delta neutral arbitrage and order flow strategies. I need to quickly point out that there are two parts to this interview.

The first part is a recording we did with Casper before the collapse of the crypto market due to the downfall of FTS. Since the collapse we did try to get Sam Bankmanfried back on the show, but it couldn't happen. However, we also wanted to get Casper to come back on.

The FTX fraud arrest of SBF and the subsequent collapse of the crypto market opened new opportunities for Casper as many players were forced to exit the market. So stay tuned for the second part, which is a shorter follow-up recording. Let's get on to the first part of the interview. Ladies and gentlemen, we present to you Casper Vandelouke.

Casper, welcome to Chat with Traders. Thank you, thank you. Yeah, tell us a little bit about your background. Where did you grow up and where are you now? Well, I was born in Tienen, then I traveled well, traveled not really, uh I moved a lot uh through Belgium. Um and I'm currently living in Brussels. Oh great. And if you don't mind us asking, how old are you now? Uh I'm now twenty two. Twenty-two. Okay. Get started early. Uh Yeah, definitely.

How old were you when you first got your first crypto and through what medium? Um, well, it's quite easy to count because I'm from 2000. So in 2016, I I was very into coding at a young age. And in 2016, I was doing a freelance job and someone wanted to pay me in Bitcoin. Um, at that time, you know, I've heard of Bitcoin. I originally wanted to mine it to earn some extra money as a teenager, but you know, didn't really have the facilities for that.

I got paid in Bitcoin and well, you know, I only had two options with it. It was either buy drugs or, you know, do do something else with it like gambling, etcetera. And then I discovered this platform called Polarnix, where you could buy alternative coins like Bitcoin, XRP, Ethereum, et cetera, against Bitcoin. And basically it was like a mini stock market. And I was like, okay, this is pretty cool because I al was always interested in that, but

In Belgium, it's very hard to get started on that. We don't really have something like Robin Hood as well, at least not at the time. You need to be 18, at least have like 10,000 euros in your account, which I definitely didn't have at that age.

Um, and I basically started, you know, playing around with it. You know, I built up some capital from two thousand sixteen to two thousand eighteen with the crazy bull market, even though that I had you know a very small amount to begin with and then in 2018 I dropped out to become you know a full-time trader.

Did did you have interest in any other type of financial markets? Um, did you follow financial news or were you just kind of thrust into it by receiving the crypto, thereby awakening your curiosity to it? Well, investing always had an interest to me because I knew that like, okay, saving doesn't really, you know, help that much to build up capital. So something like investing would be very interesting. And of course at a young age I saw the Wolf of Wall Street, et cetera. So, you know, you see

a lot of people with a lot of money is always interesting as a young guy uh that was broke. But uh no before that I re really didn't have like any experience. Like I I looked, you know, sometimes at documentaries, etc., but it wasn't like

I had a big interest in it at all. Uh that was also not really my start in the beginning. It was just more as a hobby and I always wanted to go, you know, further with what my passion was at the time, cybersecurity, but you know, that quickly changed uh after 2016. I see. Um, did you have early goals uh regarding crypto through the speculation of it or working other jobs and receiving crypto?

Um in the beginning it was honestly more of an experiment. I did set certain goals for me to achieve by thirty, which I prefer to keep private, but I've reached those already. So Uh they were also not really realistic. I thought that I would never really hit them, but well, yeah. Apparently I did. Well, congratulations for uh uh meeting your goals early. When you first got into crypto or the first few years, uh did you share your early interest or goals related to crypto with family and friends?

Family and friends. Well, I did it because the the way that I got started is I at the time I had I think I received like forty dollars. I put twenty dollars into the Polenex account and I woke up the next day. uh and I put it into a random coin and it basically doubled.

So that was to me quite surprising. And I remember that I shared it with some friends at the time who obviously thought that it was like a Ponzi scheme and whatever. But yeah, in the beginning I was quite verbal about it because it was very interesting to me that I you know, had access to a sort of casino where I could speculate on these coins. Um but

Yeah, not not that much after. I uh later on I kept it quite private to myself, um, just because it it wasn't really well received um that you were, you know, at a young age busy with cryptocurrency.

What was the reaction of your family, friends, or even teachers uh when you quit high school at uh around the age of eighteen to trade crypto full time?

Yeah, uh at eighteen I I dropped out full time to do uh at eighteen I dropped out to do it full time. I remember my dad, he he act reacted quite well to it. So I ran away at sixteen. So it's not like I had contact with my mom anymore. But um I remember my last exams, I I basically instead of studying for business development that I uh that I had, I made a presentation for my dad explaining that I was gonna, you know, drop out of high school.

And he didn't really have a choice. Like he either is gonna have to support me with it and just accept that I'm going to do it, or uh that I'll be, you know, that I'll leave the house, uh, that I already found an apartment where I could stay, that I knew I could afford, etc., etc. Uh and he basically was was quite Uh he could he accepted it quite well. Um he even said to me like yeah I I knew you were gonna do this.

But of course I cannot really verbally support it that you drop out of high school. I'd rather have you finish it first and then drop out, but well I cannot really stop you. When it came to my friends, they were kind of in disbelief. And I remember I I told my teachers a few times that, you know,

I'm just gonna drop out. And you know, they didn't really believe it. But then the day that I needed to get my last grades, they were in full disbelief when they wanted to wanted to register me uh for another year that I said like no, it's not going to happen. I'm dropping out. Oh wow. Uh did you share with them um some of your early successes in trading crypto?

Um there was a teacher from another school that I that I shared it with because he was also interested in economics. He was a math teacher, but you know, he he didn't see me at later stages and I didn't have contact with him anymore. Um also the teachers that I had.

The last year, I basically, you know, never shared what I exactly was doing. They they knew that I was interested in crypto because sometimes during the lectures I wasn't paying attention to them at all, especially during computer class. I was, you know, doing my own thing, which kind of bothered them.

Um, but no, I never really shared it with them because again, it it especially in 2017, 2018, even though it was in the media, it was still mostly seen as something used by criminals, service, drug dealers, etc. Yeah. So what makes crypto fascinating for you? I mean, what really grabs you about crypto?

Well in the beginning in the beginning uh especially 2016, 2017, there wasn't really much special about it, but the thing was that it's so open. You can easily get into crypto. Uh especially at the time you could just create an account without doing any KYC. you could deposit a small amount of money and you get charged in percentages, not really in standard fees, which makes it attractive for a young person like me.

Um, and also the data is just so open compared to traditional markets. If you want something like order book data, et cetera, especially live data, you're gonna have to pay thousands a month. compared it to crypto where it's just like okay you have an account here even though you have ten dollars or twenty bucks in your account you can create an API key request data uh and

you know, and just use that. It's very open and transparent. It they don't treat you differently uh because you're from a different country or whatever, cryptocurrency just works.

Like it should. There is certain code that the code gets executed and there's no regulation in between. Well, now it has, but you know, not back in the day. In your earlier years of trading, what type of cryptos did you buy? buy I mean the trade the biggest garbage out of all of them. Uh I remember that I was trading one coin quite heavily called Sia coin, which was something that had to do with cloud storage. Um so you could b instead of mining you could um

provide, you know, some storage to the network. And then people would rent that storage from you on the decentralized network. And I found it a quite interesting coin because back in the day you didn't really have stable coins, or at least they weren't big. So all markets were denominated in BTC and this coin was so cheap. So in the smallest unit of bitcoins or satoshis, it was like set 60 67 satoshis. However, the fees that you paid to

take and make from the markets uh were less than one percent. So for me it was quite attractive to just constantly uh place bid and ask on it and kind of do some some small market making, but manually to earn some extra money. I see. So you were more uh you were more of a market maker slash short term trader as opposed to kind of a buy and hold.

Well, I did buy and hold, but I did a lot of experimenting. Um, yeah, no, I wouldn't really say that I was uh that I was heavy busy with that. I was in short-term speculation. Uh market making really wasn't the case yet in my earlier years.

