Roshun Patel on What Really Happened During the Crypto Market Crash

probably gonna be a crash right afterwards. And then like I think literally two days or a day after that that episode came out, we actually did get one of the biggest true crashes in the crypto space in a long time. I mean, it's that classic UM magazine cover indicator, isn't it. Like by the time the mainstream media is talking about something, it's probably reaching its zenith in terms

of popularity. That kind of makes sense. I gotta say I was really disappointed, I um I missed the crypto crash. So I took a few days off that week, and uh, I was out in the country and I wasn't really paying attention to either the news or social media, trying to take a break, and then I started getting all these messages from people going, look at crypto, look at bitcoin. It's at thirty dollars. So it seems like it was a very dramatic week. But I'm still trying to wrap

my head around exactly what happened. Yeah, it was. It was a really dramatic week. There was already like a bunch of like negative stuff. There was the Elon stuff and other things going on that we already talked about. And then that Sunday, our episode with Aaron Lammer came out on a Thursday. That's Sunday, which was just I guess three days ago. So we're recording this Wednesday made twenty six, so let me I guess that was Sunday,

the twenty three. We got this like really intense crash and bitcoin touch like thirty thousand and ether fill below and so forth, really big crash, and I think are a bunch of people that were like ready to say, oh, this cycle is over, the see you see you all of four years when we do the next one. It's actually like, I mean, it hasn't come back all the way by any stretch, but pretty resilient actually the last

few days post that crash. I do think it highlights something pretty important for the crypto market, though, which is this idea that I think there's a tendency to look at it and think that it's just a bunch of people who are buying crypto on their computers, you know, with their own wallets, when in fact, the market has changed enormously and there's a whole ecosystem built around it. You have the big exchanges, you have people providing financial

services that are tied to bitcoin. You have derivatives contracts in the form of a futures mark it, which seems to be playing a huge role. And I don't think people have like appreciated enough the change that has overcome crypto and how it actually impacts the underlying price absolutely. So, you know, I think there's this sort of like crypto conversation and then there's the crypto market structure conversation, and we're both super interested in that. So today we're gonna

talk a little bit bit more about market structure. I'm very excited about our guest. We're gonna be speaking to Roshan Patel. He has the VP of Institutional Lending at Genesis, which can be described as basically a crypto prime brokerage. And so I think if we want to think about the role institutions are playing in the volatility, the role of hedge funds, how they're trading this, what caused the liquidations, where the money is coming in to buy the dip

is a great, a great perspective on all this. So Roshan, thank you so much for joining us. Hey, Joe Um and Tracy, thank you guys so much for having me. It's great to be here. So why don't you actually just start off before we even get to the crash or get to anything like that, why don't you sort of talk to us about where Genesis sits within the crypto ecosystem and sort of what your role is there and how you got to occupy that seat to just speak.

You know, Genesis broadly speaking is kind of a basically a cell side dusk in the crypto ecosystem, similar to kind of a bank prime brokerage desk. We facilitate the ability for clients of ours to trade as well as lend to us, borrow from US, um get yield on their holdings. And then recently, as of last year, trade derivatives with us BI lad early over the counter, so we kind of offer the whole janet of financial services

in cryptome markets. Genesis has its roots kind of they go back to really that kind of mid two thousands to a company called Second Market. Without getting too much into the details there, that company basically facilitated buying and selling I liquid company stock really like Facebook, Twitter, LinkedIn, like those kind of things in the mid two thousands

between buyers and sellers when those companies weren't really public. Eventually, I was sold to NAZAC and one of the dusts there started trading bitcoin in like two thousand eleven, two thousand twelve, and effectively that desk became Genesis and kept the broker dealer license, still based out in New York here,

and we've kind of grown a lot since then. What started as just a spot OTC trading desk added lending in twenty eighteen, which is kind of when I joined, and derivatives in twenty so like we've you know, added at a SLEW services and and Genesis now you know, facilitates billions of dollars of trades every you know, it used to be every month, now it's like every week, which is kind of crazy to think. You know, we

have a pretty large lending book. When I joined in, you know, we had a hundred million dollars in active loans outstanding. Now that's kind of grown to nine billion dollars in active owns outstanding as of now. I think prices are rallied a little bit, so maybe it's a little bit more. That mention of second market is kind of a from the past, and I haven't heard anyone

mentioned it for a long time. But what was what was the sort of like overlap between dealing with UM shares in the private market and crypto, Like is there a resemblance between the two asset classes or why did UM this service that you just describe spring out of the private market area second market? What was interesting about that is is connecting to sort of different markets, which was like you had early investors in tech companies as well as employees that wanted to get some liquidity on

their holdings or shares or options. And then you also and and those guys tended to be on the sort of West coast, and then you also had like more investor focused hedge fun types on the East coast. New York base that wanted to kind of get it on that and you know, weren't necessarily physically or you know, financially close to Silicon Valley. That kind of uh, you know,

marrying of two differ markets. I think it's it's sort of ties into kind of bitcoin and crypto trading generally, just because you know that the people on the West coast there that were early on tech tended to be the ones that were also early in the crypto space.

