313 · Doug Colkitt - When Crypto Markets Break: Liquidations, Leverage, and Markets Under Stress

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Trading in the financial markets involves a risk of loss. Podcast episodes and other content produced by Chatwith Traders are for informational or educational purposes only and do not constitute trading or investment recommendations or advice. Hey there. This is Tessa, your co-host, and you're tuning into Chat with Traders, episode 313. And wow, we're already at the end of another year. What a blessing though to be able to say that.

I hope 2025 has either been great or full of great lessons and growth for you. Well let's get straight to our guests. Today, my co-host Ian's conversation is with Doug Colkit, a quantitative trader who works deep inside crypto and DeFi market structure. This is actually a more technical conversation than most, but it's technical for a reason. We spend time on how crypto markets actually behave when leverage builds up, liquidity vanishes.

and liquidation cascades begin. The mechanics that quietly determine who survives volatility and who doesn't. Doug has traded and built systems across both traditional and crypto markets. He worked in high frequency trading at Citadel during the two thousand eight financial crisis, later traded futures and volatility products, ran a large market making operation in international equities.

and now focuses on DeFi, perpetual futures, and exchange design. We break down what really happened during the October crypto liquidation event. why traders who believed they were hedged still got wiped out, and how leverage, funding rates, and forced unwinds interact across centralized and decentralized venues. Doug also shares what he's building now in the perp dex space, including ideas around insurance mechanisms.

clearing and market design, and what recent market failures revealed about where crypto infrastructure still falls short. You don't need to trade crypto or understand every technical detail to get value from this episode. The goal is to give you a clearer mental model of how modern markets break. So when volatility shows up, you're reacting with insight instead of surprise.

We really hope you find value in this episode and thank you for listening. Ladies and gentlemen, we're so pleased to introduce Doug Colkett. Well, tell us a little bit about yourself, Doug. I'd like to, you know, first welcome you to Chat With Traders and um find out who you are and uh what got you interested in the financial market.

Yeah, I uh spent most of my career as a quant in uh HFT and uh in the traditional market. So started started out at Citadel in uh in two thousand eight, kinda right when the market

were going crazy. So it was kind of a pretty interesting time to start in finance. Um around that time like everything was kind of collapsing. Besides high frequency trading, um, especially at Cidal the the group was doing well, was it was pretty new then. So I decided to kind of get get into that vertical'cause it seemed like the one thing that was uh pretty stable.

in two thousand eight did that for a few years, um, mainly focused on the Asia Pacific markets there, um, the equity markets. That was those an interesting time, especially like seeing the space grow and and kind of develop um Then uh and then then I left uh left Citadel and decided I wanted to kind of see see stuff more from uh

kind of the ground up. So like at at a big firm like that, you're always kinda one piece in in a larger puzzle, which is which is great because the uh the whole machine runs really great. So you can kind of see what what the end state looks like, but kinda wanted to build something up uh myself and and see all kind all the moving pieces. Um and that was uh a lot more challenging than than you would think it is. First

Kind of what attracted you uh to Citadel and the financial markets in general? I mean, did you study this in school or did you have friends in the industry? Yeah, I was uh I was a computer I'm a computer science uh student by background. So I was always kind of more interested in the in the software side of things. Um and so this was like kind of as

As uh as I was like first looking into the industry, uh like being in school, this was like, you know, two thousand six, two thousand seven. So uh obviously big time in the uh the financial markets, a lot of interesting stuff going on and like quants were kind of getting big. I I guess quants were big in the you know, had

But we but we're getting like kind of really big, especially like derivatives and so so actually technically my my first job on Wall Street uh was for Citigroup. And so I got to and that was on the CDO desk. Um so it's just there very briefly. So um I uh you know, you get to see a lot of interesting things there. So I saw saw kind of the the whole mortgage securitization stuff happen up close and then and then kind of saw the beginning of of stuff unwinding there. So uh

But yeah, I guess from from my perspective I was always interested from like the algorithmic want uh the algorithmic want side. Um and so uh being a software person it w it was kind of interesting to do like uh you know kind of take software and apply it apply it to uh to market.

Now, did you trade yourself during that time uh before your job or while you had that job, or were you allowed to trade? It was pretty pretty restricted. So very like you could trade some stuff, but uh, you know, there's always sometimes you'd be you'd get in a to a position and then it could put on the restricted list and then you'd have to, you know, get

get a thirty day approval to get out of a position. So never really, uh never really put on too much size like trading, trading for myself, at least when when I had that job. What made you decide to move on from Citadel? Kind of like what was the catalyst to uh

Want you to. Go on your own. Yeah, I I think uh I think I I learned a lot. Like I said, it was you when you're there you're kind of uh it's you know, it's a very efficient machine, but you're just one kind of piece in in a larger machine. So you don't really even appreciate stuff like, okay, like just

You gotta get the market data, right? Like you gotta dam data has to be accurate and you have a whole team of people who do stuff like clean it and source it and obviously make sure for everyone to trading, then it gets gets to you really fast. Um you kind of take that for granted. So I wanted to uh I wanted to build out kind of something from scratch, from the some the ground up, which was uh kind of

Easier, uh easier said than done. So I learned a lot kind of doing it uh from that perspective. So after Citadel, I just started trading individually, um, built out a high frequency system mostly focused on the CME and trading index futures and bond futures. Uh what year uh was that when you Uh I left uh so this would be after I had uh you know non comp pretty long non competes in the industry are pretty standard. So I started trading uh for myself in early early twenty twelve.

Yeah. And d what tell us more about that. Well you you were trading So those that was a pretty interesting time. So I'd say uh, you know, I'd I'd also kinda So mostly focused, like I said, mostly focused on index futures at the CME. Um and kind of a bit of hubris there because you feel like

Those are the one, if not the most competitive market, one of the most competitive markets, very liquid, obviously, um, very active, very competitive. Every every major trading firm uh you know is trading ES or you know, one

Wants to trade a yes if if they don't. Uh nobody's nobody's overlooking that one. So I think uh right, like what you learn is like a as a smaller Uh, you know, a smaller operation with a lot of big fish is like you try to find uh niches, you try to find things that are overlooked and uh Around that time, I would say kind of like the bread and butter where uh you know could could make money was identifying uh

I think things a little bit more complex on uh you know what is like an HFT world would be called like alpha, which just meaning like signals and there's kind of this this inherent trade-off in HFT between um

You wanna either be very fast and when you're very fast, you can't do that much uh you can't you can't do uh you can't do that much computation, right? Computers only only go so fast. So if you wanna be the fastest person, your signals have to be very simple. Now they're some nuance around there and you can pre-compute things and like all but like in general there's this trade off between very simple and fast and kind of more complex signals, but you're slower and so uh

Somebody's faster than you, they get all the easy opportunities. So then you're you're kind of on the edge and and in some sense you get uh, you know, kind of adverse selection. uh from that end. So I I'd say uh, you know, I kind of biased more towards the latter half part of that spectrum, a little bit more complex. And and the interesting thing there is as as you get more complex, you also kind of get uh

Different players have different ways that they approach that complexity. So if you can find kind of a niche in like something, you know, certain signals that People maybe they're doing a similar signal, but like nobody's quite kind of constructing it the way you are. Like, and then hopefully, you know, you're when you're when you're trading, you're kind of trading when things are overlooked because if you're trading exactly the same time.