My knowledge about markets and was also very minimal. But yeah, back back then it was mostly short term speculation, some long term stuff. But the coins that I was trading at the time were you know many of them were garbage or even uh outline scams but that was what got traded the most back then so you know i went where volume went.

Mm-hmm. I'd like to um transition to the idea of the perception of crypto in the media. Frequently, we hear the media and some politicians and bankers. frequently say that the media say that Bitcoin mining is consuming more energy than some nations and that cryptocurrencies as a whole are primarily used by criminals for money laundering. What's your response to this?

When it comes to the electricity usage, um I don't know the exact numbers that already, you know, heavily dropped uh after Ethereum switched from proof of road to proof of stake. When it comes to Bitcoin mining. Of course, it still uses a lot of electricity, but I do know that the people that uh have mining facilities, they go to places where electricity is cheap or where there is too much electricity produced so that they can buy it for cheap and mine Bitcoin for cheap.

So I don't think they should only look at how much electricity gets gets consumed because of Bitcoin, but also at where that electricity is coming from, because if it's at a place where they just have way too much energy and they cannot, you know, send it to another place, then you know it's quite logical that, you know, why not use it for bit you know for Bitcoin mining instead?

When it comes to that cryptocurrency gets used by criminals, uh, that's definitely true, but you gotta keep in mind that with Bitcoin and other cryptocurrencies, you can at least see that it's getting used by a crime. For example, a bank gets hacked or you know there's a malicious uh transaction on your PayPal account. We as a public don't see that. When it comes to cryptocurrency, there's a public ledger. So if someone is verbally about the fact that, hey,

You know, this uh this money just got stolen from me. Um, we can see that actually the money, you know, got sent to a different address. uh maybe link that to another hacker, et cetera. Um so it you know definitely gets used uh by criminals because it's fully permissionless. Uh and you know it's not like uh PayPal, for example, can just freeze your funds.

But at least we can see that there is crime. But it's not really appealing for many criminals because you're leaving a trace behind permanently with something like a PayPal account. If you know your PayPal accounts gets closed. that data is deleted or maybe PayPal still has a copy of that. But when it comes to cryptocurrency, let's say uh that you steal some Ethereum from someone, uh, you are leaving a trace behind, even though you are using a mixer or something like Tornado Cat.

If that ever, you know, gets traced back to you, you're screwed. Yeah, so certainly um cryptocurrency is not the best way to for criminal uh to keep their transactions uh private. And I've heard that the percentage of criminal activity using cryptocurrencies has been falling as a percentage of uh total volume over the years.

Uh I'd like to dive into what is quantitative trading on the cryptocurrency market? Are you you're a quant trader yourself, correct? Correct. Yeah, why would we consider quantitative trading over, say, traditional discretionary trading? Well, when it comes to quantitative trading, the easy thing that you have with cryptocurrency again is that the data is so open. You have easy access to um order book data, live trades, etc., that you do not have uh on traditional markets.

Um should I forgot what question you asked. Oh yeah, just yeah, why should we consider quantitative trading over discretionary trading, the the advantages? Um you mentioned that in the crypto market. Is is it easier to do um quantitative trading on the crypto market than the traditional financial markets? is it's definitely easier just because the data is so much more open than on the traditional market.

on something like the cryptocurrency markets, you can open an account at an exchange, request C API, and have full access to it, with certain limits of course, but you have full access to the data compared to the traditional markets where you don't have that. I see. And did you program yourself? Yes. So before uh I got into trading, I was very into, you know, just scripting as a kid, building small programs, et cetera.

So then in 2018, when I full went full time as a trader, I was looking at ways to basically improve my improve myself. Uh and the best way to do that in the beginning was to build tools for myself. Uh things like you know uh different methods to enter a trade, analyze uh my trading history, look at, you know. you know, try to build some kind of automated trading strategy in the beginning. I see what what kind of strategies uh did you try?

Well, back in the day it was actually quite simple, stuff like trend following, et cetera, that has now evolved to, you know, fully delta neutral strategies and uh strategies based on order flow. Mostly with order flow it comes to trying to find trapped players. So players that got into a position uh are now underwater and aren't in favorable conditions and then try to make use of use of that.

So you tried different strategies. How often would you switch between strategies? It depends from time to time. Uh some strategies were profitable back in the day. Now you know they aren't anymore. I remember in the very beginning. It was on Binance, for example, you had so many different pairs like um BTC USET, but also BTC Ethereum, Ethereum USDT.

Between the uh those three pairs, even though it was on the same exchange, you could execute some triarbitrage. Now Basically what that meant was uh let's say buy Bitcoin, then use that Bitcoin to buy Ethereum, and then use that Ethereum to sell for Tether or USET again for a small profit. Uh back in the day that was still possible, but these days that's you know the the competition has gotten too high. You have companies like Alameda, Wintermute.

uh jump that are now way faster and have a way better infrastructure than me uh to do execute those trades. For example, now it's it's more order flow-based or you know strategies that aren't latent latency sensitive. Uh-huh. So okay. So you said you got into arbitrage. So what is arbitrage exactly? Is it just price differences on different exchanges that you're taking advantage of?

Price differences between different exchanges or also just different trading pairs. So like Ethereum USET, Ethereum, BTC and BTC USET. you could use your use USET to buy BTC, then convert that to Ethereum and then sell that Ethereum uh on the Ethereum UST for a higher price because there was a you know small difference between those.

I see. And the higher price that you're selling it for, th this is between different centralized exchanges, or are you also doing this on the decentralized exchange? Um, I've never done it really on decentralized exchanges. I was quite late with the whole DeFi trend. Um, back in the day, especially in the early days, I I did it on centralized exchanges. Um How often would you see these type of arbitrages come out to take advantage of it? Is it how frequently would you see it?

Back in the early days, I can't quite remember, uh, but it definitely happened uh multiple times a day that I saw it on different trading pairs. But the markets were, you know, then so inefficient that you could just arbitrage them out by hand.

Um, especially bet between different centralized exchanges. Most of the times you could just buy on one exchange and sell it on the other, and you could have minutes of delay, uh, or at you know not be the first one for minutes uh and still be able to make a profit out of it.

But that was again back in the day. Uh these days everything got has gotten so much more efficient than these types of strategies I don't run anymore because you know the competition has gotten real tough and also the the infrastructure of decentralized exchanges has gotten so much better. Uh it's honestly uh a whole different world now.

I see. So these days, so you don't do arbitrage um too often or Um, not when it's latency sensitive. Um the type of arbitrage that I still do these days is cross exchange funding arbitrage. So A funding rate is basically a fee that shorters pay longs or longs pay pay shorters, depending if there is a premium or a discount on a perpetual contract. Now, this premium or discount.

um is different on every single exchange, even though it is for the same instruments. So you could have one exchange like Binance where you get paid to long Ethereum, and then you get paid to short Ethereum on an exchange like FTA. And what I will do is say if the reward is high enough, long on one exchange, short on the other, and basically make a difference, uh make it make a profit uh on those funding payments. And then also when that spread closes.

Could you describe for our listeners uh what is a perpetual contract? A perpetual contract is like a future contract, but it doesn't It doesn't have an expiry. So to make sure that the contract is still the contract price is still close to the index price. So the actual price of, for example, Bitcoin. What we have is a funding rate. This funding rate gets calculated by the average premium uh on a certain um

time frame. So let's say that a funding rate gets paid every eight hours, like on Binance, it would look at uh the time rated average price of that eight hours. And then if it's for example positive, uh longers would pay short. that difference and if it's a discount shorters would pay loans. Why does this funding rate differ from exchange to exchange? And I mean, why does it even exist in the first place? How does that get created?