And it led Genesis and ultimately our parent company, Digital Currency Group, to establish a lot of these good relationships with early holders which are now you know, kind of larger clients, no showing, so that we have like a good asset base and a good client base and as well as investor based to kind of lead on to to help build our business into into the future. Let's

talk about that what that base looks like. And one thing that's really exhortinary, I mean, the sort of like the flora and fauna of crypto holders really diversified a lot. So you know, maybe before it's hobbyists on their phones or like weirdos, and now you have pension funds and your clients, like how many of them are sort of like funds that have some allocation to crypto sub strategic allocation or how many of them are sort of like very crypto focused. That's really the sort of like their

main energy. Yes, you know, that's really evolved. I would say over time, if you ask me, it was pretty much the vast majority of our clients were extremely crypto focused, a crypto native, and to to this day, I would say like a good portion of them still are as of late. It's it's evolved a bit where we do have more clients that are not necessarily crypto is their main thing, but it's sort of an adject thing that

they've added recently. I would say, are our cliente based now is probably like if I had to put like percentages on it, like seventy crypto focus, let's say, and the rest like more diverse and has uh as like

a primary businesses outside of crypto. These funds, and I guess maybe sort of the crypto focused ones and the non crypto focused ones, but I guess the non crypto focused ones, how many of them come into it because they say, Okay, we want to have some allocation to this space because it seems to be diversified or it's going up a lot. We want to have some exposure.

And how many you see come into the space because they see a nascent, inefficient market with lots of trading opportunities and lots of essentially arabs so to speak, to exploit because the space is still, broadly speaking, pretty immature. Both are both are pretty relevant in terms of the inflow that we see. Just kind of given the services that we provide, our clients are more focused on the trading ur and extracting yields and you know, sort of

value out of the market side of things. So I would say it's a little bit skewed towards that side. So since you're talking about the services you provide, when I hear prime brokerage, I usually think about investment banks UM servicing hedge fund clients specifically by providing money, so you know, lending the money to trade. Is that something

that you do as well? Yeah, definitely. So you know, we started our core business really by lending out crypto, particular bitcoin for cash collateral in terms of the lending side of things, and that trade was you know more or that real service was more you know, suited towards crypto trading firms that had a reason for borrowing bitcoin

in the first place. Now, um, you know kind of in I would say, like around November of eighteen, stable coins started becoming a much more popular and real thing, and you know, since we were more crypto native and focus, we were thinking, like, you know, why don't we consider lending out stable coins against bitcoin as collateral kind of doing the inverse of what we were doing prior, And that business has ballooned quite a bit where now about you know, it's about of our active loan book is

is actually stable coins right now, So you know, it's or cash equivalents like like tether dollar circle dollar packs as those kinds of things, as well as USD So you know, we do land cash against crypto and and a lot of the firms that do borrow that cash, you know, are probably clients of prime workers at banks as well. So I want to get into, you know, the recent volatility, but I actually think this is pretty important to just draw this point out a little bit

more lending stable coins. I mean, you know, we had um Sam Bankman freed on several weeks ago. He's the founder of f t X and Alimator, research is huge in the space. And you know, we talked about various arbitrage opportunities. How much is the sort of stable coin world essentially about the ability to move money quickly across different exchanges in a short period of time to either take a take advantage of price differences in spot or

futures markets and essentially attempt to close various arbitrages. Like how closely those two concepts are related. I think, probably speaking, this distable coin market, a huge aspect of it is sort of efficient settlement and timing on moving assets from point A to point B, whether that's for exchanges or even just more like settling OTC trades and dealing with dusks.

I think it's it's all relevant. You know. A good example to point to is really the most innovative and forward thinking banks I think out there are you know, kind of building these seven settlement networks UM, some are which are really mirrored on kind of Ethereum itself and

and kind of like private Ethereum networks. So yeah, table coins are really just just frankly just easier to use than wire is simply put right, So you've laid out what you do UM really well and it feels like you're in the perfect position maybe to describe um what exactly happened during the big crypto sell off. So there

was a lot of talk about positions being liquidated. I think I saw one number that was like outstanding futures contracts fell from I think it was as much as twenty eight billion in April to something like billion in a matter of days. And then there were all the disruptions at the individual exchanges like coin base and cracking and things like that. So from your perspective, what actually happened and what did you observe into the crypto market.

You know, over the years, you've seen some some pretty wicked crashes to the downside, similar to last week, although I will say last week was probably the most brutal I've ever seen in the last five years, but even even crazier than March. I would say for a couple of reasons. But you could point to like a specific headline or a specific narrative or specific theme that that could be the cause of it. But it's really hard to say if that was the ultimate reason why, you know,

the market sold off. At the end of the day, the crypto market is really just a spot order book and a derivatives order book. The derivatives order book is is very levered, and you know, there's a lot of people that take take positions down on futures and swaps that that want to get upside but have like tight liquidation levels to the downside. And you know, that market has liquidity until it doesn't, and then you know it could get a little hairy on the downside. And then

the spot market is the same thing. And the spot market is consisted of people that are buying and trading the underlying and I think really just what happened last week was similar to what you've seen before, where the you know, the futures market and the swaps market was was pretty leveled up. People were very very long, especially in the alt coins, thinking that, like, look, bitcoin has

kind of found a floor here. The next sort of thematic narrative shift that we'll see is a rotation into alts, and as long as Bitcoin doesn't fall through the floor,