As Citadel, you're not gonna be as as fast as them. Um and uh most of the time you're probably not gonna be as smart as them. So you have to figure out a few things you can be smarter than them about and and really lean lean on those. Um uh I are you familiar with the um famous book by Michael Lewis called uh Flash Boys, uh which painted uh high frequency trading.

as uh you know front-running institutions in microseconds and then uh the institutions would get these horrible fills. Uh what were you so how accurate was this uh book do you feel from your vantage point? From from my vantage point, I I feel like the book, uh, you know, I I'm not gonna say like high frequency trading is all uh all angels or all beneficial or even right, like it's a lot of people just making money. Um, but I I think the book definitely exaggerated. Uh a number.

a number of things. I think uh, you know, there are pretty pretty strong uh at least in the US markets, pretty strong protections against like outright front running. Some of the book stuff the book like talked about was um

How you know you would see a trade at, you know, say say one equity. So equity markets, I I also to caveat like I traded futures markets. The interesting thing about futures markets compared to equity markets. Um From like a microstructure standpoint is all the futures

trade at one venue. So like when you trade at ES, they all trade at the CME. Um when you trade like Microso when Microsoft trades, you know, M MSF T stock, it trades at Nasdaq, it trades at NISE, it trades at, you know, a bunch of other

venues. So I I think one thing the book identified that's probably like the most accurate is like, okay, if you have a big trade come in and someone hits like 90 and they can see that there, you can kind of Do a certain type of front running where okay, someone goes to NASDAQ, uh, you know, see the trade at NIZE and they know, okay, there's probably more trade coming to Nasdaq and someone has a faster connection.

can kind of hit hit liquidity there. But that that definitely doesn't apply to the guy sitting at home trading on his Robin Hood account. Um, you know, those are kind of institutions versus institutions. So I I do feel like the book was uh a little bit uh a little bit exaggerated in terms of some of the some of the stuff. I see. So um so do HFTs actually help the smaller trader because they're competing with each other to cut in front of each other to give the smaller trader a better fill?

That's a great question. I guess I'd say the answer is it really depends. Um, I think Like the base case, they do right, like they do compete, right? Like so, you know, when markets are based on price time priority. So uh, you know, if you're a market maker and I'm a market maker and uh you know I want to get fills.

you know, I better quote better quote a better price, I better put a better price than uh what you're providing, right? So like there's there should be right, like that is the base case. There should be competition. The more uh kind of you know market makers are in there.

you know, they they should compete on price. Does that happen all the time? completely because there are a lot of nuances here. First thing is like tick size, right? Like there are uh you can only quote so tight in in a lot of markets and a lot of markets are just that tight all the time. So uh you know if it's like that, I can't improve on your price. All I can do is

Try to be you go to the second part of that price, time priority. I can just be faster than you. So, you know, a lot of times. HFTs and this is why I like a big reason latency is important is we both want to be the first people at a new price because you know it's just a lot better to be first. Um your fills are your fills are better as as a market maker. Um you have less toxicity.

So does that really add anything? Not not really. It doesn't really hurt people, but like it's just kind of a kind of we're competing for the same rent and if, you know, one of us disappeared tomorrow, it's not like consumers would be a lot worse off. So That and then like, you know, HFTs do, you know, they're not all market makers. A lot of HFT is actually taking liquidity, right? I'm trying to hit quotes, um

you know, when the price moved. And to to be honest, right? When I was an HFT, you know, as as an individual, uh, at least that phase of my career, most of it most of what I was doing would be liquidity taking rather than market making. And you're you're basically trying to see liquidity.

And and be the, you know, price is stale or you think a price is about to move, be the be the last person to kind of hit a price before before it goes up. Um, you know, that's I don't know how much that uh that might actually be harmful for consumers, right?'Cause it makes more Makes the job of market makers tougher. Market makers widen out their spreads. Everything's more expensive. So, you know, like a lot of things that it depends. Uh it depends the answer. More complex than than the team.

Right, right. So uh a decade later, after the book, uh has HFTs uh evolved uh to the point are they a little more benign now or Or uh Yeah, I'd say it's definitely the biggest thing that's happened since that book is things have moved uh off lit exchanges to uh, you know, internalizers, dark pools. I mean, that was definitely happening.

during the book and actually spent some time at Citadel doing doing that on the uh kind of very early when Citadel was buying order flow and and internalizing that. Even today, I think it's more to a certain ext uh like even more extensive is that most most stock trades don't even happen on a stock exchange, right? They just get routed to an internalizer or a dark pool and somebody fills it, right? Because most

The average what we'll call like segmenting order flow, like that's very profitable. For market makers, if I know who's sending me the order flow, I can provide uh you know, I can provide a lot better price to the average Robin Hood trader than I can provide to uh you know, somebody who's very sharp flow or, you know, very sophisticated. So Uh, as you can go up if you go upstream and you can see where the order flow is coming from, you can kind of be more aggressive on your pricing. And so

kinda you don't want I think the equilibrium is like most order flow doesn't hit the stock market because it's the stock market is anonymized uh by by its nature. So I I'd say it's almost like It's become less of an HFT market. It's just more it's much more that's much more of a deal market, right? Like you're uh you're a big trader, you gotta go to the brokers, you gotta make deals. Um, so it's kind of more institutionalized, uh

from that perspective. It's definitely definitely harder for somebody who's coming in as an individual or like a small team to make it. Definitely a lot of consolidation into a few big firms. So uh let's transition. Tell us a little bit about uh trading Vic's futures.

Yeah, yeah. So uh so like I said, that was very compet yes, it was a very competitive market. Um, and at some point it got too competitive for kind of just uh a single guy to make money there. Um and so this was right around like the when the complex ETFs were getting kind of getting off. Well, I guess they've been there for a while, but like VXX, XIV, those are like really popular, uh, 2015, 2016, XIV, and there there were kind of a lot of inefficiencies and Vic.

