Ep. 691 Navigating the Crypto Trading Landscape and Market Structure with CoinRoutes

[SPEAKER_02]: Welcome to the Crypto101 podcast, presented by Gemini. [SPEAKER_02]: Your bridge to the future of money. [SPEAKER_02]: All right, everybody, gather around. [SPEAKER_02]: I hope you're having a fantastic morning and noon or night wherever you are in the world. [SPEAKER_02]: You are certainly in the right place. [SPEAKER_02]: We are going to be diving into some incredible, incredible things today, all around algorithmic trading and business building as well.

[SPEAKER_02]: We have an incredible guest, Mr. Ian Weisberger, the CEO, and founder of Coin Routes. [SPEAKER_00]: Ian, welcome to the show and how are you doing? [SPEAKER_00]: Yeah, thanks for having me, Bryce. [SPEAKER_00]: It's been pretty good. [SPEAKER_00]: I actually am on my way home back to Dubai from the Plan B conference. [SPEAKER_00]: I'll tell her put on in Luzano. [SPEAKER_00]: So it's definitely been an interesting, couple weeks in crypto. [SPEAKER_02]: Man, that sounds awesome.

[SPEAKER_02]: Brendan, you ever made your way out to Dubai? [SPEAKER_01]: I've yet to do it, but I've seen a lot of people like it out there. [SPEAKER_01]: Like it looks like a cool place. [SPEAKER_01]: I heard that the food's pretty good. [SPEAKER_01]: Obviously, it doesn't rain a lot. [SPEAKER_01]: So it's already pretty different from Florida, but... Yeah.

[SPEAKER_02]: Yeah, I've been once and spend a couple of weeks out there and really did fall in love with that city, so it's cool that you're living out there full time. [SPEAKER_00]: Yeah, yeah. [SPEAKER_02]: Well, well, so tell us before we dive in your background, tell us about the plan B conference, what was that all about?

[SPEAKER_00]: Yeah, I mean, it was really interesting to connect with all the ecosystem participants in Tether and you know, if you guys remember when Bidfonex was a big exchange, back originally they're kind of the OGs, but now most more people I would say know about Tether versus Bidfonex, but it's actually interesting, I forgot the actual numbers, but they're very like low on overall volume rankings, but they're like, I think number four in terms of assets still.

[SPEAKER_00]: So they have a ton of assets, it's just the asset, the velocity of the actual trading is [SPEAKER_00]: is lower, but it's, and I think that's also really interesting to compare them versus Binance who over the past couple of weeks has seen, I think, you know, 20 billion in an alphlose or something, something crazy like that. [SPEAKER_00]: So it's been interesting to see the different exchanges in the ecosystem over the years.

[SPEAKER_02]: Yeah, it seems like Bitfinex historically has had really good liquidity. [SPEAKER_02]: But like none of the like wash volume that buy and answer a lot of these offshore exchanges just generate. [SPEAKER_00]: Yeah. [SPEAKER_00]: Yeah, for sure. [SPEAKER_00]: I mean, the thing has everyone's been been, you know, it's interesting is a couple of was like two weeks ago now black, black Friday and crypto.

[SPEAKER_00]: People, I think realized that these per future venues weren't like real if that makes sense. [SPEAKER_00]: And they thought they had a position. [SPEAKER_00]: or short, whatever, but they got washed out by the auto-deleveraging mechanism. [SPEAKER_00]: So I think people now are realizing that all, you know, trading on these perp venues is not actually the same as holding or, you know, shortings, but, so it's been interesting to see how that's kind of evolving.

[SPEAKER_02]: Yeah, did you, did CoinRoute's help folks navigate a little bit of that black Friday event on the top?

[SPEAKER_00]: Yeah, and what was your experience? [SPEAKER_00]: Yeah, it's a good question. [SPEAKER_00]: I mean, look, it's one of those things where when you're in it at the heat of the moment, you feel like the world's on fire, but actually Didn't go down our system was great none of our clients got washed out, which is amazing because I literally told all our, you know, RM all our relationship managers and sales guys to, you know, [SPEAKER_00]: at the phone bank.

[SPEAKER_00]: So to say, you know, making sure that all of our clients were okay, but yeah, no, we definitely saw certain people got stopped out of positions that shouldn't have. [SPEAKER_00]: And we were on the phone on telegram, you know, as it were with clients, making sure that that they were good. [SPEAKER_00]: We heard some competing platforms went down.

[SPEAKER_00]: You know, through the grapevine, because some of our clients actually have, you know, multiple systems and obviously they train on multiple venues, but yeah, a lot of exchanges were struggling and so we actually called that out before the exchanges admitted to that. [SPEAKER_00]: Typically, we can see, like, as an exchange starts falling down the air, the air rates go up and then we're like, okay.

[SPEAKER_00]: So, and so exchanges having problems, right, to kind of get our clients to get out before it's too late, before it goes hard down. [SPEAKER_00]: So, yeah, it's definitely when that sort of volatility happens, it's interesting to be able to see the whole market. [SPEAKER_01]: It's been interesting in recent weeks. [SPEAKER_01]: It feels like there's been a lot of outages. [SPEAKER_01]: It's happened with Coinbase and Robin Hood.

[SPEAKER_01]: And like, it felt like everyone was going down where there was that event or some of the other big ones that we kind of had leading up to this. [SPEAKER_01]: There's been a lot. [SPEAKER_01]: And so it's been interesting. [SPEAKER_01]: But it's good to hear that you guys were able to stay up. [SPEAKER_01]: And you had the experience to back it up. [SPEAKER_01]: In fact, I got to know if this is true. [SPEAKER_01]: I was looking into you before we started the podcast.