the alts will kind of rallies. So a lot of the positioning was skewed down the risk curve and in more volatile assets, and pretty much the exact opposite happened, which was spot Bitcoin started selling off in a significant way, and when that happens, there's such a scramble for collateral in the market, as well as like kind of getting assets back to things that you know aren't really going to fall like seventy or eight percent, but you know things that are going to fall maybe like twenty or

thirty percent, like bitcoin. So there's a rotation back into bitcoin, and you know when that happens that the liquidations can get can get pretty wild on alts, and they kind of cascade. And the difference I think with what happened last week was usually when that happens once and gets to a certain point, it kind of bottoms out in floors. What was different last week it kind of just felt like it kept going and the pressure for the spots

selling just sort of continued. You know that that that's what made it particularly worse, I would say, relative to let's say in March of last year, which was kind of a one day thing and then kind of we rallied and there was also some solace in knowing that

other markets were behaving the same way. The fact that this was you know, sort of idios and neocratic to crypto makes it even a little bit more painful, but you know, at the end of the day, I think what the takeaway is from it is more impactful than like the than the actual sell off itself, which is look like, you know, there was no lender of last resort that had to step in. We sawraw down. There's no you know, injection of capital into the market, no

firms defaulted, you know genesis. It's you know, on our side, we manage our risk really well. All of our clients you know, topped up or return loans or you know, we didn't have any liquidations or defaults, and and the more it kind of just carries on and now you know that people left or another layer of survivors onto the next uh you know sort of market cycle. So it happens from time to time. It's hard to point to exactly what it is, but overall market moves on

and we're in a healthier spot. Now, let's say, so you mentioned the fact that we didn't get big defaults or failures in the market. Can I ask, like, how close do you think some market participants actually came to failure in that week? Because I saw some pretty crazy rumors flying around and I don't want to name specific names for obvious reasons, but it does feel like some people thought certain entities got pretty close to the brink. I guess I'm I'm asking like, how crazy did it

get that week? Yeah, it's it's an interesting question because it really depends on the entity and the sort of firm, the type of firm you're talking about, if you're talking about trading firms and art shops like, you know, kind

of our core client based. It was probably one of their better weeks on their direction neutral books of all time, primarily because their long spot short futures or short swaps, and when a move like that happens, those spreads really collapse, and not only do they come back to parity, they sometimes go the other way, so like they go into negative territories, so you get even more juice out of

the trade. So a lot of our clients actually, you know, did really well that week kind of being positioned appropriately for that trade and for that move. You know, if you're like a crypto hedge fund that's like aggregating you know, assets and kind of just sitting net long, it was probably not so fun for you. But you're not you know, as long as you're not levered on top of your

SPOT holdings, it's not really that bad for you. The only the only way really I would say firms are in a in a tough spot is if they're holding just spot, they have no cash and then on top of that they've taken leverage out against that. You know, in this market, I think the participants that do that sort of style of trading are it's just almost like a ticking time bomb, right. It's like they're not going to a round for that long because you don't really

need that much leverage to capture this market. And even Spot itself is volatile enough where where you know you you don't really need to like go crazy with futures or swaps. So I think people like to speculate and say like, oh, you know, this market sold off like all you know, there's X, Y and Z might have been in a tough spot. But when you really dig into it, it's like, you know, exchanges or fine, you know,

they're just facilitating trades. Trading firms had a great week even if they're long on their core spot or down on their core long positions and um, yeah, you know, service providers like Genesis, as long as you know, we're managing our risk and knowing our clients positions and knowing what our clients are are up to in their risk. Well we're doing fine as well. So overall I think it's you know, the price is probably the scariest part. The actual underlying behind it is, it's not so bad.

Can you talk a little bit more. There's been some research done. Josh Younger at JP Morgan put out a note about different times when the crypto market seems vulnerable, and you noted that US hours seem to be a little bit more volatile lately than Asian and europe hours. And there's been a number of people who have observed that weekends tend to be more volatile, maybe there's less

liquidity than the weeks. And in fact I saw some people talking about that on Thursday and Friday before all this, like this could be an interesting weekend, and then of course it turned out to be. Can you talk a little bit more about the texture of markets in different times and the way, say, traditional finance wires and institutions taking a break for the weekend has an effect on crypto,

which obviously trades seven. Yeah, there is definitely a case of the market depending on the hours, depending on the day of the week. I think there's a couple of reasons for that. One is like there's like a sort of Western market and in an Asian market, um they have different Sometimes they're very in line and doing the same thing. Other times they have different risk taking proclivities and preferences, and you know, they could sometimes be um

fighting each other in a sense. So like you know, you can see different price action in the Asia session versus the U S session just because the user base is positioned differently and then moving in a different sense, like you know, last summer, for example, in May, or really after the March crash, a lot of the minors and a lot of the sort of very long Asian firms had a little bit of concern after the way March moved that they were more inclined to hedge, So

a lot of the cell pressure came out of Asia, whereas the U S side of things had more of

a bid, especially in the spot market. So those kind of flows were competing against each other a bit, you know, regarding weekends and volatility on the weekends, I think a huge part of that is really the market is still very human driven it's not like everything is extremely algorithmic and high frequency trading and super qui pentative at the end of the day, that this is more of a speculative marketplace where there's you know, there's leverage, of course,

but also a lot of humans just kind of clicking buying and selling and on the weekend of course, like yeah, you know, no wires is definitely a part of it, but also like the larger liquidity providers might just be a little bit more wide on the screens, so you know, you'll kind of have like a easy way to like like there's just like a high chance that like a small amount of capital could could wipe through a lot of levels of the book, so you kind of get

those sort of drawn out moves. So I think it's really just the human element of it and the fact that Asia and the West are sort of two different markets and have their own little tendencies. So you mentioned algorithmic trading, just then why isn't there more algorithmic trading in crypto Because when you look at the space, you see a lot of fragmentation, a lot of inefficiencies um and pricing discrepancies like could in theory um that someone had a lot of profits. Why hasn't that happened more?