Well, the di the difference in the uh is quite simple. If there is a, you know, the index there it all depends on the index price. So this index price. is different on every exchange. Why? Because it's a it gets calculated in a different way. So for example, on Binance for BTC USDG perpetuals, they would say, okay, we're gonna uh give 50% weight. To our BTC USEG spot market, and then 20% on UOB, 20% on KX, 10% on another exchange, while an exchange like FTX.

could say, oh, we're not gonna do that. We're gonna give a weight uh to the Binance BTC US ET market for 20%, uh, UOB uh 20%, OKX 20%, and basically have a very different you know index calculation. And then there's also the thing where different traders on different exchanges maybe have a desire to create exposure to a specific coin, but cannot go to that other exchange or don't want to move their capital to that other exchange.

and then buy more aggressively or sell more aggressively. And because you have the different calculate, you know, the different calculation on these index prices and also just traders on different platforms act differently, you get these funding rate differences.

I see. So how long do you typically see these funding rate differences last for? Honestly, it really depends. Um, because some uh sometimes it is, you know, just like one funding rate period. Uh, but most of the time I try to ignore those, but sometimes it's also days or weeks. uh especially in the bull market, you saw these extreme funding raise uh sometimes last for for weeks, even though they were uh crazy fees, simply because there was so much demand and people wanted to use as much

utilize as much leverage as possible. So it really depends from market to market. Sometimes it's you know one funding rate period, but you know those mostly get ignored. But if it's uh you know if it lasts a day, uh they they get noticed by everyone. Have you ever watched a stock explode and thought, if only I had the capital, or sat on the sidelines because your account balance felt too small to matter? Good news.

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So these uh funding rate differences are created and amplified by um A lot of volume, transaction volume that helps push up prices. Uh, is that where the inefficiency comes in? Is it less during a really quiet market?

It's yeah, it's definitely less in a way call uh way more quiet market as always because of uh some big events. So uh currently the the funding rates on on big coins like uh Ethereum, like the the the the premium that you pay uh on these funding rates aren't really that high. I would say like a 2%, 3% APR last time that I checked. But on big bull market, it was sometimes 50% APR that you were getting paid.

uh in in a specific direction, uh sometimes even crazier. Uh I think the peak of 2021 on Bybit, you get uh you got paid 2% a day just to be short on Ethereum, which is absolutely nuts because uh A guy like me is just gonna buy Ethereum, use at Ethereum to short Ethereum and get a 2% uh you know payout every day while actually having no risk. Wow, you say there's no risk because you're long

You have no exposure to the underlying assets. So with the specific one that I'm talking about on on Bybit now is um I use Ethereum as collateral to short the Ethereum contract. So I'll let's say that I had 1000 Ethereum, I would short one, uh I would use that 1000 Ethereum that I had in spot, then use that as collateral. to short Ethereum the contract itself and then I would bag the the payout.

uh that Bybit would give me uh simply for being short. But if it would go up in price, well, I since I own the Ethereum, you know, I I have no underlying exposure, I would be safe. If it goes down, well, you know, my Ethereum becomes less valuable, but because I'm in a short position, I'm fully hedge. Mm-hmm. I see. Uh you wrote an article uh talking uh last spring about receiving three hundred and nine dollars a day for just one Bitcoin.

uh and you're protected on the downside for through this uh delta neutral. How much has this funding rate changed over time? Because this this number equates to over 100% annualized payment. Yeah, but uh you know when it's a crazy rate like two percent it uh most of the time doesn't last.

for that long. You know, over time, like now uh rates have have normalized again. I I personally don't really know what they are at the moment. I haven't checked in a bit. Like no, I'm I'm now checking it on uh on Bitcoin, for example, the best that I can get as we speak. Uh is currently one BPS every eight hours, which isn't that special. But also there isn't a lot of volatility currently on the Bitcoin market.

There hasn't been a big down move or up move for a while. We've been going sideways for almost half a year. So people aren't really, you know, aggressively betting. I see. So what kind of strategies do you tend to favor during these times of quiet market activity? Um the strategies that I currently favor is actually most of the time none. Uh at the moment I'm busy uh building um further down my my systems that uh you know that I wanted to to scale out.

uh or start experimenting with new strategies. And I'm basically just waiting on volatility. Now these days, uh as the time of this recording, we've received some volatility again, especially on uh pairs like Ethereum. And so I'm trying to, you know, play around that, but that's mostly directional order flow. But besides that, at the moment, you know, if if markets aren't favorable, uh, then I'm not going to force myself to trade and I rather sit back and and just try to improve my systems.

or build out uh current operations further.

Have you heard of the Kim Chi premium? Yeah, I definitely have. Uh the Korean premium that uh Sam Bank and Freud and uh Alameda Research are well known about. Um You're talking about that one, right? Yeah, definitely. Um I don't know what the percentages were, but back in two thousand seventeen on the Korean exchange. Uh BitHump, I think. Um there was a sudden premium on Bitcoin of over 50%, if I'm not mistaken. And what El Amida research back in the day uh did was

They because it was so difficult to to, you know, le arbitra from a legal perspective. I cannot really remember what it was, but I thought that you couldn't uh redraw your Korean wong um to the USA or something like that. So what they did is they put people on a plane. uh sent them to Korea, let them open a trading account there and basically by hand arbitrage it out. But I could be wrong there because it's been a while since I heard the story. But there was a wild 50% uh spread.

Well, 50% premium in Korea that uh that they arped out. Wow. Uh so I assume nowadays uh the these kind of premiums, they don't no longer exist. Has has the markets become much more efficient? The markets definitely have uh become way more efficient thanks to stuff like stable coins, better uh regulation, um, just overall also market makers now popping up in the space back in the day because volumes were extremely low, you know.

It wasn't interesting for a market maker to build out that infrastructure, especially because exchanges uh were very flawed. But uh these days you don't really see wide premiums like that. If you want to see wild premiums, you would have to go to something like DeFi. But on DeFi these premiums have gotten way lower, maybe two percent uh these days on on low low market coins, but uh They have low caps, but you really don't see them anymore these days. Mm-hmm. Have you gotten into D5?

I've gotten into DeFi, but not from a quantitative perspective. I find I've well, no, I have to be I have to be correct there. I have gotten into it from the quantitative perspective, but not into stuff like, for example, liquidity providing. So you have automated market makers providing liquidity for them. Um

I've done that by hand, but not really in a in any quantitative or automated sense. What I have utilized though is um Um decentralized exchanges you now also have for peptuals where you can uh Again, with the cross exchange funding arbitrage, you can uh get some good trades. I've definitely uh taken advantage of that. And I'm also now working together with a few DeFi protocols, advising them on how to improve their systems, etc.

Oh wow. What what do you see are the biggest advantages and disadvantages of going through DeFi? Uh when it comes to DeFi itself, uh DeFi has advantages in the way that it's just open and free. So like the thing that I already liked about cryptocurrency that you easily get access to data, et cetera.

That is only stronger in DeFi. There's no more, you know, there's not even private data anymore. Everything is public. You can request as much data as you want. You can send transactions, you know, you have no rate limit. like you have on, for example, a centralized exchange. So that is very nice. You have better, you know, you have alternative liquidity solutions. So for example, with trading, you have AMMs.

So automated market makers that they aren't really better, I would say, but you know, it's a nice alternative to have. Um, and it's just better, you know, it's how can I say this? It's easy to start a finance startup on DeFi compared to, you know, anything else in normal finance because you can just start up a smart contract and start your own, you know, decentralized protocol or decentralized application. Mm-hmm.

Do you ever get involved with NFTs? Um, any kind of trading stuff? With NFTs, um, I'm involved as an investor. I've you know taken a few positions. Uh, I don't know if I'm allowed to say names. Oh no. For example, two NFT projects that I like is Milades and Petit Penguins. Milades, purely because it's uh both of these projects are profile picture uh projects.