VX futures, there are a lot of inefficiencies in that whole complex. So kind of transition more towards what I'd call like a medium frequency trader in those markets. Um So that was pretty interesting. I think there was just a massive amount of retail, uh retail interest in those markets for a while. It was like everyone had like some theory about how to how to trade VIC.

And I think a lot of people got bit by it. But yeah, I mean it was it was really interesting, especially around like Brexit and stuff. And then uh and then when some of the V ETFs blew up and so a lot. Yeah, those are those are definitely uh definitely I think a lot of people a lot of people got bit one way or another. Um luckily luckily for you know, never never got really hit hard and it was it was pretty good trade.

For for a while. Um, you know, there were a lot of very obvious inefficiencies. A lot of those ETFs were just massive amounts to the market. Um, you know, I think. it would be something like eighty, ninety percent of the open interest in the uh in the VX futures and then they had to mechanically rebalance at certain times of the day, right? Like so Drox IV, you have to stay one X short if you're uh UVXY was like two X.

So it had to mechanics so you'd have these huge trades and they'd happen at the same time every single day. Um and everyone would kind of know them ahead of time. So it's kind of very easy to

for for a certain period very easy to kind of see, okay, and this is, you know, the ex futures are gonna move up or down at at a certain point. So uh Yeah. It's not gonna be like that forever. So my advice to any trader who finds himself in like a market like that is uh get uh definitely size up and and kind of get take advantage of it while it's there. Cause you don't know how long like these alphas are gonna last.

So uh I understand that you got into trading Turkish equities. Uh what attracted you to that market and what were the unique challenges there? Yeah, so I I wanted to go back. So did did the kind of the VIX thing for medium frequency trading for for a while. Um I wanted to go back to something more classical, like high frequency kind of kind of myth. miss the excitement of uh kind of trading, microsecond level trading, um also kind of going back like

It was a al always been like a computer science software guy and uh you know, high frequency trading has a lot of just interesting things trying to push the edge of performance. So wanted to go back into that world. Um, at the time, like I'm still now, right? Like the major US markets were very, very competitive. So hard for uh someone

an individual or small team to to compete. So I was I was looking for kind of markets that were large enough that would still make sense to trade. If the market's very small, you might be the best person, but maybe you make ten dollars a day. So it's not not worth it. Uh, you know, or at least without like I'm not high frequency profile. Um, if market's very large, it's gonna be competitive and the biggest players are gonna be there. So it's kind of just looking, you know, kind of thought.

So I actually at the time is looking in both at like crypto was kind of getting larger um and looking at different emerging markets. Um in retrospect, probably should have done crypto because it would have kept getting larger, but uh that that would be later. Um

Though uh yeah, I mean I was looking at a bunch of different emerging markets. Um, Turkey had made a lot of sense because it was uh just had recently transitioned to like a fully electronic stack. So okay, that's something you can do as as an electronic trader. Um, and kind of met some local partners there who kind of knew had had kind of knew the layout, um, had had connections with local brokers, kind of all that other stuff, can handle the business regulatory side of it. So

Yeah, we we started a a market making operation. So uh that was also somewhat of a different move like like I said before uh I was mostly uh uh on the taker side of liquidity back when I was trading the CME um so this was a as a market maker um we were actually pretty large per percent of the market. Um at at one point we were, if not the largest, close to the largest uh market maker in in uh in Turkish equities. Um

So yeah, we we did that did that for a while. Uh the funny part is is like as an HFT trader, you really know nothing about the stock. that you're trading. So I there are still there are still pickers that I remember vividly because for either you know up or down days. But uh to be honest, I'm pr I don't even know like what the companies did. Um

So when you're an HF teacher, you just look at like order book and charts and flows and and kind of all the other stuff. And uh so you know whether you're trading Turkish equities or uh cryptocurrencies or ES futures or bonds, it's all kind of this it's all kind of the same thing, which which is the nice part about like HFT. It's it's all kind of the the same thing regardless of uh what you're trading. So

So tell us about what attracted you to get into uh cryptocurrencies. I mean, I hear the skeptics say that uh they have no value. Um, so what attracted you to crypto? Yeah, that's uh good question. Uh well, whether they have value or not, people were trading them quite a bit. So uh, you know, as a as a trader, at least like as a as a

you know, not a short term trader. You really don't you really don't care that much about whether something is gonna hold its value. You just care, uh, is does it have activity? Does it have liquidity? Are there counterparties? Can you make money off of it? So This was around uh this was around twenty twenty. Uh I think everybody remember kind of that COVID year when everyone was locked up inside. Uh so couldn't go out, couldn't do anything. So

I was looking for uh kind of a hobby originally, um decided to get into the the DeFi side of things. So I kinda skipped over all the all the centralized exchanges, uh started Started trading stuff um on the on-chain uh exchanges, the DEX and everything, the decentralized exchanges there. Um

kind of did uh you know what what people call like MEV type trading where it should which is basically like a high frequency equivalent for uh decentralized uh decentralized trading started that just as a hobby. Um Just wanted to learn more about the technology and then uh actually though uh

Kind kind of the kind of similar theme here is is it was an early market, it was very inefficient and uh it was easy easy to uh be profitable. Um, so it kind of made sense and said I should just kind of devote devote myself full time to uh to trading trading this market. Um so yeah I

Kind of similar there, especially early on. Uh I wasn't as deep in the in the kind of community. So I was just trading a bunch of coins and to be honest, still don't know what some of those coins did, but uh, you know, you could they go up, they go down, you can trade them, you can make money. Uh-huh. So g give us an example, like kind of kind of a dive into uh particular uh coins or types of trades, how long you held on to them. What did you look for when you entered a a trade?

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Yeah, that's a that's a great question. Um ba I mean, basically, so I was I then this is really interesting. A lot of trades you technically hold for zero seconds, um, in the in the sense that uh So even higher than high frequency trading. But uh, you know, what you're looking for are uh What you're looking for are basically mispricings, but say one qu a coin trades on different uh different venues. Um

And and the interesting thing is uh all the venues are on the same or you know, a lot of times they'll be on the same blockchain. So you can you can do it different venues across different chains, but you have one decentralized exchange on the same blockchain as another decentralized exchange.

Technically you can uh and and they're out the prices are out of whack, technically you can arbitrage that um in in in in a single in a single transaction. Um So you don't actually technically need and and this is even different than HFT because you can do something similar where I buy Microsoft at Nighty and I sell at NASDAQ because it's a missed price, but you still technically have to hold it and you have risk and the price could move.

Or you can sell it. The the real interesting s thing about this is you can do it in a single transaction. Um And you can arbitrage you can, you know, you can arbitrage between prices and and technically truly take truly take no risk. Um, some maybe transaction costs, but like those are small. And if, you know, the price happens to go back online before you get there, someone gets there before you.