Don't get me wrong here, Like I think there's there's definitely a lot of algo trade and going out a crypto, especially on the art of it at exchange side. Um really since since when when March or kind of January to February where those spreads were really wild, the very smart art trading firms out there definitely started looking at the space or and got involved in a big way. I just think the way the market is structured leads to like some ways that you know, it's it's more

difficult to be an art shop in crypto. You have to manage a lot more nuanced than say like uh an exchange or et F art shop. One example is really just the blockchain itself. You know, there's a men pool, there's different chains. You know, it could be clogged with transactions.

Things could be slower on chain, so it's like physically more difficult to get assets from point A to point B. Even service providers like Genesis, you know, we we settle trades as fast as we possibly can, but when you know the network is clogged, there's really not much that we can do other than kind of put put in high our fees and wait for transactions to go through. So all those sorts of elements make make our nuances more prevalent, so you know, you do see a little

bit of widening there. And then there's also like limits on how much you can withdraw from certain places and liquidity constraints in terms of how much size can be actually thrown at this, where like people that have really big balance sheets and really big our trading capabilities might not be looking at a specific small art because it's not worth their time just notionally what they can make.

So you know, for all those reasons, I think you know you're gonna see these spreads sort of persists for a while and and it's a good opportunity I would say for like more like nimble, smaller size firms to to to really take advantage of. So just out of curiosity, what we're settlement times actually like um, the week of the big sell off, um, you know, settlement times specifically for Genesis. I mean, we we were pretty good about them, you know, we we got through all of them totally fine.

I think on the exchange there are some delays here and they're like kind of t plus one, which is really just an eternity in crypto, which you know normally in traditional finance, it's like T plus three and it's like wow, arrives on time. And I think you know, there was a little bit of clogging of the ethereum mem pool where gas fees went super high, and oh, I forgot to mention this earlier. You know that that causes it so that it's basically really hard to move

assets on ethereum. And there is a lot of collateralized lending going on on Etherium, like you know, people are posting the RC twenty tokens or eth as collateral to borrow like stable coins from protocols. When a sell off like that happens in spot moves so significantly, all those sort of on chain deposits are very difficult to top up, both from a collateral perspective or returning the loan perspective.

So you get this cascade of on chain liquidations where the prices of things on decentralized exchanges might be vastly different than the price on centralized exchanges. And it's really just a product of difficulty actually, you know, coming in to support the bid and then and then it all sorts of normalizes and then and then it kind of

builds back from there. But yeah, that that the pace of that is difficult, right, and I want to go back to the crash, But just from a sort of market structure standpoint, speaking of the d the defy exchanges,

they don't go down, but the fees absolutely sore. The gas fees, the sort of the the block space that's required to execute your trades, everyone rushing through the door, it all, it all holds up structurally, but you could it's I guess it's easy to imagine and I'm thinking about algorithmic trading, how in periods of high vall are opportunities just completely disappear when the sort of I guess you could say the de facto commission of the trade

absolutely sours. Yeah, I mean it depends on the size of the art. But in a sense like sort of because like people can still pay really high gas fees and jam themselves into the into the pool and get

top priority from miners. It's just a matter of like what if the opportunity you're looking at is worth that, Like a lot of like the smaller things aren't really worth that, so they just kind of hang for a bit, so just to go back to uh Sunday for a second or that that crash And by the time people listen to this, I think it'll be two Sundays from now, but everyone should know we're talking about going back to that crash. Who bought the dip and you? Was it institutions?

Was it funds? Was it retail? I actually had someone talked to me like, I bought my first crypto today after the big crash. I know there was at least I know there was at least one retail buyer, probably many more. But I'm curious, like what your senses in terms of like what what put the floor under the market and sort of what contributed to what's actually been a very strong bounce back as of right now. Yeah,

it's it's so funny. I mean, I was working on Sunday and kind of on shot with the desk, and the amount of times I said, like, who is selling? Was that it was kind of crazy because the only thing we're seeing on dips like that are our net buyers.

And granted, our our flow is very skewed and biased towards the buy side because it kind of the new Sure the clients were dealing with, but we were seeing institutions come in buying the dip, like you know, large hedge funds, trading firms, as well as ultra high networth individuals. Like really every single piece of flow that we saw in like the sub two k eight range and sub

thirty five k bitcoin range was just net buyers. So like we were supporting the bid in many ways there, and the question was really like, why the heck is you know kind of selling off so hard? So you know, we we've just seen a lot of net buyers there. Well, what's the answer to that question? Like when you were asking that, why, so what is the answer? Because I feel like we haven't really correct It's like who where

did the selling pressure come from? And who wasn't Yeah, I mean it's like the billion dollar age old question, right, It's like I think it's just at the end of the day, you kind of just have to look at the activity on exchanges and the sort of the trading that that occurred. And there was large spots selling on certain exchanges. So someone out there with a lot of inventory, um basically, and maybe it's not someone. I don't think

it's definitely one person or anything. Like that. It's just like there was just a lot of exiting from the market in spots. So you know, we don't know who who that was because it's not really the flow that we see, but it definitely existed. So you mentioned UM leverage right at the very start of this conversation and UM more recently, you you mentioned this idea of people borrowing in ethere um too and using that to borrow UM stable coins and then do something else with them.