But what I find interesting is both of them have a very good community. Milades are more private parties type of situation, while Petit Penguins is more of a wholesome community that tries to help each other out. They also do some interesting stuff with IP licensing. So the penguin that you own, they could utilize that to you know have some kind of How can I say this? How what is it correctly? Um so Putji Penguin says what they do is they could since uh intellectual property is yours.

When it comes to project penguins, you also have a wholesome community community, but you own the full IP rights to the penguin that you own. However, what you're trying to do is enable that IP. So for example, try to get a licensing deal with you. uh to build real life products. So the guy that recently bought up the project called LucaNet.

Uh he has a history with creating toys, uh gel blaster specifically. What he's now trying to do is try to get IP licensing deals off your penguin to then make plushies with it and sell them to Target, Walmart and other stores, which you know when I hear heard that bitch in the beginning, I thought was kind of bullshit.

Uh but since he has this, you know, good history of already creating toys, one of the best-selling ones in America last year, uh, you know, it gives a lot of hope and makes it an interesting project. They also are now busy with storytelling, like an animated series, et cetera. Um and are you know trying to create really a unique uh and interesting approach for trading nfts itself uh something that i've been looking at is trying to arbitrage them out

So, since non-fungible tokens, you know, they're not like a Bitcoin. One Bitcoin is a Bitcoin. There's no difference between them. However, with NFTs, Because you have one uh item of a collection, it's not the same as the other one. It's for example with the example of pingwings. It could be uh the one has a crown, the other one doesn't, uh difference in skin or fur background colors of that picture, which causes some liquidity issues. However, now you have these automated market makers.

like NFTX, StudioSwap, uh, etc., where you always have a bit and an ASC. And sometimes these price differences get very big, especially compared to more centralized platforms like OpenCN LuxRear. where you can execute an arbitrage. But it really it can be really difficult because trading fees on these NFTs can be very expensive. For our um listeners, can you describe very briefly what are NFTs, non-fungible tokens, and how do they add value?

Well, NFTs, what they are in in short, is a sort of unique token and that can be anything from a piece of art to a concert ticket. Um Those are yeah, the two prime examples. Um, you've probably seen them before, like a board APR club or a crypto punk, and how they add value.

really depends from the collection. If it's something like a profile picture, you most of the time get access to an exclusive community. It's kind of like a sign of wealth sometimes too, especially the bored apes and the crypto punks. I think the cheapest one on both of them is at least six figures. So having a profile picture like that, you know, it's just a status symbol, just like a role.

The other utility that you have really depends from project to project. Some like the Millades give you access to private parties, same with Board Aid. Some of them just give access to, you know, a group chat or or or part of a community, but it really depends. Um, but the most interesting part for me is just You know, it's a it's ownership. You get the NFT in your cryptocurrency wallet and everyone on the blockchain can see that you own that NFT.

And it is from that specific contract address. It's not like you know uh going back to the Rolex example, someone sees you with a Rolex, but is it a real Rolex? You don't really know. It can be a super clone, it can be a very good fake, you have no idea. But with cryptocurrency, you can see okay, that is number

let's say 1000 out of the 8800 ADH and we can all see on the blockchain that that exact that it it is uh from that specific collection that we are talking about. So we know that it isn't a fake. It's truly just ownership uh in short.

I'd like to move the conversation to talking about March of 2020 when the crypto and uh financial markets had a big fall. Yeah. And what happened briefly uh in March of 2020 with crypto, other than the prices falling? Uh, was there some issue with the crypto exchanges? And have those issues been been solved now or most been improved upon? Um the the biggest issue at the time was of course the UST collapse. So there was this.

cryptocurrency project called Luna, which think of it as like an Ethereum competitor, but they also had a algorithmic stable coin. What I mean by that it's an algorithmic stable coin it A stable coin and the peg, so which is one dollar is remained by an algorithm. It was based on the uh on the Luna blockchain. So if UST was below$1, they would use Luna in the Treasury to sell for US.

And if UST was above$1, they would use Luna, uh they would use USD to buy Luna. But back in the day, what happened was that, you know, the peg difference got really big. And since it, you know, UST uh was, I think, 96 cents when it really started uh going hard, you know, they aggressively started to sell Luna to buy uh UST. Now, because there was a DPEC, no one wanted to buy Luna. So Luna got into a death spiral.

and USC never recovered. So many people, you know, lost all their money and a lot of exchanges had trouble keeping up because you know the the trading that happened on Luna was so aggressive, which also you know brought down every other price. And well, yeah, that's in short what happened.

Great. Uh what is it like for you uh setting up a quant fund as a young entrepreneur? What what was the motivation for you to start in the first place? Well for me I actually originally just wanted to start a prop shop. So I had my own capital, was quite happy with it. And you know, for me it was especially in big bull market, it was always a trade-off of either you trade.

You built your systems or you know need to maintain your systems, uh build it out to new exchanges, etc. But it was always a game of catch-up. Um, so I was like, okay, I need to hire some new people. The moment that I uh got a bit verbal about that in my friend circle, there was a certain financial institution that said, hey, I would like we would like to create some cryptocurrency exposure and we would like to do that through you.

you know i thought that it was going to be uh you know quite easy to do uh start up a fund uh somewhere like camen uh and then you know raise some capital and call it a day uh burnt my fingers on that because the financial institution that i

Uh you know, that I was in contact with is very traditional. Um, you know, they they cannot just use Cayman, for example. They told me that they could only do it in a front located in Luxembourg or Switzerland or something like that. They're pretty open-minded with that. And well that took at least a year to set up. Uh I think one year and three months in total. And after setting up it became a pr problem because There was um uh I'm sorry, my microphone disconnected Do you hear me?

Yeah, I can hear you fine. Okay, shit. Sorry, my microphone just disconnected for uh for a bit. Um problem the cable got pulled out. Great. Do you do you know do you know anyone else uh running a quant fund in the crypto sphere? Oh no, there definitely are. You have mostly market makers, so more traditional delta neutral set uh strategies like Elameda Research, Wintermute, Nibio, Folkfang, and many others. Now you also have SANCAP.

uh which is run by a friend of mine have many fold there are many others but there aren't many that do it in Luxembourg which is quite unique mostly you know because it's It's hard to set up there. It's very expensive. And just a legal headache that you have with them is, you know, since Luxembourg is slow-minded and they move slow, it's not something many want to deal with. So you hire uh programmers to help you uh build out your system, is that correct?

Yeah, I did hire one guy full-time. His name is Munir. Basically, I picked him up right after college, uh, after university. He got a master's in AI and then uh applied for the job with me. And besides that, I currently don't have anyone else, but we're looking to hire uh someone who has more experience with DeFi pretty soon. Uh, and also just another senior programmer to to speed up uh our systems because currently you know building out to newer exchanges takes a lot of time.

Uh in your article, you mentioned that you designed your system to be a microservice architecture. What is this, and what are the advantages? Think of it as like normal programs, how they work. It's like a stack built on top of each other. It is a one big robot that you build.

uh monolithic programs it's called. The issue is of course with this one big robot robot is that if one part of the robot breaks, your whole system falls apart and it can create a lot of issues. While what we're doing is we're building a small army uh of of all different kinds of robots. But if one robot uh goes down, it doesn't mean that the whole system goes down. And the others can notice like, okay, there's one system that currently isn't operating. So we can spin up a new instance of it.

uh that can replace it. Um an example of this could be let's Let's say uh a risk engine. So I would have my terminal. Uh I want to execute a specific trade as a human. I submit it uh to my terminal. The terminal wants to go through the risk engine.

to our API to place a trade. But we notice that there's something wrong with the risk engine. It doesn't respond. There's an issue. You know, there there's something wrong with it. In a normal program, you know, everything would just be stuck and you wouldn't know. With us, it would, you know, it sees like, hey, there is no reaction, we spin up a new instance of it, we submit our transaction to the new instance, and then it would, you know, send it to the API and work just fine.