[SPEAKER_01]: I saw that you started building in tech when you were 12. [SPEAKER_01]: You launched your first movement at 14. [SPEAKER_01]: And then you co-founded coin routes in 2017. [SPEAKER_01]: Is that right? [SPEAKER_00]: Yes. [SPEAKER_00]: Yeah. [SPEAKER_01]: Tell us about it. [SPEAKER_01]: Tell us about it.

[SPEAKER_00]: Yeah, I mean, it's kind of one of those things where you always kind of like I think certain people know that they're going to be in tech and I just kind of knew I mean I'm really happy that I ended up in tech because I don't think I would have made it otherwise I don't think I could have worked on other job. [SPEAKER_00]: I'm just you know I'm much better with computers and with people but you know recently I've I've dealt with a lot of people.

[SPEAKER_00]: In my role as CEO, and so I don't really do that much tech anymore actually as it's kind of funny. [SPEAKER_00]: But yeah, look, I started my career in tech in high school. [SPEAKER_00]: I actually had a web hosting business in 2008 and I was in high school. [SPEAKER_00]: And one of the core pain points I had was my merchant processing account. [SPEAKER_00]: We're always getting like flagged and shut down because I was selling web hosting plans and whatever.

[SPEAKER_00]: And literally like, [SPEAKER_00]: I had five different merchant processing accounts and one time they all got shut down at the same time and I had no way to take money in and that's why I was like wait Like there has to be a better way to be able to bank and and you know take money in and send payments and pay contractors I actually had a bunch of contractors in India because my teachers would take my laptop in class and I wouldn't be able to detect

[SPEAKER_00]: kind of a funny story. [SPEAKER_00]: But yeah, anyway, just the merchant processing situation back there was not good.

[SPEAKER_00]: And so that's kind of why I started getting into crypto, why I realized that crypto was the future. [SPEAKER_02]: Yeah. [SPEAKER_02]: It totally makes sense and it's funny. [SPEAKER_02]: I love crypto because everybody comes at it from a different angle. [SPEAKER_02]: Sometimes, you know, we speak to folks who came at it from, you know, executive or Wall Street.

[SPEAKER_02]: Some people come, you know, cipher punk, cryptographer, some people like yourself come, you know, from the tech world. [SPEAKER_02]: And, you know, we really want to get a good understanding just at the outset of exactly what coin routes is. [SPEAKER_02]: We've kind of alluded to it. [SPEAKER_02]: It, you know, helps folks manage their positions on exchanges. [SPEAKER_02]: sort of understanding of coin routes here.

[SPEAKER_00]: Yeah, so coin routes is the market leading platform for institutional trading across all of the different crypto venues. [SPEAKER_00]: So you imagine you're a crypto hedge fund, you have a account set by ants and coin base and you might trade on a hyper liquid and you need a central place to manage all of your positions, manage your risk thresholds and just do a better job trading because if you're only looking at one exchange or not going to get good prices.

[SPEAKER_00]: So essentially what we're able to do is look at all of the exchanges and then figure out where is the best place to trade [SPEAKER_00]: What ends up happening with a lot of these crypto markets is they're kind of mean reverting around each other. [SPEAKER_00]: So one minute hyper liquid might be better bid than buy-ins, but it reverts around each other.

[SPEAKER_00]: So not only having multiple exchange accounts at ones, but knowing where all the other markets are, you can do a better job trading on a single venue. [SPEAKER_00]: So to that end, we allow people to do things like arbitrage, where you can sell a perpetual future and buy spot, or you want to do a T-wop order, or you want to do a pair's trade, or you want to do a basket. [SPEAKER_00]: And so we have these really sophisticated institutional order types.

[SPEAKER_00]: Now, more recently, we've also gone down to high-network individuals. [SPEAKER_00]: So if you're a protrader and you want to, you know, ten million dollar account on Buybit or whatever, you need a better way to trade than just swing trading on Buybit directly on their GUI. [SPEAKER_00]: Or if you have a basic bot that's a trend following strategy, you want a better execution system that lets you also manage your risk and see your positions across all exchanges.

[SPEAKER_02]: It's almost like a brain or like a central nervous system for a crypto hedge fund. [SPEAKER_00]: Yeah, and so we're previously, you would have to be a really large hedge fund that has a lot of resources and you might have full-time engineers working on your trading system. [SPEAKER_00]: Now, we kind of democratize that by allowing even smaller hedge funds to have it.

[SPEAKER_00]: That said, we do have a larger crypto hedge funds on the street using us, but we also have kind of gone to smaller funds where it might just be one guy trading.

[SPEAKER_00]: So we service kind of the whole market of trading [SPEAKER_02]: How have you seen crypto trading evolve over the years from what felt like back in you know 2016 2017 it was pretty much only retail guys and now it feels like there's all these institutions, but like how is that kind of changed the market structure from here.

[SPEAKER_00]: Yeah, I think when the ETFs got approved a couple years ago now, it really changed things it really signal to the market that the institutions are here and you know. [SPEAKER_00]: you're going to now be able to hold this in your retirement account if you use certain brokers. [SPEAKER_00]: Obviously, some retirement account administrators still said, no, you can't, you can't buy this thing. [SPEAKER_00]: Right? [SPEAKER_00]: And to this day, we're still fighting that.

[SPEAKER_00]: But it seems like everyone, I would say that's probably listening to this would understand that that war has been one in that, like, institutions and retail now have access to this asset class that it's not going anywhere. [SPEAKER_00]: And if you compare that to 2017 when we started this business, I mean that was not for sure at all.