I mean, this is something that has come up again and again in all our podcasts on Defy, and I know Joe has been asking this question of like where is the yield actually coming from? And why is it all crypto doing stuff with crypto? I guess it just feels very circular or sort of like crypto all the way down, Like somehow crypto is generating money from other crypto, but like what is the underlying mechanations of like how

that yield is generated. Yeah, now I've been watching I've been listening to kind of the recent podcast and it's it's it's it's a question that comes up so off and the Aaron one was great, by the way, you know, I think there's two there's two sort of aspects of that yield that comes from the table point. One is the more the one that makes more sense, and the one that's easier to understand. It's really just the basis trade, which is of course retail and leverage traders want to

be long. They bid up the market in futures. There was a good tweet actually by Sam Bank and Free who was on this podcast, that kind of described why that exists, and in a nutshell, it's basically like, if the crypto market is worth you know, one or two trillion dollars, and the sort of traders in the market wanted to be worth four trillion dollars, but only five billion dollars is being lent to the market as spot

sort of cash leverage to use. The remaining difference is sort of bid up in interest rates, and that causes derivatives and futures, you know, to kind of go bid relative to spot, and then that's reflected in interest rates, and then of course you get good yields on cash for coming into the other out of that trade and trying to help close it, which you know, it's not completely free money in any sense, but it's it's very simple to understand why you could earn yield on your

castion that way, and it makes sense like from an

end to end non circular crypto perspective. The crypto circular perspective is, I think where you're gonna get as more on the yield farming side of things, which you know that that aspect of the market is game theory psychology in terms of kind of getting in getting out yields like kind of delta risk and an impermanent loss and thinking about all the ways that you know you can actually extract the yield but also walk away in notional dollar terms in a decent sense without having to take

uh sort of large bosses there. I would say the main reason why those yields exist is really protocols are formed which have an native token. That token contributes to governance or has some sort of value tied to the protocol, either through like a burn mechanism or some sort of fee generation mechanism. Basically it's somewhat valuable if the protocol is valuable, and then to incentivize people to use the protocol, especially at the start of the protocol's launch, the protocol

will emit sort of that token. Two people that contribute to providing liquidity on on the protocol, and that causes

you to have good yield opportunities in crypto. But you know, a lot of what I just said there was like you know, at the start and at the beginning, and you know that eventually dies down, so like it's not really something for like the passive yield yield seeking investor to kind of just be like, oh, I'll just park this here for a bit, And you can do that in many ways on chain, but the sort of the crazy yields that you're talking about, you know, you wouldn't

you wouldn't quite see if you were just so passive. It takes a little bit of understanding as well as like nimbleness and willingness to be able to move around. And also like the fact that Ethereum has like two

pretty large side chains now. One is called Matic it rebranded to Polygon, and the other is Antum, where you know, though you're basically if you're willing to go change up the change you're looking at, you know, you can be compensated in a way because a lot of people aren't just going to go do that, so like less people

are looking at it. And then you get into other sort of layer ones like Salana and things like that, and you know you're compensated effectively for dealing with crypto, but then also going further down the rabbit hole and into into areas where you know a lot of people

might not be looking. So yeah, you know, the first time Roe, you and I connected, we were talking about the basis trade and I want to get to that in a minute, but before we do, just you know, one of the theories going into the crash, and you know, you were sort of racically questions like who is selling, who is selling, and there's some One of the headlines that initially hit the market was China climbing down on

mining activity. And I know there's so many rumors in this area and it's always contradictory headlines and very opaque. But minors have Fiat obligations. Their liabilities are in FIAT, either in the form of electricity or acquiring new hardware in the form of chips. How much could that have contributed? And I saw a bunch again on Twitter and things that are translated out of Chinese like multiple times and reinterpreted.

But this sort of like miners having to pick up their stakes, so to speak, pay off their bills, liquidate any holdings of coins that they had generated before winding down. How much plausibly could that have been a catalyst. And I'm just curious, like sort of more broadly, I know, like Genesis, I think you have a mining cousin or sister company out there, Genesis Mining. Correct me if I'm wrong, But how much does that play into you know, sort

of like that fit into the ecosystem. Yeah, so our our sister company is actually a DCG foundry, which is uh it is effectively a mining and staking company that's it also has like a core mission to help bring pass rate to North America and also do it in a more conscious renewable way. But you know, the mining thing, and I've talked to to Mike Colier. They're a bunch who's kind of runs that business and it's very very

in tune with with the mining ecosystem. And you know, we have fins that are that are miners as as well. I think it's it's less likely that the whole cash obligation uh woe was like it was a reason for this most recent sell off, mostly because the break evens for miners in terms of like the prices they need these assets to be apt to sustain their electricity costs and operational costs are significantly lower than where spot was.