You just don't execute it. And the really interesting thing is you actually don't, you know, for for a lot of these trades, you actually don't even need the capital to do'em because uh In in blockchain, there's this concept of flash loans. So there are uh if you do something in a single transaction, you'll borrow money. Um uh oftentimes for you know no interest or very low interest, you can borrow capital from some uh

you know, on chain protocol, you can uh take that capital, um and you can do, you know, some operation with it. And y as long as you return the capital by the end of the transaction, um Like there's, you know, that's that's the security. So you don't need to post collateral or anything like that. So it it was kind of uh, you know, it was kind of a very interesting world, like a whole whole bunch of new things, which is which is kind of why I found it so so fascinating.

So you're you're noticing, for example, XYZ token on one decentralized exchange is higher priced than that same token on a different decentralized exchange. And so what you manually go through and you're able to get this flash loan and somehow combine all this in one transition. Yeah, exactly. But you're on different Texas though. Right.

on different dexists but from the same from the within the same transaction you're able to you know because these are all just smart contracts so you're able to actually interact with multiple smart Mm well, first of all, I should say you definitely not doing it manual. Um the markets were that inefficient, but uh yeah, so still have a bot a bot would do it. But um

But yeah, I exactly. So you would you would write a bot a a program and you would usually run your own smart contract on on the chain and that you know you'd send it uh you'd scan constantly for these imbalances and and try to be the first person to to close them and you could look at um, you know, one decks or another deck.

get a flash loan from somewhere else if you needed to. Um and so if you know if there's a higher you buy you buy on venue a you sell on venue b. Um you sometimes also it'd be like A triangle trade or or you know longer, right? So it'd be it might be uh, you know, usually the liquidity pools are paired with uh the two tokens. So, you know, you might go from

Trade token A to token B and then token B to token C and then token C back to token A. And you you know, you hope that you have more token A than you you started with at at the beginning. So uh

You know, it's it's the same kind of concept as of arbitrage and financial markets, just kinda done done a different way. I I see. So was this operating uh while you were asleep? I mean you had these spots, right? Yeah, so Nino that that's the other that's the other challenging part of the crypto market is it's it's twenty four seven. So uh, you know, when you're in you're in regular, you know, traditional markets, at least like you said, you can sleep when the markets open, they close. Um

When I was trading Turkey, it that was like usually two AM to ten AM. So uh I did get used to, you know, needing alerts and you know, we sometimes you wake up in the middle of the night'cause the the PL is is bad and you get kinda the alert on your phone. But I did get used to automating stuff uh at least

to do stuff while I was asleep. But man, when it's when it's twenty four seven, you're uh it's never it's never a break, right? Like it's there's no Saturday afternoon to chill out. It's always those PL is running. So I think uh I think that's kind of the maybe one uh one negative of of the crypto space for people don't appreciate till they're till they're in it. Mm-hmm. And did you have to make frequent adjustments to your bots uh over time?

Oh no, that I mean that's a great question. Yeah, I th it was you know, it was when I started in and this was like summer summer twenty twenty. This was like right when like D five was like kind of taking off. So it was like very new. I think every everyone was trying to figure out what was going on. Um And I that was that was very different. Um and then obviously things

Things got rapidly more competitive. Uh, more people came in. Um, you would make adjustment. Yeah, you'd have to make adjustments to your bots, you'd have to look at different and and even like the, you know, the different DECs that were active. were changing over time. Um, you know, like this was ever at at at that point anyone could launch like a a DEX and, you know, attach some some food token to it and

You get a bunch of liquidity there, uh, and and kind of do do all kinds of crazy stuff. So yeah, you'd constantly kind of have to have to keep up with the market. The n the nice thing about like

A good and bad thing about crypto is it it moves very fast. It's very easy to set up like new exchanges, right? Like setting up a new exchange in in traditional world is very difficult. Like there are regulators, there are you know people have to trust you uh and and defi right setting up a new exchange is just hit a button and and you got a new one so uh yeah you're constantly you're constantly like have to kind of keep keep on top of things

Mm-hmm. Uh, so I imagine you've traded on uh a range of DEXs. Uh, what is your selection criteria for trusting a particular deck? Yeah, that's a that's a good question. Um it depends what you're doing on them. Um if you if you're swapping, um the nice part if you're swapping is like you really don't have to deposit. any money on a decentralized exchange, you just, you know, you send your token in, you get your token out. Um you there may be uh

Maybe right. Like you can't I I guess there could be like malicious things in terms of like if it was really malicious, it could, you know, send you a fake swap or, you know, take your m take one side of the swap and and not send it out. But that'd be pretty pretty rare like so like no North Korean Dexis um would be would be criteria one. Um if if you're actually putting money into it, right? You're you're kinda trusting.

trusting them over the longer term. So like if you're providing liquidity, uh right,'cause that's the other side of the equation is there are swappers and then there are people who actually, you know, deposit liquidity in in one form or another. And, you know, if these are automated market makers, uh usually you

you know, you you know, you're in a pool and the kind of the whole pool provides liquidity. Um that's yeah, that's that's a harder criteria. And a lot of times like people are providing liquidity uh in DeFi it's very common like call like liquidity mining, which means right, like there are usually the tokens of the decks uh are are going. So so it'd almost be like if you were quoting at the CME and the CME was giving you stock in the CME for every day you were active. Uh

there. So, you know, a big criteria there is like how much how much do I believe uh in in the the decks itself? Is it gonna be around like is this token gonna be worth something? Um is it is it worth being there? Um So yeah, I think those those are like the major criteria. Now now things have like moved on to like, well, I I guess perp dexists are are bigger. Um

Those are those have right, like now you're dealing with leverage and those have kind of their whole uh that's that's a whole whole other can of worms in terms of uh like what you're looking for for there. Mm-hmm. I remember back in that time when I first got into it, um, the crazily high yields that uh I could get as a liquidity provider on Uniswap and some of the other ones.