[SPEAKER_00]: There was no ETF there, you know, banks were talking where we're shutting down people's bank accounts for even purchasing Bitcoin right in many countries in the world. [SPEAKER_00]: You saw multi like tens of percent differences in the spot instrument price between exchanges, right? [SPEAKER_00]: Like I remember when there was a $3,000 price difference between crack-in and coinbase. [SPEAKER_00]: And that was just spot.

[SPEAKER_00]: Like you could just make free money people where printing money. [SPEAKER_00]: Now to a bit more nuanced, you have to be a bit smarter to make money trading in the current market structure, right? [SPEAKER_00]: Like you might have to buy a few Trump, a perp on one exchange and sell it on the other and collect the basis between that. [SPEAKER_00]: Funding rate arbitrage is more popular now. [SPEAKER_00]: It's a bit more complicated.

[SPEAKER_01]: There's less like free money available in the ecosystem and the markets have gotten quite a bit more efficient Yeah, it's been fascinating and I know all this kind of been here to watch crypto and especially the trading side of All and it's been fascinating to see like a lot of those tradfi kind of concepts come into crypto which makes the tradfi

[SPEAKER_01]: people in general kind of open up to this idea, but in context to your distributed smart order router, what makes algorithmic trading so effective compared to manual execution? [SPEAKER_01]: Because this is the topic that we get a lot of questions about. [SPEAKER_01]: The algorithmic side versus the manual side. [SPEAKER_00]: Yeah, absolutely, I mean, if you look at the way that this market is evolving, it used to be that everyone was doing OTC deals on voice on telegram, right?

[SPEAKER_00]: And then that switched to the single dealer platform, which is when you, you know, you're going to count with the B2C2 or an emitter or whatever. [SPEAKER_00]: And then they give you a nice little good way where you can buy and sell electronically, right?

[SPEAKER_00]: This market is undeniably moving electronically, and so what we're allowing our clients to do is rather than [SPEAKER_00]: having to basically pick up the phone and do a voice quote with a broker that's then using an algorithm to trade out, they can do it themselves, they can have their own algorithms to trade the stuff. [SPEAKER_00]: And so it's better for certain types of trading where you don't need the immediacy of trading kind of voice, right?

[SPEAKER_00]: And so ultimately this market is moving to an electronic market and we're enabling people to do that that previously wouldn't have the resources to do so. [SPEAKER_01]: Do you see a difference between maybe the institutional side or maybe like the high net worth individuals trading more algorithmic based, whereas retail tends to do it more manual? [SPEAKER_01]: Because the way that I look at it is there's a lot of people that get lured into this.

[SPEAKER_01]: trading bot dream, right? [SPEAKER_01]: There's, oh, you know, the world's moving towards AI, you need to be using a trading bot or an AI or an algorithm or something, but a lot of the times the ones that are marketed towards the retail people, just like aren't good. [SPEAKER_01]: They don't work. [SPEAKER_01]: They underperform and overpromise. [SPEAKER_01]: But on the institutional side, that's a real thing.

[SPEAKER_01]: But they also spend a lot more money kind of building out these things. [SPEAKER_01]: And I think it makes a lot more sense for an institution to use it.

[SPEAKER_01]: But do you think that, [SPEAKER_01]: it makes as much sense for retail to use it as well. [SPEAKER_00]: Yeah, I mean, on an institutional side, so we do, we have clients that are directional, which means they're buying a bunch of coins and we're going to go up or selling them and hoping they go down their directional. [SPEAKER_00]: We also have a large constituency of our clients that are market neutral.

[SPEAKER_00]: And so those market neutral clients are happy to make 15 to 20% on a mostly delta neutral market neutral basis. [SPEAKER_00]: And they're going and raising a ton of cash to do that and people and institutional investors are happy to make 15 or 20% on a relatively risk-free basis. [SPEAKER_00]: If you're a retail guy, a lot of them, look at 15% and say that there's no way this is enough I want 20% a month, like that, yeah, that's real, right?

[SPEAKER_00]: Like you're going to underperform, right? [SPEAKER_00]: You're probably better off just buying and holding at that point if someone's promising you that kind of return. [SPEAKER_00]: But we are seeing, I would say, 15% to 20% relatively risk-free in the market right now with on an actualized basis. [SPEAKER_00]: I don't an annualized basis, exactly, on what clients are running this successful once. [SPEAKER_00]: I would say that's reasonable.

[SPEAKER_01]: And it seems like that is a smart way to go about it. [SPEAKER_01]: And that's like one of the big misconceptions that I see with people is that they think, oh, a trading bot or an algorithm or all these things, they'll be able to give me that per month or some people who want to get levered up and they want to do that every day. [SPEAKER_01]: When in reality, that's just not really possible to make that kind of consistent return every day, every week.

[SPEAKER_01]: every month like there's going to be times where it fails and I think that's where algorithm of trading and trading bots and all these things like thrive is when you're looking at a smaller return that's still real it like I would say really good you're right 15 20% a year you compound that over a long period of time you're doing pretty freaking good for yourself and that's where these things can be so so strong and so consistent and

[SPEAKER_01]: Yeah, it's just the misconception that I see a lot of retail traders have where they had this misunderstanding of like how these kind of things work and the rewards that could be earned with something like this. [SPEAKER_00]: Yeah, I mean, like it wasn't this cycle, but I remember last cycle, one of my older family members sent me a link of a, you know, a 10% guaranteed return per month, crypto scam and I was like, I can't do that.

[SPEAKER_00]: That's a scam, you know, and I have to say, I think I've seen a little less of that [SPEAKER_00]: Um, and yeah, I think we tell should be wary of that because that doesn't it's not right. [SPEAKER_00]: That's not realistic. [SPEAKER_00]: Right. [SPEAKER_02]: Yeah, like I've heard so many people, you know, ask me or just show, you know, oh, hey, you know, I could do this program and it's 2% today. [SPEAKER_02]: I'm like, if you.