Uh and that's with every uh small piece that we have uh in our system. I see. So this type of design, is it uh built to be more resilient, say during um when exchanges uh freeze up or anything, any problems that happens with the exchanges that occurred in, you know, years in the past. Does this help protect you a little bit from that? Definitely, definitely. Because if there's like one error, we can spot it uh more easily. And it's also very important for scalability. So

Let's say we have our current systems in place and most of it is written in Python. But let's say there's something very heavy to run, which Python is too slow for, we could rewrite that microservice in a language like, for example, Rust. Uh which is way faster, but you know it takes a little bit.

uh a longer time to write it in. Um and we could basically replace it with that quite easily, just like that, spin up a new instance, but then in Rust, uh, if we have developed it and replaced it and it would work just fine. Think of it as like uh you know a a a piece of your card. uh if the engine isn't fast enough, but you know, back in the day it was, we can now just replace it quite easily.

Uh so for your crypto fund, are you targeting uh individual or institutional investors? Um mostly insu well, technically anyone uh that is high network, but we definitely have a preference for institutionals because On board them, it's it's more easy. Uh, and also the minimum ticket size uh in Luxembourg can sometimes be quite high for angels. Excuse the last interruption here. This is Tessa. We hope you're enjoying this episode so far. If you love the podcast,

Please give Chatwith Traders the best review you can on whatever platform you're listening from. This will help us to keep the episodes coming. Also, if you haven't subscribed to our email list, please hop on to chatwithraders.com and click on subscribe. so we can keep you posted of information that may be of importance. Thank you. Now back to the chat with our guests. Uh how much new competition do you see entering the field or is it difficult to track?

Um it's quite difficult to track because quants like to keep a low-key profile and don't really you know shout it a shout it out like hey we're starting in your quant fund. Um but Most of the competition that we see is more from the VC perspective. So early investors, seed investors, not really people that, you know, actively trade or run liquid strategies.

I think this also comes because of the attractive uh period that we had in 2020-2021 where VCs, you know, a lot of them just did spray and uh prey investments. uh and sometimes they went uh up by 100 and sometimes they went bust. But VCs you know had a I had an incredibly easy time then and I've seen that uh friends of mine, but also, you know, uh competitors are now attracted to that way more than running a traditional hedge fund. Mm-hmm.

Uh so to effectively utilize your strategies, um, have you calculated roughly what is the maximum amount of money that you could manage and still be effective? We've noticed that if we if we keep it below thirty million. we're gonna be fine um with our current systems, but it's quite easy to scale that up because the the issue that we have is just liquidity overall with with the types of strategies that we run. Uh since we are mostly directional.

you know it's we can manage quite a a large sum in overall. But the liquidity of course on lower cap coins is you know very spread out. So for us, if we want to go above that 30 million mark, we're just gonna have to you know connect to more exchanges and uh perhaps also more OTC platforms.

So where do you see yourself or where would you like to see yourself in three to five years? It's a difficult question to answer because if you asked me that question three to five years ago, I would have said that I worked in cybersecurity. Um Honestly, I would say kind of the same place where I am right now. Like uh trading isn't really a thing that I

that I'll quit soon. It's I have tried to quit it uh in the earlier days or even uh other periods, but I always get attracted back to it. So I will I think that I will always uh you know stay in this space. um, you know, running this this shop, especially for for Mosca itself, it's you know, it's something that I wanna do long term. I wanna do it for at least ten years, not leave anytime soon.

uh I want to scale it out actually, not you know, uh scale it out as not only the fund, but also you know building something on top of that. Think of something like a Bloomberg terminal for cryptocurrency. uh for centralized exchanges and and stuff like that where my expertise is you know where I have some expertise. So yeah I would say that just

further with the you know building out the fund, uh advising projects. There are now a few projects that I'm, you know, that are going to be announced soon that I'll be advising. I'm very stoked for that. And honestly I just want to you know stay on that path. Uh huh, great. Uh I had one question uh regarding regulations and some say that uh

some kind of regulatory framework is necessary for big institutional money to get involved. Uh what's your take on that? Do you think we need some kind of regulation for the big money to come in?

Regulation for the big money to come in? Well, it's it's hard to answer that question because you have regulation, you know, in the USA, you have that in the EU, etc. Um the I don't really think you need more regulation because at the moment the regulation is already pretty strong, uh especially you know, and now especially there's you know a lot of work going uh around uh Mikalov for example in Europe you have the USA where San Bangman Friday is

you know, pushing really hard for regulation. I think it's more of a liquidity issue. At the moment, liquidity has gotten way better in crypto, but it's not like you can, you know, execute a$100 million trade quite easily on the crypto market. that's going to take days or at least have you know a big market impact on even coins like Bitcoin and Ethereum. I think it's more of a liquidity issue and an an overall adoption slash interest issue than regulation.

I'd like to move to uh mindset and psychology. Uh and is the mindset different for a discretionary trader versus an algo trader? Definitely. Well, for me at least. Um, because when I was a discretionary trader, I had like a more How can I say a long-term view around uh trading strategies? Well, now as an algorithmic trader, like I

Because I'm so into the data, I try to optimize every small part of it. With a as a discretionary trader, what I did was I placed one single limit order or I placed one uh market order or whatever. and that now has become to okay how do i for example optimize my uh my entry and it's not only the type of orders that i'm going to use but also which exchange am i going to use it uh you know which exchange am i gonna execute it on Back in the day when I was a discretionary trader, uh what I did was

I want to create a 1000 Ethereum long. I go to the exchange that I use and I execute a 1000 Ethereum long. These days it's very different. I have my own terminal. I type in I want to create exposure to 1000 Ethereum.

and it's going to look at okay where do I have money on which exchanges which at which exchange do I have the best um rate so to say to enter this trade based on prices, liquidity, maybe things like funding rates, etc. And then it's going to execute that trade, but not only on one exchange, but most likely on multiple different exchanges all at once.

And with a discretionary trader, you know, for me it were I did a lot of uh manual work with now an algor as an algorithmic trader, it has really changed to you know, since I now have way more time because I automated a lot of my workflow, then I'm spending more time optimizing my system. uh or s or building them further out than actually you know trading itself. So what do you struggle with most and how do you deal with it?

Swittling with most is decide where I'm gonna invest my time and resources to. Um because cryptocurrency grows so incredibly fast and you know you you can, you know, have the mentality of like, okay, I have this one thing that's now very popular and very cool that I want to expand to, but that maybe not be interesting in, you know, tomorrow or next week or next month.

So it's constantly a decision of like, okay, am I gonna spend more time building out to this new exchange? Am I gonna learn more DeFi related stuff on this specific chain or am I gonna learn options? It's really where you're just going to invest your resources, both time and money wise, because the space just moves so incredibly quickly. Right. There's more things to learn than uh than you have time for.

Yeah, and uh it's it it it's too much for everyone because there's just so much new stuff going on. Um the the last in Arbitrum for example uh is getting very popular which is like thing uh which is a new chain you well not a new chain but Well whatever it's it's a new uh ecosystem basically. You now also have new memes, uh which sound very strange to say, but coins like Dogecoin, Shiba Inu, etc. are very big, and now you have Doge chain.

Which are getting a lot of traction. It's like, okay, is it worth to spend your time on that or not? You're gonna have to invest some time in it. uh perhaps because it's gonna get big or maybe it's just a fat that lasts for another week. But at the same time you have, I don't know, a new decentralized application that's coming out that that's maybe interesting because it's new derivatives exchange where inefficiencies are created. It could be uh something NFT related that can be interesting.

uh maybe a new fraud or a new scam got invented, maybe you gotta spend time on cybersecurity. It's just so much, you know. And and even if you have a team, it's it's a pain in the ass to keep up with. Yeah. Uh so how did you get, how did you quickly get to where you're at at your age? Did you have mentors?