Um, did were you ever tempted to be a liquidity provider, get those yields, or take positions short term or long term in any crypto? Yeah, yeah. No defin definitely I mean definitely took positions uh Well, but but well I I all all three, yes. So like the thing about crypto is you get into one thing and then you get you get into everything else. Um so uh yeah, definitely like for the first point being a liquidity provider, I think

I a there's definitely an art to it um because like like you said you get the yields but like what a lot of people don't realize is on the other side um you kind of have this position that isn't fixed, right? So especially like if it's a pool with like Because usually the pools pair two tokens. So like let's say they pair like USD and Ethereum and like the the values of those fluctuate. So as a liquidity provider, your positions are fluctuating with those, and they're usually fluctuating.

in the wrong direction.'Cause if if ETH goes down, right, like what are people gonna do? They're gonna sell uh ETH into the pool and USD is gonna be going out of the pool. So you're as a liquidity provider, you're getting more ETH as it's going down and vice versa, when ETH is going up, you're losing, right? You're getting

uh you're you're selling me. So um I think a lot of times like those yields were uh some somewhat misleading in the sense that like people oh like I got you know whatever uh three hundred percent APR but like I'm not seeing the other side of this which is you know meeting a lot of volatility um on the wrong side. But I think like for a while, if you were intelligent about

kind of actually measuring those things. I think very like not a ton of people were at the time. Or even not like then with the token emissions, sometimes things were just, you know, during during like those DeFi Silver game days, like the tokens were

So some of the tokens had a lot of value that you're like, oh why does this thing have any value? But you know, you know, it was it powered the ecosystem. Um and then to your point of short term or long term positions, yeah, definitely, definitely, you know, will

fun around in in crypto, I think from a fundamental perspective, especially when you're in it, you kind of know the teams. And like I I feel like the biggest thing you bet on in crypto is like the like if you're taking a longer term position, if you're not doing like

arbitrage or liquidity providing or like short term short term trading, uh, you know, the biggest thing is just like the team behind it. Uh, you know, I guess some is like the category, uh, you know, what what you think is gonna be big or or not big, but

Usually if like teams execute well, um the tokens tend to be good bets. And so when you're in crypto buttons, you kind of get familiar with there there's not a really a ton of people in the industry. So you know, okay, like these guys running this are like pretty legit. So Hogan's probably good bet. Uh you mentioned the word perpetual. Uh what are perpe uh what are perpetuals or perps and uh what do they offer uh the typical trader?

Perps are a crypto specific uh innovation. Um and it goes back to uh I I guess technically somebody came up with the idea like way back in the nineties or eighties, but they never really uh they never really got like

Um that big and I think there was like a number of implementation problems. But but the the idea with perp uh perpetual is it's uh it's it's a future that never expires. So uh you know typically You know, we all will know and love futures and and trading futures and those have obviously f especially like financial futures have been a big part of uh of the f you know, the traditional financial markets is where we we all trade E S or NQ or the, you know, the index futures instead of uh

instead of the under we still trade the underlying stocks, but right it's a lot easier to trade the futures, especially if you wanna do, you know, short term swing trades or leverage or all that stuff. Um so a perpetual is basically a future that never expires. So I think like Um well originally it was BitMax, I think it was introduced in 2016. So uh it was basically BitMax wanted to run an exchange, uh they wanted to run a crypto exchange.

They didn't actually want to deal with dollars going in or out, um, right?'Cause like and then you have to have banking relationships and and all that stuff. And that's, you know, fraught with all kinds of stuff. Um

So there was just a Bitcoin only exchange. Um you can only deposit Bitcoin, but you could take levered bets on Bitcoin. Uh right. So that was like kind of their hook is like, okay, this is the first time you could really I mean you could kind of lever up at some of the other, but it was like messy. So you take levered bets on Bitcoin and their their big thing was uh you put Bitcoin as margin and you know you could go lever long, lever short. Um and this was it was huge. Um

And so perpetual is basically, yeah, it was basically, and that was that was what they offered. It was just a uh an instrument where it never expires. So it's like a future, it trades. trades linear so you know bitcoin goes up bitcoin goes down there's a mark price to it um it aims to you know just give linear exposure so if you're you're 50x levered on a perpetual you have you know fifth and bitcoin goes up one percent, you know, you should be up fifty percent. Like that's that's the goal. Um

Simil similar to future. Um the the difference being right futures have fixed experies, um perpetuals don't because dealing with experies are hard. People have to roll their positions. How do you you once you do settlement, okay, you have to like deliver stuff.

Mark stuff. So a purpose works by every hour, eight hours, twenty four hours. It depends like the specific exchange and their rules, but every, you know, we'll call it every hour to every day about there's a there's a funding rate mechanism and that basically works where uh

The exchange will look at the price of the perp or, you know, maybe I'll use some volume, you know, time weighted thing and look at the price of the underlying. It will see the difference. And if the perp is more expensive than the underlying, then uh

Longs have to pay shorts. So right, like like any any derivative, there's equal amount of longs and shorts. So uh it's perfectly balanced. So, you know, a million dollars long is open interest, there's a million dollars long, a million dollars short.

Um, it looks at the difference and it determines a funding rate and it says, uh, you know, if the if the if the difference between the two is is positive, we want to push the price down, right?'Cause like the goal is the perp should match, you know, be as close to the spot price as possible.

Uh we want to push the price down. So therefore uh longs are going to pay shorts. Um, right. So it's more costly to be a long the more dislocated is going up and and kind of more attractive is to be a short and and vice versa, if the price of the perp is below.

the price of the spot, then uh shorts shorts pay long, right?'Cause like the mark you want to incentivize people to take the direction that pushes it back. And this has actually been like very it's a kind of simple system has been very, very successful. Um You know, you put these funding things in and and perps do tend to track like track their underlying like pr pretty closely uh most of the time.

you know, within with as for the majors like Bitcoin, um ETH, you know, within a few basis points. So um, you know, there's been a very successful system and it's kind of allows a very simple way for traders to get leverage. Um on a very wide variety of coins and and simple implementing. You don't have to worry about like X Freeze and stuff. So I I arguably uh you know the biggest innovation that's actually come out of uh crypto in general. Oh wow.

Well interesting. So uh let's talk about the October tenth. 2025 crypto massacre, uh, where it was the largest liquidation event ever in crypto history with supposedly close to twenty billion dollars liquidated in a single day. Um, what on earth caused this? I mean, how could this happen? Yeah that's uh yeah that's I that's uh I I think a lot of people nobody really knows for sure to to to be honest. Um there's been a lot of uh

you know, speculating about what's, you know, what the underlying thing is, what broke. Ca a lot of conspiracy theories. But uh what we do know is is like you said, it was a massive amount of liquidations, uh, largest ever. I mean, to be fair, crypto is a lot more expensive.

You know, a lot higher market cap than it was four years ago. So there, you know, there were large liquidations then, but on a smaller market cap. Uh, but but Pretty large people weren't expecting it. It wasn't on a ton of news, it was on some like rare earth tariff type thing. Um, but the market just kind of broke down, and I think I think what happened is a lot of leverage. had built up in the system from from perps. Um so we're kind of going through a period where there's a lot of new um

Dexas specifically focused on perps. Um, so like perp Dexis. So for a while it was you know spot Dexis and kind of uniswap and what we talked about. talked about earlier. Now uh now kind of the technology is getting there where Dexas can do perps. Um and then like a lot of Dexis, um if you're trading there, you people can, you know, are are are getting tokens uh Token's run the you know the deck's token or expecting to get the token or farming the airdrop.