[SPEAKER_02]: compounded 2% a day and you started with like 10,000 bucks. [SPEAKER_02]: It'd be worth like well over 10 million dollars and that would just be in one year. [SPEAKER_02]: And then the next year would be like a billion dollars. [SPEAKER_02]: It's like you think everybody's going to make it a billion dollars off this year. [SPEAKER_02]: But people don't think about the math behind it and they just they get scams.

[SPEAKER_02]: So anybody who's listening if you're if you're trapped in one of these products don't send any money to them. [SPEAKER_02]: A lot of the times they're just in the right form. [SPEAKER_00]: Yeah, I mean, I've seen unfortunately some of them were owe you to posit.

[SPEAKER_00]: I don't know, like a one big coin. [SPEAKER_00]: And then, okay, we're going to lock you with your account if you don't send more and it's really, yeah, it's really unfortunate. [SPEAKER_00]: It's so sad. [SPEAKER_00]: You know, what's kind of it's it's sad what's what's happened in this market. [SPEAKER_00]: I remember seeing back in the day like anchor protocol and I was like, how are the generating this you only what's going on.

[SPEAKER_00]: And I would kind of tell anyone that would listen like I don't I don't know that this makes the most sense, but you just you never know right it's hard I think I would say like if you're looking for a yield in the crypto markets like you have to I don't say I wouldn't say you have to fully understand But you should at least ask like how are you generating this yield right yeah, and if someone saying okay We're lending it out to other people Great like okay whatever max like 20% yield like probably a lot less than that I've heard that like you can get collateralized loans at around like 12%

[SPEAKER_00]: But certain counter parties, that's kind of where it's at. [SPEAKER_00]: And if you're doing some market making where there's like a little bit of legging risk, then up to 20%. [SPEAKER_00]: But I would say above that is not realistic. [SPEAKER_00]: You know, it's environmental strategies. [SPEAKER_02]: Yeah, it's super interesting you bring this up. [SPEAKER_02]: An anchor protocol was part of the whole Teraluna explosion back in the day, you know, promising 20% yield.

[SPEAKER_02]: And then everybody declared the death of the algorithm stable coin. [SPEAKER_02]: However, there's been now, you know, other algorithm [SPEAKER_02]: I think most notably Athena's USD and it would have been different. [SPEAKER_00]: Yeah. [SPEAKER_00]: Yeah. [SPEAKER_00]: Yeah.

[SPEAKER_00]: So actually, the way that Athena USD work is basically is this arbitrage that I talked about, where you're buying the spot, so you buy Bitcoin's spot, for instance, and then you sell the future against it. [SPEAKER_00]: and so on the whole usually you should be generating positive return. [SPEAKER_00]: Now, of course, when the markets go gap out and go crazy volatile, this funding rate can actually turn negative and the pool actually loses money.

[SPEAKER_00]: But if you look at what happened to Athena during the whole Black Friday, it actually stayed solvent. [SPEAKER_00]: The protocol was able to create and redeem [SPEAKER_00]: units of USEE at par value at one dollar. [SPEAKER_00]: But the issue was the way that the exchanges were pricing and as collateral finance basically said okay this thing isn't actually worth the net asset value it's worth what our order book says it's worth.

[SPEAKER_00]: And so that created this huge mismatch where people got liquidated and finance said oh actually we messed up a little bit here. [SPEAKER_00]: have some money back and it wasn't enough to for the people that got washed out, but a lot of people got washed out that shouldn't have because rather than saying it's worth one dollar because I can redeem this for one dollar worth of the total. [SPEAKER_00]: And yeah, it's worth what our order books have it's worth. [SPEAKER_00]: Right.

[SPEAKER_00]: And so you can make the argument that that was manipulation and maybe it was maybe it wasn't but at the end of the day the way that they were pricing it wasn't actually based on the underlying asset value, which I think was was wrong was incorrect. [SPEAKER_00]: And so I think people need to take a look at how they're actually pricing these, these assets are basically kind of like a tokenized money market fund right like they're tokenized fund.

[SPEAKER_00]: You should price it like if you look at a money market fund on the street typically it's priced at the asset that's close to the asset value. [SPEAKER_00]: It doesn't go way below if it's redeemable. [SPEAKER_00]: Right. [SPEAKER_02]: Yeah. [SPEAKER_02]: No, it's super crazy. [SPEAKER_02]: And the defy stuff seemed to hold up pretty well while a lot of the C5 stuff kind of went compute. [SPEAKER_02]: And I was reading some post mortems about maybe like why this happened.

[SPEAKER_02]: And yeah, like some of these defy protocols had hard coded $1 equals $1 USD. [SPEAKER_02]: And that was able to like help them not, you know, liquidate, you know, people unfairly and stuff.

[SPEAKER_02]: But did you see any other triumphs or catastrophes in the defy world during the past recent times?

[SPEAKER_00]: You know, I think so, if you look at the, I think the big thing that people are now finding out about because they've never heard about it before this event is the auto-delabringing and so basically what that means is if your position goes so far like let's say you're long Your short Bitcoin like so even if your position will be profitable you shorter than at 125 Bitcoin goes to 102 the whole system would be in solving if they actually let it get to 102 so they actually stopped you out at a higher price than 102 they said okay you're done at 110.

[SPEAKER_00]: And even though technically you could have made more money, they said no, no, no, you're done because otherwise the longs on the other side would have just been wiped out and the whole system would be in solvents.

[SPEAKER_00]: And they actually change would be bankrupt and the exchange would be bankrupt and so they basically say, okay, we're going to give you a worse price because this thing moved so far so quickly that we would be bankrupt and so we need to basically stop you out at a price that wasn't real at a worse price than you otherwise would have gone and that happened across the board.