It was more of the relevant concern, I would say in like the March of crash where we saw a move past like four k and kind of into the five K range on bitcoin, because at those levels you're getting really close to this sort of cost of mining, and and like you know, it gets a little harrier down there in terms of miners staying profitable if prices were to sustain in the lows they're here at like you know, over third k, miners are doing fine in

terms of operational expenses relatives revenue. So I don't think like a sudden urge for like you know, oh, you know, we have to pay our bills, you know, cause the sell off. Just on a related note, I mean, even before the massive sell off that we saw in May, there was a sharp dip in bitcoin. I think it was a few weeks before where some people were blaming it on a power outage in Shenjong where there are

supposed to be a bunch of miners. Can you maybe just talk more generally about how the miners and changes in hash rates and things like that actually feed into pricing and the market, because it seems like when like every time Bitcoin does something that people can't quite explain, the miners often come up. And it's unclear to me whether that's just a convenient thing for people to point

to or whether it's something that actually matters for the market. Yeah, I think I think you actually that they're and you know, I'll speak broadly on this because I'm by no means a mining expert or anything like that, but I think from a psychological perspective and a trading perspective and markets perspective, and our markets sell off drastically and suddenly all of a sudden, there's like a there's a feeling that like who is responsible for this? Like where do I point

the finger? Like someone has to there's something that you know, can can bear the blame here. I think miners just kind of given there maybe like elusive nature and activity are easy to point to, but in reality, like it's not really you know, it's not really the cause of like you know, like the electricity concerns and the capex concerns or the or the or the outages and shen and like, you know, those things relative to the actual blows in the market, I think are are pretty small

and and don't don't matter as much. But people like to, you know, paint narratives and and find a way to like be like why is this happening? So that I think you kind of nailed it with like why people do it? It's just because people want a reason, and miners are conveniently, you know, not that public about what they do, so it's easy to kind of say, like, oh,

it must be the minor. Alright, one last miners question, But this is something I've wondered about, and I'm kind of guessing the answer is no, because there is, as you say, this huge gap currently between spot and UM cost for most of them. Do minors currently participate in the futures market and use them as hedging instruments at all? Kind of the same way oil companies locked in prices? And if not, do you see a future in which

the futures market serves a commercial purpose for miners? If that spread word to compress and it became and the they had a need to hedge volatility, So they definitely do they definitely do they used UM, They use futures the use options, I think really after March of last year, with with that sell off, I think a lot of them are even more inclined to do so, which is kind of why you saw us rally from the lows of like let's say four four K on bitcoin to

ten k in June on pretty much a pancake forward curve, Like the June futures were barely above or the September futures were barely above Spot throughout that whole move up, which is historically very different from than what you've seen in the crypto market, where like if the market swings bullish and like two X is, you know, usually you see a bit up in premiums. But the futures were really tight relative to Spot. So the prevailing theory is there is that, like, you know, there must have been

a tight offer on futures. Who is selling those futures? You know, I think a lot of that people that have you know, sort of forward receivables in crypto and want to be able to hedge that, and and so you know, that's why you saw a little bit of pressure there. So there's definitely a sophisticated, you know, participant in derivatives by miners. So I want to get to We talked about this um several weeks ago Row, and you know, I think this trade is still out there,

and you sort of hinted at it. But there is this sort of like I called it in a newsletter,

the sort of like free money bitcoin trade. And you know, nothing is free money, there's nothing guaranteed, but there is this big arbitrage opportunity that exists that more and more people are talking about, which is that there is a huge gap, at least there was between bitcoin spot on the various exchanges and the various flavors of futures, whether we're talking about CMME futures or some of them more exotic futures on the exchanges like f t X and

cracking and so forth. And a lot of people seem to be interested in this opportunity to centrally by bitcoin now short the futures because they're trading so much higher, and then over time and theory they converge and you get free money. And these sort of basis trades are like common in commodities, but they tend to be like way narrower and rarer than they are, and usually there's

a cost of carrying. So can you quickly sort of like describe this opportunity and the degree to which sort of like non crypto interested money is sensing this opportunity and interested in exploiting it. Yes, I mean on the interest side, there's definitely a lot of more eyes on it right now than I would say there ever had been. Um, you know, it's it's a lot more popular, it's talked abou a lot more. You know, in a nutshell, I

think you know, you described it pretty well. But you know, derivatives traded a premium to spot primarily because people want leverage and people bid up those interest rates similar to kind of I was talking about what the market cap should be worth in the eyes of traders relative to what it is versus the amount of cash that's been

that's being lent to those traders. So you know, all those parameters slide around, and I think you know, in in February and May and March and April, you had a pretty wide gap between where the market cap was trading and versus where people thought it was going to go. But that is a you know, that is an emotional difference, I think, and and it and it ebbs and flows

over time. So if that gap narrows, which it actually has right now as we're talking right now on this date, you know, the futures are much more in line with Spot because after the whole sell off, all of a sudden, people think that the market is not going to go up as much and they don't really have a desire to own the curve as much. So to the spreads and the sort of yields have compressed there in terms

of the difference between the two. But the underlying market is so volatile in crypto like the spot market, where you know, the the interest rate market, which is basically

the basis market, is equally as volatile. So these these annualized rates swing all over the place like they were pretty much negative the whole way through really since nineteen twenty they've been positive, and then you have these like really really wild moves where the rates are super positive because they're so bit up, and then they kind of usually come down. And I would say it's actually a in many ways, it's a it's a leading indicator as to where kind of spot could move next, because and

traders talk about this all the time. It's like, as these rates kind of get bit up and these curves

are very blown out. You know, it could indicate that, like, look like there's there's some sort of wash up coming up next, because you know, things are just a little out of control right now and it's way too profitable to just buy spots sell future, where like I kind of just have to do it, and you know, the unwinding of that trade, you know, kind of going back to talking about, oh, why is the sell off happening?