So there's a lot of synthetic leverage built up into the system where people would who don't naturally have like a view on something would just, you know, we're taking positions on perps, uh sometimes very levered.

Um, you know, just take a position'cause I said, you know, I'm hopefully gonna get a token for this. So I don't know. I don't really know if Bitcoin's gonna go up or down. But you know what? I'm gonna open a five X long on it and on this exchange and you know, they're probably gonna have a token soon and I'll get some tokens. Um and then a lot of people were doing, oh, you know, I'll open a five X here and I'll short five X here and I'm a edge and I'm a different.

exchanges and you know, I'm naturally balanced and learning tokens on both. But the problem is, uh, yes, you are hedge, but your margins on two different clearinghouses. So if in a situation where things move very fast, uh

Just because you have a profit over here doesn't mean you're not going to liquidate it over here. So uh a lot of a lot of leverage had built up into the system. And I think when things started going and and this was also true on centralized exchanges as well, as something like Binance. had a huge amount of liquidations. Um

When uh right, like when studied unwinding, you kind of get this this feedback loop where uh a lot of people were um, you know, selling selling into a thinner and thinner book. Um a lot of order books just had no liquidity.

On one side. Um, and then when that happens, there's technically something called like auto ADL or auto deleveraging, which was kind of really what shocked a lot of people because this This happens rare enough. It it happens every couple of years. It ha it's one of those things that's rare enough.

totally forget about it. Um it it happens. People totally forget about it. It happens. And then it takes a while and then people totally forget about it again. And then it and then it happens. And you always have to relearn and just it just never uh people never remember it. So Basically, the idea is on these perp decks is one way they can support so much leverage is because if the they have these liquidation mechanisms where uh you know if

If there's ever too many people getting liquidated on one side and there's just not enough liquidity in the market to absorb it, uh, what will happen is, and because remember, it's derivatives, that's always balanced. So there are

You know, if the longs are getting liquidated, there are shorts on the other side. And so if there's no liquidity naturally in the market, what happens is they start force closing winners. A lot of people were kind of shocked because they didn't realize they thought they were really in profit.

Uh, their positions got forced closed sometimes at prices that, you know, were They didn't expect right. They they thought, okay, Bitcoin, you know, I'm short Bitcoin, it's at one oh two. Wait, what the hell? Like the system closed me out at, you know, one oh nine. Uh, where where's all my money? Um And then also going back to the people who are doing kind of those delta neutral trades.

Um, if you're getting forced closed out on one side on one exchange and you have uh, you know, you're short on one exchange, you're closed down and you're long on another, and you're getting you're not hedged anymore. Um so now now you have like

Losses. So I think all what the biggest takeaway from October 10th was a lot of people who thought they were safe from the perspective of Uh maybe learned these altcoins and they were comfortable with the leverage or they were hedged between venues and they thought they could manage that. um ended up getting kind of burned and and you know, typically in in a lot of like financial stuff.

It's not so much the amount of losses is when people feel like they're safe and they get, you know, burned, then they tend to be uh you know, it does tend to be worse for like financial markets. People get a lot more skitty. But the thing is, is that uh weren't the perps, I mean the perps are influenced by what happens in the spot market, right? Like at the big uh centralized exchanges. And I I noticed that some of these uh well-known coins would go down 60, 70, 80 percent in in minutes.

Oh, yeah. So what happened there? Did did the market makers on the centralized exchanges just pull back suddenly? I mean, I I I don't understand why, how could they drop so much in such a short period of time? Um Uh is do the perps wag the dog or or you know or the Yeah, yeah. So it seems like yeah. So two things there. And one one one you you touched on is one one there are you know, most coins

Have market makers. Um, and that's very typical and for you, you know, you have formal market making agreements. So uh, you know, if you're an altcoin and and you're listing on on Binance or whatever, um You know, you'll typically retain a market maker and uh, you know, the model there is typically like what's called the call loan model. So uh the project will, you know, loan.

one, two percent, whatever. Some some per so some small percent of the token supply to the market maker and the market maker comes in and and uses that to make sure there's always liquidity um in the order book and, you know, uh They kind of have requirements. They have to have, you know, 99% up time or, you know, within 99% of the time, they have to have so much depth in the order book. Um

But you know, they have that one percent wiggle room. So uh, you know, they tend to use that one percent wiggle room during the periods kind of when when when you need the most. So I think what happened is, you know, a lot of market makers just you know, turned off like even though they had obligations they you know turned off and who who knows? Who's specs people speculate, but like

You might just say, hey, like this coin is way too much volatility. It's not worth for me to quote uh you meet my quoting obligations right now. I'm just gonna, you know, go go offline. I I've got other problems, Greg, because usually they're trading a bunch of they're big trading firms, they trade other things. I got enough other problems. I'm just gonna turn off this system for, you know, an hour or whatever. Uh you know, as long as I quote.

you know, a hundred hours for the rest of the week, I'll I'll be fine. I'll meet my obligations. Um, so that that was one. Like like you said, the the other thing is on Binance, um And and a lot of the centralized exchanges, you can use uh your spot holding as as collateral for for the perps. So uh, you know, like you like you said, the the kind of the tail can

the uh the tail can wag the dog there because, you know, normally it should be the spot markets kind of determine the pricing on the perps. But, you know, what can happen is if somebody is putting You know, and you you somebody's on Binance that has spot holdings and they're using that as collateral on their perps and their perps are underwater because they're leveraged on that. Binance is going to come in and say, okay, I'm liquidating your coins. And a lot of times.