[SPEAKER_00]: So, if you look at what some of the centralized exchanges do to avoid the crazy auto-delivered doing, like, private for instance, they actually smoothed it out over time. [SPEAKER_00]: So, they have, like, a little bit of a rate limit on it. [SPEAKER_00]: So, when we went to V, we had the V from, like, you know, 125 to 102 and then from 102 to 108. [SPEAKER_00]: But, like, some of the exchanges that didn't actually go all the way to 102, they kind of smoothed it out.

[SPEAKER_00]: So, they let it recover a little bit. [SPEAKER_00]: And so, what that means is less people get liquidated.

[SPEAKER_00]: But, the risk that you have is, if you're smoothing it out, [SPEAKER_00]: below one or two or at one or two that there would be just losses that would have to be socialized right and so some of the exchanges take the tactic of well we have a insurance fund that's big we've made a lot of money for years fine like will take that risk and it turned out that in that instance it didn't go to zero it stops at one or two and it bounced once to one or eight almost immediately.

[SPEAKER_00]: But the D5 protocols don't necessarily have that ability to do that. [SPEAKER_00]: They don't necessarily have the huge insurance funds. [SPEAKER_00]: And they don't want to have, like, losses socialized. [SPEAKER_00]: So they stop you out faster. [SPEAKER_00]: So I would say that more people got auto-delivered on the hyper-liquid than on bi-bit because they had less of a smoothing. [SPEAKER_00]: Right. [SPEAKER_00]: Like, it's hard to pick which one is the correct way to do it.

[SPEAKER_00]: I think there's merits for both. [SPEAKER_00]: But that's just how these things tend to work. [SPEAKER_00]: But also, I think a lot of people didn't know what ADL meant or what the mechanics of the future's exchanges were before that event because they never had to worry about it. [SPEAKER_02]: They didn't read the fine print. [SPEAKER_02]: Yeah. [SPEAKER_02]: They just took the free 125 times leverage and cross margin to their account and said, let's do this thing.

[SPEAKER_02]: Yeah. [SPEAKER_02]: Crazy. [SPEAKER_02]: Do you think that like... [SPEAKER_02]: You know, not to like, you know, I know you're not a lawyer or to like getting to like too much of the regulation stuff, but it feels like This doesn't really this kind of stuff doesn't really happen that much in like traditional markets, but does it and like do you think that like we're going to see some kind of self policing or some standards to make sure we don't have something similar.

[SPEAKER_00]: It's a really good point. [SPEAKER_00]: I mean, it's just different, right? [SPEAKER_00]: So if you want to trade futures in in in US markets, let's let's say you're trading on the, on the Sammy. [SPEAKER_00]: You have to open an account with what's called a futures clearing merchant on FCM, right? [SPEAKER_00]: And you put up collateral with them. [SPEAKER_00]: And then margin calls are once a day because there's no real time liquidation, no real time lending.

[SPEAKER_00]: And if someone in the system goes and solve it, then you have this whole like insurance fund and mutualization model. [SPEAKER_00]: Long story short, it's extremely convoluted. [SPEAKER_00]: It's not real time. [SPEAKER_00]: It requires a lot of extra capital in the system to ensure against losses. [SPEAKER_00]: And I just don't see that full methodology working in crypto. [SPEAKER_00]: It's a lot of different in crypto where anyone can just go and sign up and get an account.

[SPEAKER_00]: Like when you're trading futures, potentially you could lose more money than what you put into the account, depending on your agreements, depending on who you are, et cetera. [SPEAKER_00]: It's a bit weird. [SPEAKER_00]: Whereas in crypto, you're only really able to lose what you put in in terms of collateral. [SPEAKER_00]: So you have to do real time liquidation.

[SPEAKER_00]: So it's just a bit of a different game, but that's that I think like there should be some self-leasing in terms of what we're doing to protect consumers. [SPEAKER_00]: I think it's really complicated to figure out, let's say you're trading on Binance, let's say you have one Bitcoin and then you're trading futures against that one Bitcoin. [SPEAKER_00]: The liquidation price that it shows you, [SPEAKER_00]: changes as the price of Bitcoin goes up or down.

[SPEAKER_00]: So a lot of people didn't realize that actually it only took a 20% move to white to mouth. [SPEAKER_00]: They thought they had a 30 or 40% move, right? [SPEAKER_00]: It's really confusing to see like what a stress test scenario looks like in these markets. [SPEAKER_00]: It's not completely straightforward.

[SPEAKER_00]: And so I think people just thought that they were trading Bitcoin on leverage and didn't realize what how the liquidation prices worked and whatever they just got wiped out. [SPEAKER_02]: Yeah, no, it's kind of a bizarre world and I think that if we kind of bring it back to coin routes, you guys don't just help people execute transactions fast and across a lot of different venues, but you help them save money.

[SPEAKER_02]: I know you guys have been doing a lot of transaction cost analysis, but I just kind of want to understand a little bit,

[SPEAKER_02]: you know about that and in kind of some of your findings and then maybe you know what do people who are like just on you know coinbase or whatever you know just buying through the app what do they maybe not realizing out the fees and stuff yeah i would say if you're a retail user i mean a lot of people trade on coinbase and robbing her whatever and your paying for ease of use that's fine like if you're just buying and holding probably it doesn't matter that you're paying you know up to one percent in fees

[SPEAKER_00]: I think as you start buying and selling and if you're doing what is essentially swing trading where you're buying and selling, then you need to figure out how to optimize your fees and you need to move to Coinbase's more advanced product for instance, you're probably not gonna use the Coinbase app, you probably use what they call Coinbase advanced trader or whatever.