I didn't well, I didn't really have mentors. I just had because all the resources are on the internet. It's, you know, something that fully got invented on the internet. Um you know, you you have all the resources, but I I learned a lot through social media, which sounds strange to say, but through platforms like Twitter, private Discord chats, etc., where you meet people that are into the same stuff as you.

you know, you you talk about it and you build together and you experiment together and you teach us uh each other stuff. And that's, you know, the the thing that enabled me to to learn quickly. Also just the the thing is about crypto is not only is data so open, but also the the founders of these protocols or exchanges are very open. Uh so a lot of the times like an exchange like FTX back in the day.

Uh, when they launched, I had some questions about how they designed their liquidation engine because it was so different than anything else that was in the space. I would just DM the CEO, who's now incredibly big, but at the time he wasn't. And I just DM'd him a question saying like, hey, I don't really get this part, or like, why did you design it this way and not design it this way? And I would just get a response. So I don't know, just fucking around and finding out.

Mm. Yeah, you've uh those early days you felt like you were part of a community, right? Now no now these days too, like uh especially around DeFi, everything is very open. Uh with DeFi protocols, you can just join the Discord, you can ask questions, and you have people that are paid full time to just Just you know, answer your questions or even the community is just going to answer uh what you're asking for or send you a link where there's further documentation.

uh with cryptocurrency uh cryptocurrencies who really feel part of a community. I don't know how it is on on platforms like TikTok, et cetera. I don't think it's, you know, really I don't think it's going uh really well over there, but on platforms like Twitter.

Everyone is very open, like even big traders that are running way bigger firms than me are just very open to talk about stuff. Um, some uh I don't know how to pronounce his name correctly, some Trubaco, I think, but everyone calls him Tabasco. uh was the CEO of of Alameda Research. And for a while he would just post his analysis after doing the trades publicly on Twitter for everyone to read.

and these were very valuable and you can just you they're still up you can still go there and read them Mm-hmm. Mm. Nice. Uh what kind of sacrifices have you had to make in order to trade and be an entrepreneur? Have you sacrificed on sleep, time with family? Friends

I I don't know how you uh in in Dutch it's called Klausenach. So basically like locking myself up for multiple years. So when I dropped out of high school, you know, all my friends were still at high school. They were studying, later they went to university and I locked myself up into my parents' bedroom. Later on I did move to a rework office before starting the fund. And then after a year, you know, I I got Munir. But, you know, I I just locked myself up. And, you know, as a psychopath.

was trying stuff out, building stuff out, reading, listening to podcasts, watching YouTube videos, whatever I could to, you know, keep up with the space and try to earn a living out of it. Because um, you know, I don't come from a lot of money. So for me it, you know, it was either get obsessed with it and master it as fast as possible to, you know, try and make it, or, you know, basically lose it all uh as in a a time investment.

that I would not make it and could not make it my full time job and would have to work as a cashier or whatever. Is so do do you end up having any free time to do anything else for relaxation? Um in 2021, uh, when I started launching the fund, uh, because the legal the legal work was gonna take. Originally it was gonna take three to four months, but I got screwed over by my legal team, so it took over a year. Uh but when I when I started setting up the fund, I decided to, you know.

spend three months just hanging out with friends, et cetera, meeting them, eating out, it's et cetera. But um I don't really regret it or or anything like that. I really enjoy my life at the moment. I see, you know. uh many different kinds of people every week. I eat very good food. I have a comfortable living, so I cannot really complain. Um Great. Great. Sounds like you're living the life, living the dream.

Well some say that. Yeah. So in closing, what would you say to those risk-tolerant equity investors who are curious but scared of getting into crypto? take 100 bucks experiment with defi experiment on centralized exchanges learn as much as possible if you're you know if you're young and you don't have the money to experiment i mean like you know 10 bucks on the solana uh A Solana ecosystem, for example. Uh send me a DM on Twitter and I'll send you five bucks Solana where you can experiment with.

Honestly, I would just say experiment with it, play around, uh, compare to what it does to traditional finance, join communities, ask questions. Um it's it's such an open space. And you know, you're not really gonna lose anything uh except the money that you well, except the money that you put in, of course. Uh you could always lose that, but. Just play around with it. That's that's what I would say. It's it's very open, it's very transparent, and there are a lot of resources out there.

Great. Thanks for coming on the show, Casper. Yeah, thank you for the invitation. Yeah. If listeners are interested in getting in touch with you, what is the best way to reach you? My Twitter is at Casper Lok. So Casper with a K and an L-O-O-C-K. Uh I also have a LinkedIn and if I'm not mistaken, Chat with Traders is also launching a platform where I can communicate with them. Yes, we're launching a community. So well, I'll uh I'll make an account on there and uh they can also reach me on there.

Fantastic. Stay tuned for the follow-up interview coming up right now. So everyone, we're having this part two interview with Casper uh just five weeks after the first one, due to the extraordinary events that has recently rocked the crypto world. Uh last time we spoke. Bitcoin was around 20,000 and Ethereum was near sixteen hundred. And just a week later, prices had fallen 20 to 30 percent due to the collapse of the centralized exchange FTX.

run by the infamous Sam Bankman Freed. Some are calling this the Lehman Brothers event for crypto. Casper, uh how have you been during these difficult times? Um, I've been pretty all right. I did have some significant exposure to FTX, but overall I'm doing well. Did you have a an account with FTX or? Yeah, I I did have an account with FTX. I've been with them since the day that they launched. Uh I really liked their product and uh well

I was personally hit with my personal assets. I did move off uh a lot of my activity over the last few months since I had some issues with the exchange. But uh yeah, it's it's sad to see a player like that go. But It's also, you know, eye opening to see what what kind of business that they've been running. Yeah. Can you describe for us what were the reasons for the collapse of FTX and its impacts on cryptos, NFTs, borrowing and lending, and decentralized finance?

So in short, what happened was you had FTX decentralized exchange, but Sam Bankman Freed also had his own trading company called Alameda Research. And Alameda Research apparently went bust. And to cover that, what they did was they used customer assets to trade Witter Prop Shop called Alameda Research. Uh and that didn't really go too well. And they lended a lot of money to fill the hole on their balance sheet of uh of FTX.

With their own tokens. So they were taking out loans against FTT, the FTX Native token, against MAPS, against Oxy, against CIRUM, which were all very illiquid tokens and where they held the majority of the assets. of and a big exchange called Binance discovered that and the CEO noticed this and decided to sell uh his shares of the FTT token. Which caused the price to collapse and well

all the lenders uh asking for their money back and FTX couldn't provide that money because they lended it all out to their to their you know trading firm, which also lost all the money. Uh so there was basically a bank run. My understanding of FTX as a centralized exchange is regulated, right? They were regulated. Uh, you had FTXUS and you had FTX.com. However, you know, there were some malpractices going on and it wasn't really a good oversight.

And you know, SBF was also one of the the bigger sponsors, politicians in the USA, and was really, you know, trying to push some bills. So everyone was trusting him on, you know, on that end while it wasn't really in check. They didn't even have a CFO apparently.

So after the FTX collapse here about um almost a month ago, what were its impacts on cryptocurrencies, NFTs, borrowing and lending, and decentralized finance? Well, borrowing and lending was already in a pretty bad state because there was unco uncollateralized lending was uh really popular, but after the Luna crash, because of players like Trieros Capital.

Uh, you know, that industry wasn't already doing well because a lot of people realized that, hey, a lot of these companies don't have their risks in uh in check. So there, you know, nothing major changed. Like some uh companies did go bust that had uh some loans open because they had a lot of significant exposure to FTX. But to the crypto market itself, the the you know, the market pretty much knew.

Overall, there was you know twenty, thirty percent downturn on on most coins. Um, but coins that Alamida was heavily invested in uh or was active in had it really tough. Coins like Solana went from $30 to$9. Now it's currently back at 15. Uh their native token called FTT went from 30 to I think$1.5 right now. Uh tokens like serum went from two, three bucks to I think twenty cents at the moment. Uh and that's still really high. Um serum is

They're decentralized exchange tokens. So think of it as like the centralized order book on the blockchain, which was pretty, you know, new back then on the Solana ecosystem. That project has now been forked. uh because a lot of the players that are building on that project realize that you know Alameda was only doing them more harm than good uh and are now you know trying to build an alternative. Mm-hmm.