I'm gonna liquidate your most of liquid coins first because I you know, I wanna I wanna get that out of my system. Like I don't want that collateral. I wanna push that collateral out of out of the door first. Um So yeah, I think that's what happened on on a lot of coins is that, you know, if you a big whale dot liquidated and happen to be holding that coin, like you get slammed into the into the order book. Um plus plus right, no liquidity'cause the market makers are gone. So kinda

Recipe for disaster there. So I noticed that on the uh hyper liquid uh decks, the one of the largest uh decks is out there, oh on this day, uh their their liquidity vault, uh one that one can invest in had its largest single jump. on that day when everyone gets liquidated, how how can their um vault, what what is that exactly and how can it go up so much on a day where everyone gets cleaned out? Yeah, that's a that's a good that's a good question. Um

Well, I guess a first thing to keep in mind is that uh, you know, these are zero sum markets. So anytime uh somebody's making losing money, there's always somebody sitting on the other side, right? Like if there's a BTC perps, uh for every long there's a short. Uh there's no actual BTC underneath it. So somebody's getting cleaned out, somebody's somebody's making money. And it doesn't necessarily mean it's the vault, but uh it does mean I

Uh usually when s when people are losing, there's there's somebody who's winning um on the other side, uh or always and it just is who who that is. So so the Vault and Hyperliquid's pretty interesting. Um It does two things. One one it's a market maker. So uh it originally started um Because

Right, like coins need liquidity when when markets get bootstrapped. Um, and so it was it was the kind of the the standard market maker. And it was kind of interesting because it was the first time like you could really deposit into a market making strategy as like a retail user. Um, you know, market makers tend to

can have very good returns, at least like in terms of risk adjusted uh returns. So it's pretty attractive. Um over time it's kind of stepped back from that role because other market makers have come into the into hyperliquid. It's obviously been very successful. Um Other market makers have come in, have got kind of comfortable with the system, um, and they can kind of do a better job than like this.

Relatively simple uh system that the vault was using. So they don't make a ton of markets anymore, but what they do do is they provide uh a backstop for liquidation. So kind of going back to What we were talking about before, uh, you know, there is kind of this liquidation cascade when uh positions are liquidated. On hyperliquid specifically, and then a lot of a lot of per both centralized exchanges and dexes work.

basically this way. At first they'll they'll take the liquidated position. They will try to, you know, close they well, you obviously got to close it out. So they'll try to sell it through the order book. Um

If there's not enough liquidity in the order book, the uh the next step is there's there's a backstop. In this case it's the vault and some other exchanges it might be an insurance fund. Um FTX actually had an interesting model here and I did other things wrong, obviously, but they had an interesting model here where they had like special backstop providers, but but they all have like some sort of backstop provider because sometimes things will just won't be enough in the order book.

That will step in um and and kind of absorb the liquidation at at a at a pretty disadvantageous price. Um So it tends to be it tends to be very profitable, right?'Cause you are absorbing kind of these liquidations that uh obviously they're not informed. They're not like informed traders. They're not uh they're not telling you anything. So you're kind of sitting on the other side of liquidations. You're getting pretty good fills. Um

The hyperliquid vault does do that. It's the only like system that does that. Uh the problem is that the vault basically fills up or takes too many losses or can't uh or or can't absorb it even with its own collateral, because it is just another trader in the system, can't absorb it its own collateral, then you go over to the ADL.

mechanism. So I think what was interesting about the hyperliquid vault, and I think the vault itself got liquidated a couple of times that night. So it's its P and L was up and down. It like it definitely it was taking risk, right? Like it wasn't like just

kind of printing money. It was the vault itself was taking risk. Um but what it did do, I think, is it got to absorb a lot of liquidations, um Both as they were coming like on coins that before they kind of got totally wiped out. So so got a coup basically bought the bottom for a bunch of coins because it was kind of there. And then like when it kept going down it got ADL'd out and then

And then as coins went back up, it also got some of the liquidations on the other side. So uh yeah, it it's it it's kinda when a lot of people are getting liquidated, you would expect like these systems too mostly. So have you found any uh DEXs which have a um I imagine each DEX has its own ADL parameters, right? And do you know of ones uh that are better than the others or that are quote more fair or have a better What mechanism for doing this?

I mean, the reality is is that all Dexists have to socialize or

Well, I'll say socialized loss or force loss at one point. So like the ultimate would be like this just didn't exist at all. But like unfortunately, just the mechanics. If you're gonna have leverage in the system, you're gonna have people who are uh insufficient you're

There are some moves that are so big that they're gonna have insufficient uh capital to cover those moves and right, like you do have to have some mechan the w the worst thing would be if you don't have it at all. Um, and then the system could actually be insolvent. So um Even though like we'd all love it if that could never happen. Like you you do need it to exist. Um

I mean uh we we I'm building we're building a perk dexterity project. So like I I am opinionated here um about like I think our approach is right, but like we do think like The insurance fund model kind of makes sense. And that is one problem with like hyperliquid doesn't have an insurance fund, it has a vault, but the vault itself doesn't. take uh the vault itself doesn't take uh loss. The vault will never take a fill that's a lot it can take a loss if it fills and the price goes against it.

But the vault itself will never actually take a loss into uh liquidation. So if a liquidation happens just too bad, the vault will pass it on and can just not not fill it. Um and I think that's fine, but uh Like the insurance fund model makes sense where you're building up reserves and capital based on fees being the other thing is when there's when there's a lot of volatility, there's a lot of fees, right? And like

As those fees build up, uh yeah, like some should go to the exchange, but you should also those are natural buffers for uh to kind of prevent these things. So if you can add a little bit more buffer, um, buffer room, I think that makes a lot of sense.

Binance does have Uh, an insurance fund. There's a lot of centralized exchanges. Perp Dex is don't as much, but the problem with centralized exchanges, you really don't know what's happening. Uh the rules aren't clear. And at least the nice part about perp Dexes are you can see what's happened, even if you disagree.

You can see what's happening. Um the centralized exchange there were a lot of weird there were a lot of undocumented things at Binance as well. Certain people had special ADL exemptions, um and that didn't come out until that night. So uh, you know It's it's it's kind of pick your poison, I guess. Uh uh Um so w what are you working on? But you you mentioned that you're working on something. Mm-hmm.

Yeah, so uh we we have a project, uh Ambient Finance, which was uh is a is a it is we still do run spot dexis um on on uh Ethereum based things, but now now we're building a perp Dex. Um on new chain Fogo, uh which is kind of optimized to be a trader specific uh chain. So much shorter block times, much higher scalability. Um the perk decks itself, I think We have a we have an interesting model where we kind of separate the clearing house

from the exchange part. And that that often hasn't been done in crypto. The exchange and the clearinghouse tend to be uh, you know, unified into a single system, which has some advantages, but also some disadvantages, especially like in this type of system, there's not like clear clear delineation on credit and insurance and and things like that. Um and yeah, and just general working around uh kind of minimizing some of the toxic HFT behavior as well. So you hope to accomplish

Um, kind of what are the main things you mentioned insurance fund. And so tell us a little bit about that. I mean. Oh yeah, yeah. So yeah, I'd say like we're we're focusing on a couple of things. So one is uh we're trying to separate out the ic exchange.

from the clearing house. So um, you know, traditionally in crypto, the the model in crypto has always been clearing, settlement, exchange all happen at the same place. And as we all know from like Uh you know, traditional finance, those roles tend to be separated, um separated out more, which is uh you know kind of

In in addition, right, you you like one thing is you can have clear clear lines of responsibility. Okay, like where does stuff like insurance fund or like how do the rules work around that? Um, and they're pretty clear, clear layouts. You can build a very uh

without being tied to the exchange, you can build a kind of a much more uh security into into the clearinghouse side. Um the other the other interesting thing is like other people, once you have a clearinghouse, well one problem that's held back herp dexists is unlike like spot dexis, they can't

interoperate kind of in the way uh you know what we were talking about before with like the uh arbitrage between exchanges, that's a lot harder. Herbdex is because you actually have to move the collateral over. Um

Things don't seamlessly interoperate. But you know, one interesting thing is if we have a clearinghouse that's kind of this base layer, um, you know, even if we have an exchange uh vertical, other people can hook their exchanges into into our clearinghouse. Um And so like ultimately, right, like the nice thing is people can experiment with different per uh exchange models without having to build everything from scratch and and kind of can innovate on that side and you know, we can plug and play.