[SPEAKER_00]: And so it's important like if you're just buying and holding it probably doesn't matter that you're paying 1% because this SM moves by more than that in a couple hours and a day for sure moves by more than that. [SPEAKER_00]: Where I think it really gets interesting is when you're trading kind of smaller names.

[SPEAKER_00]: Like if you're trading means stop meme coins, you're trading these smaller names, then a buy order for a couple thousand dollars could potentially move the market. [SPEAKER_00]: Then it makes sense to, you know, be smart and how you're in how you're trading these things. [SPEAKER_00]: And so what a lot of people were previously doing that are our clients, where they were just going to the interface typing and limit prices and trading it manually.

[SPEAKER_00]: That's not the best way to trade these things, right? [SPEAKER_00]: You probably want to scale into it over time. [SPEAKER_00]: And that's where you would use a system like coin routes to be able to trade it in and out and break up your orders into small pieces and post them on the order books that you're not moving the price. [SPEAKER_01]: Yeah, and I mean, speaking of big orders, I mean, you all are doing over 40 billion in monthly volume. [SPEAKER_01]: Is that right?

[SPEAKER_01]: Mm-hmm. [SPEAKER_01]: Yes. [SPEAKER_01]: Yeah. [SPEAKER_01]: Where is most of that liquidity coming from today? [SPEAKER_00]: Um, I mean, usual suspects up more around like 70 to 80% of our volume is futures, right? [SPEAKER_00]: So it's trading the big futures values hyperliquid by the answer by the, okay, acts the big, you know, exchanges, right? [SPEAKER_00]: Um, and but we definitely are seeing more interesting interest in perp taxes.

[SPEAKER_00]: I would say, especially after the finance debacle, more and more people are wanting to trade on hyperliquid and some other, some other taxes, um, and we're, we're facilitating what, a couple billion dollars a month in, in perp tax transactions.

[SPEAKER_00]: Val, and that's growing pretty rapidly. [SPEAKER_01]: How does hyper-liquid just mention it? [SPEAKER_01]: How does it compare to some of these other options that are out there? [SPEAKER_01]: Because it feels like it's exploded onto the scene. [SPEAKER_01]: It's taken the vast majority of market cap. [SPEAKER_01]: Everyone raves about it. [SPEAKER_01]: It's hard for us in the US.

[SPEAKER_01]: I mean, we really can't use it as much, but you probably have a much better understanding. [SPEAKER_01]: Like how does this compare to everything else? [SPEAKER_01]: And no pun intended does it live up to the hype. [SPEAKER_00]: Yeah, I mean, look, a lot of our clients are trading on it. [SPEAKER_00]: I can't really comment on regulatory matters of who we isn't allowed to use it. [SPEAKER_00]: It's not really what we do. [SPEAKER_00]: But ultimately, a lot of people are using it.

[SPEAKER_00]: And if you look at the fee schedule, it's pretty cheap. [SPEAKER_00]: It's cheaper than most of the centralized venues. [SPEAKER_00]: And the rules are somewhat transparent. [SPEAKER_00]: I would say they got into a little bit of trouble on the Black Friday, but not anywhere nearly as much as the centralized venues. [SPEAKER_00]: Overall, they held up really well. [SPEAKER_00]: They didn't go down.

[SPEAKER_00]: A lot, as I was kind of mentioning earlier, like it's more, there, you will be quicker to liquidate it than I'm trading like something like a biobit if there's a crazy market move. [SPEAKER_00]: Like they don't have the smoothing that some of the centralized exchanges have, but it's transparent in terms of how they're doing it.

[SPEAKER_00]: I don't think, I think a lot of the other, the other issue with the centralized venues is they're giving preferential treatment to certain clients. [SPEAKER_00]: So, you know, one of the things that happened was people were worried that if Dina was in solvent, because they thought that they might have been all of the leverage. [SPEAKER_00]: Now, it turns out they had special deals with the centralized exchanges where they were kind of more or less exempt from that auto-deliverging.

[SPEAKER_00]: They had a special deal. [SPEAKER_00]: And that's one of the reasons why they stayed solvent. [SPEAKER_00]: But on a perplex venue, like hyper-liquid, it's much harder for people to have special deals. [SPEAKER_00]: And so I think that's another reason why they've gotten so popular is people are mistrustful. [SPEAKER_00]: Like if you look at the special deal that Alameda had with FDX, like they had no liquidations, they had unlimited credit, et cetera, et cetera.

[SPEAKER_00]: I'm not saying that anything like that is happening today, not on that scale, but it's been shown that there are definitely special deals that market makers have on exchanges with liquidations, and I think hyper liquid is more fair, in general, probably, you know, than the central economies. [SPEAKER_02]: No, I totally agree. [SPEAKER_02]: It's transparent.

[SPEAKER_02]: Like all those liquidations that happened on Bivet or Binance, I apparently they were rate limiting it to one per second or something like that. [SPEAKER_02]: And so when you have thousands of liquidations in one second, but you would only show one of those liquidations is what the hyper liquid guys were saying because they basically said on chain, you could see every single liquidation that happened.

[SPEAKER_02]: You know, not to get two in the weeds, but I am curious about, um, you know, hooking up defy with your platform, you know, if, you know, I want to say, trade on uniswap or do something like that, do I have to give you certain keys to my wallet in order for that transaction to, you know, occur, or is it a one time approval?

[SPEAKER_02]: Is it multiple approvals? [SPEAKER_02]: How does that kind of work? [SPEAKER_00]: Yeah, we have a couple of modes, like for institution, so for hyper, like what it's fine, they have, uh, trade only keys that that we have. [SPEAKER_00]: So for the [SPEAKER_00]: via that workflow.