What about the big uh decentralized players like uh Uniswap, for example? Uh were they uh impacted significantly by this decline? Or did uh some people argue that Most of decentralized finance uh continued to work reasonably well despite the collapse of centralized player FTX.

Decentralized players were, you know, were thriving at that moment because everyone was looking for alternatives and you know, especially decentralized alternatives since they, you know, a lot of people had trust issues now with centralized exchanges. So players like Uniswap, uh GMX, BERT Protocol, Zeta Markets, etc. were all doing really well because of this.

You can now also see that centralized players are feeling the heat and are feeling forced to show proof of reserves. So proof that they actually have all the assets that they claim they have on the exchange itself. But uh you know decentralized players are you know benefiting greatly from this and you can also see that in volume.

Uh have any of the strategies uh you have been using uh been impacted? Oh yeah, definitely. Uh FTX was one of the exchanges that I had implemented into my systems. And I really liked using FTX. It had a very clear UI. It had some very unique aspects like the non-USD collateral system. So you could use coins like Bitcoin, Ethereum, and others uh to trade certain acts uh assets with a certain float. So I if I recall correctly, if you had uh$100,000 worth of

Bitcoin, it was calculated as$95,000 that you could use as collateral to trade perruptuals. And that was something really nice. Uh especially for hedging, etc., it you know it was it was a big deal to me. Uh their funding rate system was also very interesting. Most exchanges pay out a funding rate every eight hours, FT exited every hour.

uh and well they just had a very simple and clean uh API and user interface. They were also one of the few exchanges that supports fixed API, which is important to market makers. Not something that I use personally, but a lot of my friends are missing that. You know, on FTX and other exchanges. That's a shame that uh all this happened. Uh so are there any other centralized players?

uh that come close to uh making up for the collapse of FTX. Uh can you do your strategies uh through Binance, for example? Yeah, I I mean most of my strategies that can run on other exchanges, I've personally integrated with four other exchanges and I've now integrated Coinbase 2, um, you know, to make up for uh the, you know, for what I'm missing at FTX. But you can definitely run uh these strategies on other exchanges too, but it's you know.

You're you're definitely missing one of your uh major key components in your systems. Uh especially I like to use FTX for directional trading because you had that hourly funding rate. Liquidity wasn't always too great on FTX, but it was a very good user experience. And I had very low fees there. I had a good connection with the team. So if I had ever any issues, I just contacted them directly, which is not something that I have with every exchange. I have it with Binance, I have it with Bybit.

But exchanges like Coinbase, they demand a lot more volume uh every month before you can get to a level like that. in the last month have other pl have many other players left the space, creating potentially more opportunity or less opportunity for you? Uh for me personally, uh there's a lot more opportunity at the moment since Alameda was one of you know the biggest players in this space, uh and also a bad player uh in a lot of ways, which is now removed there are a lot of trading firms.

you know, that are down or simply closed uh their doors. Uh there's are now rumors going about Amber Group, the CEO recently died, uh, that they aren't paying their workers and that the seniors are, you know, missing. So uh there's now definitely uh a gap uh for traders like me, which I'll definitely take advantage of.

Have you experimented with any new strategies since the last time we talked? Or are your um the strategies that you have been using, um, you're saying they're creating more opportunity now because of the the exit of some players? Um, I'm not really running any new strategies. I've simply, you know, first two weeks after at the FTX uh stuff happened, my focus was simply okay, what is currently going on with FTX? Uh is there any chance that I will be that I will be getting my money back?

quickly realized that wasn't the case, removed FTX from my systems. uh checked if there were you know any errors caused because of it uh to see later on if there's another exchange that is having issues uh the same way that ftx uh caused it will that you know interfere with my systems wasn't really the case. Um besides that, I've been busy, you know, developing some stuff uh and looking at some new arbitrage opportunities, but I haven't executed them. I think I'll be doing some live tests.

uh the eighth of December, but I still have to wait a little bit for getting some more data. Leverage has been a big topic uh in the crypto um uh crypto universe. How often do you use leverage in your strategies? Leverage to me, I use it if I don't have enough collateral of a specific exchange, but I have it somewhere else. So let's say I want to create a long position on Qcoin, but I only have 100k there, but I want to create a 200k position.

I don't mind using uh two X leverage to enter that position and then move uh 100k capital from let's say binance to quick kubecoin but for a lot of players they simply use leverage to you know get naked into a position uh to create more exposure. Besides that, a lot of people use it to limit their exposure to a specific centralized exchange.

So in the case of let's say FTX, I knew a lot of my friends only had 10% of their capital there, even though that it was their main exchange. And then they simply use 10x leverage to you know trade that. that specific asset that they wanted to do uh while having their you know counterparty risk limited. So there's been a lot of horrifically negative sentiment in the news today in recent days and weeks regarding crypto. Uh last week the European Central Bank said

that crypto is on the road to irrelevance because Bitcoin is rarely used for legal transactions. Its impending regulation is misunderstood as approval, and its promotion bears reputation risk for banks. Uh Bitcoin transactions are cumbersome, slow, expensive, and have never been used for any significant extent for legal world transactions.

Any thoughts on that statement? What why do you think they are s want to make that statement if it's go on the road to irrelevance? Uh I find it strange that they make that statement because I have a few friends that work at uh the European government uh and work at uh some financial companies there and What you're telling me is that uh for example, the central bank uh and some financial institutions uh from the government are giving out DeFi lessons uh how to work with decentralized finance.

Uh and that, you know, that they're looking for a lot of crypto native people at the moment. Uh I know that they're trying to improve their laws by twenty twenty three, uh which I think is going to be delayed be delayed to twenty twenty four. Um there was recently also a new law that they wanted to implement around stable coins uh that you know you're limited to

There was it was something related to like USD stable coins versus euro stable coins, but I can't really uh remember what it exactly was. And when it comes to Bitcoin. Bitcoin still gets used for for you know legit transactions. Um the thing is you simply if you see a transaction on the blockchain, you know, it's very hard to know if it's you know for Legal. use case or illegal use case unless you know one of these addresses that is, you know.

related to a specific crime. I personally use Bitcoin to to pay for stuff sometimes like gift cards, et cetera. Or if I have to pay, you know, for something online in general. uh because my credit card is acting up because it's you know from a it it's a strange country that I'm buying something from, even though it's just a an an online subscription or whatever. For me, cryptocurrency is overall easier to use.

Uh for Bitcoin itself, it's hard to really say because I don't really use Bitcoin that much anymore. I'm more of an Ethereum and Solana guy because it's faster and you know you can interact with smart contracts, et cetera. It the the statement doesn't really make sense, but it's also logical that you're gonna talk uh badly about a competitor like that.

Do you think that it's uh much better to talk about the specifics, the pros and cons of each type of cryptocurrency instead of just lumping it all into one basket? It's it's kind of difficult to to say because I I'm really pro crypto, but on the other hand, if I was in their shoes, um and I would have to address the public, the average Joe.

I would not advise the average year to get into crypto simply because there are so many scams and you know so much can go wrong and it's more for uh you know for tech native people uh to get into or for you know investors that are looking you know to really speculate on certain markets.

So if I were in their shoes, you know, maybe I would also make a statement like that, not really saying that it's, you know, fully irrelevant, but you know, give more, you know, warning signs, try to get people to stay away from it unless they really know what they're doing. Uh but saying that it's irrelevant, you know, is isn't really a a validity. a valid opinion if you're giving out DeFi lessons, et cetera, and are looking for crypto native people to work for you.