Um and and then the the other thing we're trying to accomplish on on the exchange side is being uh

kind of avoiding some of the the toxic uh HFT behavior that talked about earl earlier in the interview. Um we're experimenting with uh kind of this kind of been working on it with uh with jump trading which obviously a very big uh big HFT firm is like huge in both crypto and traditional markets but it's it's called what we call dual flow Batch auction similar to Club, it's pretty similar to traditional order book, but it tries to uh use these kind of micro batch auctions to where

Takers compete more on price rather than speed. So I think especially in a blockchain context, that makes sense because block Can't be faster than a certain speed. Um, and we think like basically that takes a lot of the predatory

Trading out of the market makes things a lot easier for uh, you know, ordinary traders to, you know, if not make money, makes it harder for them to lose money at at the very least. Um So yeah, I I think we're just trying to kind of r reinvent uh reinvent kind of a lot of the things in in Perptex space. Did you have any takeaways from the October 10th massacre and what happened on, say, Hyperliquid and others?

kind of new lessons that you can incorporate into your uh system? And if so, um was there kind of uh any takeaways that you got? 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.

Yeah, I I mean I think the biggest takeaway is like number one, like transparency about stuff ahead of time. Um, and that's the uh, you know, A Whatever the rules are, if they're not clear ahead of time, then people are gonna be unhappy. And I think even Even some of the perk decks has had unexpected behavior and the the documentation around'em wasn't

fantastic. Um maybe maybe if they were documented. And the other thing about like a lot of these prep deps are they're they're closed source. So you know that's something we're also trying to avoid. So I don't know like how decentralized you can be. Um If you're if you're not open source, um, right. Because all ultimately if you're open source, everyone can check the code to see, see what happens. But uh, you know.

Whether it was centralized exchanges or decentralized exchanges, I definitely think the biggest takeaway is just when things weren't transparent or they're ambiguous or behavior didn't quite match up with what people said they did. That's you know, that that hurts trust. in in the system and I you know that hurts your your brand long term. Uh at least one perp dex I found uh allows investors to actually invest in an insurance fund and to take the other side.

of that kind of trade and earn yield from that. Uh do you anticipate offering um any type of uh ability for people to invest in a in an insurance fund and take uh the more opposite side Yeah, we actually think that that's a is pretty interesting model. Um, and uh we also think you know one one thing that we're doing uh a lot of perp dexists basically live on like siloed uh siloed systems, so they're

technically on a blockchain. They're they settled to a blockchain, but a lot of times the the system runs off chain on on a server. So we were trying to put all of our systems very, very on chain. So so even something like an insurance like we would be able to offer that. Um we could even take it a step further and say, okay, you can tokenize.

Shares in the insurance fund potentially use that as collateral for uh you know for other things in the DeFi ecosystem, potentially trunch it out. So somebody says, you know what, I'm very you know, I want could be uh, you know, I wanna be, you know, s once the safer part if someone else takes the first ten percent of losses on the insurance bond and I'll do the ninety percent and get get lower yields. So uh you can kind of turn those into the DeFi Legos that we all all know unless

Oh, great. And uh when do you uh anticipate um being able to launch your new platform for traders to? Yeah, we should be we should be out uh and end of this year, uh if not very early next year. Okay, great. And just a couple other questions before we wrap up. Um, what are your thoughts on real-world assets and the tokenization? Is it a lot of hype or is this uh the future of finance?

And then the last part would be um convertibility of crypto in the crypto sphere to be able to use it in day to day life. Like how can I use it with a debit card? Can I Yeah. pay pay my mortgage with it. Uh I think so. Yeah, let me uh I I guess I'll I'll answer the second question. Uh I'll I'll go backwards. Um yeah, I I think

The biggest thing is getting integration into into the banking system. Um, there's a lot of interesting things now with like crypto cards and and a lot of the rails and and obviously the regulatory climate has changed. Um At least in the US and I I think other places. So um banks are I I can't tell you like two years ago, uh you know, even just being a a developer like a a a developer, right? Like word like our banks.

banks would ask you for all that just having a checking account for for your company um was uh was risky. But you know, now now I think the financial system kind of wants to interoperate with crypto and figuring out how to do that. And obviously

Um things in traditional finance don't move quick. Um there are whole c there are lots of compliance things, but uh once once you kind of get moving, uh, you know, the the ship is large. Uh so once you just gotta get it moving in the right direction. I think I think we're moving there. They're now. Well that kinda c I guess t kinda ties in with real world assets as well. I think for a while. Um

those weren't on the blockchain because uh, you know, it was just way too much regulatory risk. The the kind of regulators who are actually responsible for those real world assets would say, like, no way. um to any s type of tokenization. I I think it's I think it's really useful. Like crypto rails are fantastic for this is why stable coins are so big, because they're just easy to send.

Easy to store, um, you know, easy to move around. Um, you know, if you bring that same type of convenience and and mobility and uh low friction to, you know, stocks or bonds or other types of assets, um, you know, I don't see why those aren't like

strictly strictly better be you know soup how how how much of a pain right now is it to move stocks between brokerages versus just, you know, opening your wallet send it here to there? Oh so yeah, I I think right like Once it gets off the ground, uh it should it should I think take take a lot of market share quickly. Great. Well, Doug, I'd like to thank you for coming on Chat with Traders. Thanks, Ian. That was great.

Yeah. So uh how can our listeners reach you and and what's your um uh website for your new platform? Yeah. So uh they can reach us. Uh the biggest I guess the easiest way is follow us on Twitter. So we're at ambient uh finance. I am at ambient underscore finance. And uh our our website is ambient.finance. And uh fantastic. Great. Thanks for coming. Thanks again. But rest assured there are more episodes of the channel. if you leave a rating. We'll catch you next time.