[SPEAKER_00]: For Uniswap, we either require you to use a custodian like a fireblocks, so we do the partnership with fireblocks where we don't have to have access to your keys, and that's how we do it in that. [SPEAKER_00]: And then we are working on some other methodologies to trade on defy that don't require custodians like fireblocks for retail, so we're working that out to how to offer that product to retail that wouldn't necessarily have a custodian.

[SPEAKER_00]: No, that's absolutely not taking custody. [SPEAKER_02]: Yeah, it's certainly something that we we're excited to learn more about and you know, maybe we'll have you back on when there's some more updates on the defy stuff for the everyday person, but one thing that I know a lot of people ask me and Brendan as we kind of do these interviews with you know market experts and stuff and.

[SPEAKER_02]: we always get a different answer, but I'm curious what your signs that you see of a market top or a market bottom, do you kind of like look at those funding rates and when they're blown out one way or another, that's an indicator.

[SPEAKER_02]: Do you see other things around like order size or order book liquidity that tips you off? [SPEAKER_00]: Yeah, it just feels different this time. [SPEAKER_00]: I mean, I remember when Black Friday happened, then it kind of, it just like, V-bottoms. [SPEAKER_00]: Like, there was no, it didn't really crash. [SPEAKER_00]: I mean, everyone was saying doom and gloom and it's going to go down 75 or 80.

[SPEAKER_00]: It just didn't happen and now it looks like things are, you know, recovering S&P's at an all-time high, you know, goals off the ties now, seems like people are rotating the basket back into a risk assets, it just seems like we're not, you know. [SPEAKER_00]: Like, a lot of people were saying, okay, 125 was the top, but it's don't believe that's the case anymore. [SPEAKER_00]: I think that will get higher in the cycle.

[SPEAKER_00]: Based on what's happened, based on how nice it's recovered. [SPEAKER_01]: Yeah. [SPEAKER_01]: And like I didn't even go so far and we talked about this a little bit, but we've started having conversations about not only can we go further, but can this run last longer. [SPEAKER_01]: And I think that that's like a pretty, I don't even think it's a hot take anymore.

[SPEAKER_01]: Like I feel like there is this idea that the run can go longer this time around and you look at some of the different catalysts that are happening in the background. [SPEAKER_01]: And again, I don't think that's really as much of a hot take anymore. [SPEAKER_01]: So that's kind of my thought is number one, I do believe that we can go further than $125,000. [SPEAKER_01]: I would say that. [SPEAKER_01]: In my opinion, that's a probability.

[SPEAKER_01]: It's a likelihood, not just a possibility. [SPEAKER_01]: I'd also say that it's pretty probable that we see an extended run. [SPEAKER_01]: And when you kind of go back and you look at the last several, I guess cycles as you'd want to call them, it almost looks as if they have been a long getting as adoption has been increasing.

[SPEAKER_00]: So that's kind of the way that I'm living it's a global it's a global risk asset now wasn't really the totally we didn't really have this level of of assets in the ETF last cycle we just didn't have the level of adoption that we have now there's just way more market participants undeniably and so I think there's more there's more demand.

[SPEAKER_02]: And on that point, it's kind of a perfect segue. [SPEAKER_02]: Like, you're in Dubai, you see sort of the Middle East and North Africa regions. [SPEAKER_02]: I hear all the time about these sovereign wealth funds that are secretly accumulating Bitcoin. [SPEAKER_02]: Some of them have announced that they have, like, shares of microstrategy or some Bitcoin. [SPEAKER_02]: What do you see in terms of the institutional adoption trends in your area?

[SPEAKER_00]: Yeah, I mean, look, I think it is undeniable at this point that these sovereign wealth funds are allocating into Bitcoin through subsidiaries and venture firms and like a web of companies, I don't think it's as straightforward as them owning physical Bitcoin and their balance sheet, but you know, there are a lot of companies in Dubai and the UAE that are very much exposed to the price of Bitcoin that are owned. [SPEAKER_00]: you know in large part by the sovereign wealth fund.

[SPEAKER_00]: So I do think that that will that trend will accelerate and I do think that the adoption will accelerate throughout the region and globally. [SPEAKER_00]: I think if you know some of the people that we're working with are issuing stable coins right in in the way and abroad right. [SPEAKER_00]: that will increase adoption. [SPEAKER_00]: Ultimately, the more stable coin issuance that exists the more the crypto market cap can exist based on, can grow based on that.

[SPEAKER_00]: Like there's been a link between the market cap of Tether and the market cap of Bitcoin that's been undeniable over over the years. [SPEAKER_00]: And so the more entry points to the crypto that exists globally, the more that that's going to accrue value to the crypto ecosystem. [SPEAKER_02]: fascinating.

[SPEAKER_02]: I love that that take in, you know, stable coins, I think Scott Bessent, the Treasury Secretary of the United States said that he thinks that stable coins in the wake of the genius actor going to go up to something like 10 times the amount of market cap they have currently by the end of the decade. [SPEAKER_02]: So I can five years. [SPEAKER_02]: So that would be incredible for crypto, a lot more liquidity.

[SPEAKER_02]: And, you know, I think the case is fully, you know, understood for Bitcoin pretty much. [SPEAKER_02]: Although allocations globally are pretty low, but like pretty much everybody gets it. [SPEAKER_02]: Everybody's heard about it. [SPEAKER_02]: I think Ethereum and Salon are starting to starting to get there with, you know, some of the digital asset treasuries and the ETFs.

[SPEAKER_02]: But what do you make of, like, [SPEAKER_02]: the schmorgasborg of altcoins that are out there. [SPEAKER_02]: Are you generally bullish on on altcoins, or are you kind of like, you know, these are just, you know, trading instruments that shouldn't be bought and held. [SPEAKER_00]: Yeah, I mean, look, I am not a meme quaint trader, or maybe someone else would have more input on that.