That means that it's definitely here to say. I don't know, it's the the banks make so many strange statements all the time. And I I didn't really follow it up over the last few weeks, uh, what they exactly said. So it's hard to give an opinion about it. Some people are saying that uh there's some talk on the regulatory front that exchanges would make users passed pass a test.

before they could enter DeFi so that they have basic understanding of the risks that are potential in DeFi. Would you support that kind of Uh regulation. depends on how far i it goes there. I think I don't really know how to how they want to implement it. Like do they want to implement it in the in the user interface of a website? Like let's say that I have to go to Uniswap that I have to fill in a quiz before I can actually use the protocol. I find that, you know. A little bit.

hard to implement since you know how are you gonna check if this person already did a test? Are you gonna link it to a certain wallet, but then you have to, you know, uh somewhere store that information? Are you gonna log it by IP address? You know, there are so many questions around it that I find pretty difficult.

Uh I would rather not see it happening, but I wouldn't be surprised if it would, because you already have it uh with some cases like uh future straightings and perpetual trading. If you go to Binance and you create an account there. uh before you can trade futures you have to fill in a quiz. So I wouldn't find it strange if certain you know protocols, if you use their user interface online like GMX, would actually ask you like, hey,

This is how our systems work. Do you are you aware of that? What the risks are, et cetera, et cetera. Uh I would find that kind of logical, but on the other hand, it's a decentralized protocol, so you cannot really, you know. There aren't really any laws when it comes to, you know, crypto itself. I think it's very hard to implement, uh, especially because are you going to do it in user interface? But if someone forks that interface and then just removes that quiz, how are you going to stop it?

It's kind of like saying we're gonna, you know, force you to do a quiz before you can use a cryptocurrency wallet. It's all open source, so someone can just fork it and remove it without an issue. Mm-hmm.

Yeah. Um so turning to sentiment, uh right now there's so much negative sentiment uh regarding crypto. uh and some prominent um people in the investment field uh are saying, you know, sell all your crypto. Uh, for example, uh James Kramer, uh, the head of uh CNBC is saying, sell all your crypto. And uh recently we had a front cover article on The Economist saying, um, you know, uh the downfall of crypto.

Do you ever look at contrarian indicators like this as possible early indicators of we're getting near the bottom? Well if you look at uh Jim Kramer, his tweets and you put them on the Bitcoin chart. uh then it always does the exact opposite of what he says uh is going to happen. So I'm very happy that he is bearish on uh cryptocurrencies and I hope he remains like that uh for a couple of years.

When it comes to the economist, uh the downfall of crypto, uh everything that has happened is actually just an indication that you know there is actually need for for crypto because cryptocurrency is all about decentralization, transparency. Uh and being open. The reason that we use centralized exchanges is just because the liquidity currently on these centralized exchanges is pretty bad.

Uh it's pretty slow and there are some privacy concerns when it comes to, you know, a wallet address. You can look into it, you can see what kind of positions it has, open orders, et cetera, on a decentralized exchange. However, on a centralized exchange, you don't really have that case. However, you do lack all, you know, the the aspect of uh of you know it it's a centralized party. You don't really know where your money uh gets placed.

This is, you know, just a sign that we actually need to work more on decentralized exchanges and you know bring those really forward. And you know, I think it's it it only shows that we really need uh crypto more than ever. Uh Saying that it's a downfall of crypto, I think is a very, you know, bad sentence to say. I would say it's a downfall of SBF uh more than anything.

Given the blow ups that we've seen with FTX, Celsius, Voyager, and others, uh, how do we improve the crypto ecosystem to increase stability and trust in the centralized andor decentralized exchanges? Well, when it comes to centralized exchanges, I think uh stuff like proof of reserves and just, you know, having a good auditor, uh, maybe having multiple auditing firms that are doing regular checkups.

uh would be something nice to see. FTX apparently did do audits, um, but only once a year. Uh and there were, you know, higher ups that could tamper uh You know, apparently SBF had some kind of uh backdoor into the accounting system um that the CTO Gary um made for him. So, you know.

That is is is fairly hard to spot, but I think if we have m uh more regular audits from multiple accounting firms, that would be something very nice. Having stuff like proof of reserves would be very important. And when it comes to players like Celsius and VJ, The suspicious thing about these players is that you don't really know where the yield is coming from. They were promising yields of ten to twenty percent on stable coins, which is

utterly insane and you know people didn't know where it was coming from, apparently from big players like Triaris Capital. But I think if you provide some kind of yield on a centralized exchange, I think it's very important that you know who your counterparties are. uh with players, you know, like Binance, et cetera. If you want to lend out your money, you know who the counterparty is. It's another trader that has collateral on Binance.

uh and will get liquidated if he's not able to pay that back. However, with players like Celsius and Voyager, you simply don't know who that is. And it's very hard to calculate your risk if you don't know that. Yeah, so there's been some positive movement toward uh um releasing proof of reserves, but the critics argue that, well, what about the proof of liabilities? Because y unless you know what the liabilities are, that's um showing your proof of reserves is is only half the picture.

Yeah, yeah, I I fully agree with that. But when I when we're talking about proof of reserves, I just mean like the the assets, you know. the assets that they they have and the the liabilities of course as as you you know what the LT uses, etc. I personally don't know how they're gonna approach that problem. I personally haven't been too deep into it yet on how they could actually like build a solid system around that. So I cannot really go further into that.

What are your thoughts about whether we need a decentralized algorithmic stablecoin, such as an alternative option to the centralized government influenced stable coins like USDC and USDT? Uh supposedly Ave is designing uh a stable coin called Go. Uh that's algorithmic. What are your thoughts on all of that?

Um, I try to avoid algorithmic stable coins as much as possible. I mean, we've had some tries in the past. It's true that Ave and Curve are both now building uh some kind of stablecoin, but I uh they released some kind of light paper, but I haven't really, you know, dig too deeply into it. Um, but I personally don't really have an issue with uh centralized stable coins as we have it right now. I think coins like BUSD, USDC from Circle, USDT from Tether, you know, they're working fine as is.

uh you already have some kind of uh algorithmic stable coins that are working like DAI uh has been a very strong consistent. uh contestant you also have uxd which is a stable coin on Solana that I find very interesting. So what they're doing is create a stable coin but it's backed by delta neutral positions.

So they would go long Ethereum somewhere and short it somewhere else, um, do a potentially cross-funding arbitrage or something like that. And those positions would then be the collateral for uh those stable coins. But when it comes to the curve stable coin and the Ivy stable coin, I haven't read the documents yet. In in Europe, uh, do they have certain disclosure requirements regarding the use of leverage? You know, when and how much and to what degree? Um

It depends I'm limited to my usage in Luxembourg, but how it is with me is in in my uh offering document, I stated how I exactly use leverage. I go into the types of strategies that I use. how I use them, the the risks that are involved. Um I personally just put the risks uh of everything to the max um because I didn't want to, you know.

Fiddle around with how riskful is it really? I just put the risk on on the on the highest. I explained how I use leverage. And when it comes to uh you know, providing proof that I actually have these assets, I I have to go to my CPA every quarter to do a nav calculation and they go over every single order, every single transfer, every single payment I have done.

uh you know individually uh to actually do these calculations and then they um you know make up the final document that I can send to you know my investors saying if you know if their share prices are up or not. Uh I don't really know how it works in you know in in places like Cayman, et cetera. So it's hard to form an opinion on that. Uh my system is at least very transparent and you know that's that's a good thing, especially now uh since a lot of players didn't care about that two months ago.

But yeah, uh I I personally don't know uh how how it would be in other jurisdictions. I see great. Uh is there anything else you'd like to uh share with the listeners? If you have any other questions about the FTX stuff, about me, or just want to have a chat, you can contact me on Twitter. My handle is at Gasperlo. which is K-A-S-P-E-R-L-O-O-C-K, or you can contact me via the Chatworth Traders community. Fantastic. Great having you on for a uh part two uh catch up, Casper. Thank you.

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