I forgot to mention this then, but I'll mention it now because it came up when you unwind this trade that the action you have to perform in the market is buying future and but more importantly selling spot at the same time. So when markets sell off, the basis traders that are involved in the market are going to have to sell spot and buy future, adding to the spot pressure that you see on the order book. So that is definitely a huge portion of the of the

offer you see right after a liquidation sell off. So you know, I would say those are kind of the things to consider there. But also the margin on the futures leg is a concern generally for all traders and part of the reason why potentially these markets blow out so wide because you don't really want to be in a position where you buy spots sell future, but then the underlying ten xes or five x is from there. You know, it's it's a it's a very tough position

to be. And like last summer, for example, if you'ring was probably trading around, and the September and December futures were trading, and even the March futures were trading at a pretty good annual eyes basis yield where you would be very comfortable to buy spot self future, but then ethereum teleports all of a sudden, you're scrambling for margin on your future's leg and you know, it gets a little harrier. So it's not it's not totally cut and dry and and as riskless as as it might seem

on the surface. This is gonna be a weird question, but how much does cryptos allure sort of depend on these inefficiencies and having a fragmented market, because it does feel like a lot of people are clearly in the space. You know, they might talk about blockchain technology and changing the world, but there is a big chunk of people who just want to make money. Bitcoin is really volatile.

It's fun to trade. Stuff is happening every day, but it does feel like as the market matures, the potential for those sort of big discrepancies in things like spot versus futures, like maybe that starts to go away a little bit and that attracts and starts to wait. I don't know if that's I'm having a hard time putting

this intowards but hopefully you understand what I mean. Yeah, I think I get what you're saying, which is like a lot of people will be a lot of market participants are here for the the inefficiencies of the market, and once the market becomes super efficient, it's like, Okay, onto the next thing. What's next? Right, It kind of gets to the the yield farming idea that you mentioned earlier, right, Like a lot of it depends on the new the new coins, and that's where the opportunities are. But sorry,

go ahead, no, I agree with you. I mean, like broadly speaking, like, yes, the market is going to get more efficient over time, and the amount of very blown out or you know, high yield arbitrage opportunities and similar kind of are are smaller. At the same time, though, I do think the tailwind of the fact that like a new asset class is born here, which is like

pretty rare for anyone to see in their lifetimes. Like you know, you don't really get like a new asset class, right, Like it's like, okay, you know, you have assets and they kind of exist like stocks, realistic a gold, but like, you know, now there's a new asset class. It's called crypto, whether people like it or not, Like it's here to stay that it's like Pandora's boxes open, like you know, you can't just put this back and like end it. So it's gonna be around in some form of the other.

And and given the difference between the crypto market and the traditional market, which I think the key difference really is access, Like there's really low barriers to entry for someone and and individuals to kind of come in and trade and and you know, do leverage or whatever they

want to do. Where um, it's going to be much more tied into like the nature of like the way humans are are trading, and the emotional aspect of and then the psychological aspect of markets more so than like let's say the stock market and the you know, the

commodities markets, out there. And on top of that, there's no sort of blender of rap last resort or or or similar in crypto, where like you know, liquidations can happen and markets can can go really really south and and no one's really gonna no one really has to come in and step in and be like a designated market maker. Similar like you know on the CME there are designated market makers and a lot of these products out there which are forced to be on the bid

if markets sell off a certain amount. You don't have that in crypto. So the democratic nature of the market, the fact that it's a new asset class, I think it's going to cause these opportunities to almost persist a lot longer than we think. So, you know, maybe some very very future hyper efficient state like crypto has just used as colloquially as as as cash or or you know, venomo or stable clans, whatever, But I think we're long ways away and these inefficiencies should persist for some time.

I just want to go back real quickly to the orb the spot futures are. I mean, you mentioned the risk that can happen even if the trade should close profitably. We get this sort of teleportation higher, which happens all the time in crypto, and so even if eventually the spread does close, you have to put up a lot of cash. Potentially. Is anyone working on or you know, just solving the problem of using your spot as as

your collateral. Josh Younger has done that work. It's like if there was an e t F, then it would be super simple because then you'd have this liquid product that traded on all the normal exchanges, just let you know, on a desk, and then the futures trade on a desk, and then the e t F becomes your collateral and you don't have to worry about putting up new cash. Like how much could that you know, could that be

made easier? But basically yeah, I mean you know one example of this is and it's very relevant, is really Genesis started our registrating desk in May. We've seen explosive volumes there. I think that's actually kind of why I'm on this podcast. Anyways, Joe I shared you that that report on Q one which had a huge options and forwards, uh sort of trading section. Genesis is one of those venues where you can post spot bitcoin against a short