[SPEAKER_00]: But I do think we are seeing the emergence of certain what you could call all coins that actually have real protocol revenue, and I do think that over time, those are going to win. [SPEAKER_00]: So, I mean, if you look at hyperlink with they're making over a billion dollars a year, and 90 plus percent of that value is agreeing to their token, their other, [SPEAKER_00]: new dexes that have launched as well that have similar mechanics.

[SPEAKER_00]: Ultimately, the killer app for crypto right now is trading and payments. [SPEAKER_00]: So, if you have this on-chain trading engine where the value actually accrues to the token, I think those are going to win over time versus the utility tokens or governance tokens or whatever. [SPEAKER_00]: I mean, memes are this whole other category, but I think the days of these governance tokens just being worth a huge, huge amount of money where there's no value accrual to the ecosystem.

[SPEAKER_00]: I think those days are over. [SPEAKER_00]: And I don't think that those coins will be successful long-term. [SPEAKER_00]: people are demanding that value accrued to the token holders now, directly. [SPEAKER_01]: Yeah, fair enough, man. [SPEAKER_01]: There's a, there really is a lot of speculation when it comes in the altcoins and the way that we kind of look at it is, you know, clearly there's going to be some ones that are doing some good stuff.

[SPEAKER_01]: They've actually working products and we like to pay attention to those, but obviously there's a lot of noise. [SPEAKER_01]: You look at coin market cap and I checked this a couple of days ago and it said that they had

[SPEAKER_01]: I'll check it again right now, but it said that they had around $22,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

[SPEAKER_00]: Yeah, I think I kind of mentioned it earlier, but ultimately the market is very different from traditional instruments if we look at how crypto derivatives are traded. [SPEAKER_00]: You are only, when you trade a crypto derivative, you're only as a user at risk of losing the money that you put down. [SPEAKER_00]: There's no like additional losses, there's no mutualized loss system usually, and so it's a very different system.

[SPEAKER_00]: So the traditional [SPEAKER_00]: things like if you look at the way that U.S. equities work and by proxy, you know, the indexes, the futures that are, I could be based on them, they have circuit breakers. [SPEAKER_00]: They say if the thing moves by more than X percent in a day or whatever, it's shut off for five minutes and then 15 and then it's done and there's a trading halt.

[SPEAKER_00]: Like you can't do that in a market where you have to be able to support real-time liquidations, where you have to just be able to de-risk the system on demand and it's a 20 furthermore, it's a 24, 7, 365. [SPEAKER_00]: Market like the mechanics are going to be different. [SPEAKER_00]: It's not going to be exactly the same as as equities and futures and FX and I meet a lot of people from Tradify that say, oh, this is going to be exactly the same as as as Trefi.

[SPEAKER_00]: That's just not that's not going to happen. [SPEAKER_00]: There's going to be a lot of similarities. [SPEAKER_00]: But fundamentally, this is a 24 seven, 365 global real-time market that is not going to be exactly the same as as equities and and then futures.

[SPEAKER_00]: And so you need companies that are actually built to support this from the ground up that are supporting all of these different things right you're not going to the traditional players ultimately going to have to go out and buy things or you know partner to to get the full functionality yeah and there's a lot of people who come in here and they get worn hate cryptos volatile.

[SPEAKER_01]: And they go, oh, I know, and then they come in and they experience a black Friday event like we did the other week, where you're right, there's no circuit breakers when things are going down double digits, and then some of these all crints are down 50% in a day. [SPEAKER_01]: And they go, crying, crying a lot. [SPEAKER_01]: And there's, Bryce, what's the saying? [SPEAKER_01]: What's our favorite saying? [SPEAKER_01]: There's no crying in the casino.

[SPEAKER_01]: We were using that. [SPEAKER_00]: Yeah, I mean, it's about your risk appetite. [SPEAKER_00]: The biggest issue was a lot of people didn't realize that these were cross margin. [SPEAKER_00]: They had like one portfolio with their, like they had Adam and Bitcoin sitting in the same thing. [SPEAKER_00]: And then Adam was down 90% on one exchange. [SPEAKER_00]: Okay, they're holding out wiped out. [SPEAKER_00]: Like you need to have different risk buckets for your trading accounts.

[SPEAKER_00]: You need to have sub accounts for your different portfolios. [SPEAKER_00]: That's very important. [SPEAKER_00]: You can't expect that these things aren't gonna crash very, like a lot in the bottom, right? [SPEAKER_00]: Totally. [SPEAKER_02]: Man, this was awesome. [SPEAKER_02]: And we greatly appreciate your time. [SPEAKER_02]: I know you guys got to some travel ahead, so we don't want to make you miss your flight or anything. [SPEAKER_00]: I was just great.

[SPEAKER_02]: Yeah, this was a ton of fun. [SPEAKER_02]: And hopefully everybody at home, listening was able to pick up some golden nuggets, make some better trades, be more informed. [SPEAKER_02]: And where could people kind of check you out, check out Coin Routs if they're qualified, and just generally learn more and stay in touch.

[SPEAKER_00]: Yeah, I mean, I post a lot of market intel on my Twitter and LinkedIn and say them on the coin outs, so it's just at the NYS Burger and then the coin outs on LinkedIn and Twitter. [SPEAKER_02]: Awesome. [SPEAKER_02]: We will be posting those in the show notes. [SPEAKER_02]: Ian, thank you so much, safe travels and everybody at home listening. [SPEAKER_02]: Thanks for joining. [SPEAKER_02]: We'll see you back next week, same time, same place with some more great guests.