futures position. You could face this bilatterally over the counter, or you know, we can cross you on CME or a different exchange of your choice. But you know, well we'll we'll do that for you because like we think it's good collateral. We know that your short future is long spot. It's a place that you know, it makes sense to us and we're happy to Can we just set that up after the podcast? Can I just go do a Genesis account to like do that because it

seems pretty easy. Yeah, just onward and yeah, shoot me a message and I'll get I'll get you also have very very simple and straightforward but in all seriousness, um, the Genesis is one. But but also more exchanges are are getting involved in that too. I think what Josh Younger brings up is really like a liquid point of access for similar in the brokerage model, like the CMME model, the ETF model needs to have that sort of be

a thing to to really close the spread. That is true in the sense that we would we would need that to see like that the trade be much more in line with like the traditional cash financing. Great in

the market. I think the closest thing honestly you can see to that you know not financial advice or anything, but like if hypothetically, you know, g BTC was used as collateral, which is not actually you know, how to discount to NAV, Like you know that that's something where like you know, long GBTC short features is like a trade where you get the discount to NAV and then also the collapse of the curve as well. So there's like, if you're prime broker, even where to take that and

maybe some out there to do. I'm not I'm not actually quite sure, but you know, those are kind of things you have to see for it to be more of a point of access from those sort of brokerage accounts into the marketplace. So yeah, wait, the idea of Joe transacting with you actually reminds me of a question that I wanted to ask, which is how do you manage your counterparty risk? Because you know there are a

lot of i would say sketchy players in the crypto space. Um, there's a huge question mark over doing due diligence and how you do that and avoid money laundering and things like that. Joe clearly sketchy guy. Um No, but like how would you how would you go about like doing due diligence? On a potential client, and how does it differ from investment than doing due diligence for prime brokerage

services for something more traditional like a hedge fund. I mean to start regarding the m L and ky C we we actually Genesis is in the New York entity. The broker dealer is kind of the point of access for all the onboarding. So we're SEC and FINN are regulated, and our onboarding is the same that you'd see for onboarding to any broker dealer, which you know, in short,

means that it's a long process and very thorough. Then we do kind of warren clients before they onboard, like look like you know, set aside thirty minutes to fill out the app and then also expect some questions from compliance if anything isn't perfectly right, so you know they're The onboarding is I would say, as robust as any bank out there in terms of the other part of

the risk, which is the counterparty and credit risk. And this is kind of I think what makes Genesis a pretty unique player in the space because of the client base we've chose to to have at this point, you know, there's definitely a lot of variety of players out there in the crypto market. What we do is we kind of are facing not that many borrowers really, you know, we're not a type of shop where you know, any sort of retail client can just post bitcoin is collateral,

borrow cash, go do whatever with it. But then like if the price sells off, there's no like human interaction there, and like we're just gonna liquidate that collateral across thousands and thousands of customer accounts right now as at a nine billion dollar it's probably ten billion now active loan book outstanding, you know, we have I would say less than a hundred and fifty active borrowers, which is, you know,

not that many considering the size. And also like the top ones, the top trading firms, you know, like our our core clients that we've known for years. But also we understand the nature of the risk they're taking, the nature of the of the markets they're participating and the

and the trades that they're involved in. So when an event like March happens and bitcoin goes from like eight K to five K, like rather than liquidating a bunch of retail accounts across thousands and thousands of clients, like what we're doing is like, hey, like we understand that the bitcoin or the ethereum collateral you've posted with us is has fallen in value significantly, Like how fast can you get me the p m L from the future is leg to close up this margin gap, like whereas

it is it on CMME, is it on some of the more faster settlement exchanges. And we kind of have that conversation and we work with our clients to to understand their risk and and and bring bring the assets back into line with with where they should be on

collateral levels. So that's kind of the main thing. And then really just like in terms of managing our book, I think we've done a really good job of understanding you know, liquidity and duration and and creating like a very good internal platform which we spent a lot of time in nineteen developing to help us have very good visibility into purve risk and things like that, so a very good picture of kind of how assets are going

to move in and out of the firm. And then also lastly on this point, I'll bring up kind of like reserves and balances, like banks have to obviously keep like reserves on their balance sheet for outflows and things

like that. We're really good at like kind of thinking about the interest rate market and kind of how the market is position from a demand perspective and supply perspective in terms of Bitcoin, ethery UM, and cash and then all the other or altos of course, but those are really the three main ones um and really you can call it crypto and cash, where you know, we we can position ourselves in a defensive way if we think that market's going to sell off and bitcoin is going

to be much more valuable relative to cash and kind of skew our inventory that way. And then when you know, markets bottom out and curves are flat and things are kind of looking like they can go the other way, we'll we'll position the reserves and inventory accordingly. We're we're

floating large balances but also thinking ahead. So like going into March of last year, we were well positioned for that because we we're really talking about it on the dusk before we're like, look like, I feel like it makes a lot of sense to hold a lot of

bitcoin here. We're probably going to have some sort of move that that we might need it, and even last week, like you know, we're positioned, we're positioned very defensively on the on the reserve front in that nature, and um, yeah, you know, we're always thinking ahead rather than like, you know, we're not reacting, we're kind of like setting up for the future. You know. I want to go back to

something that you said early on. I think it might be really important in this idea of like can the crypto market hold up with Bitcoin selling off and with the rise of ethereum this year more talk about the so called flipping ng and maybe a theorium will be a bigger coin this year. Could that happen in a sort of orderly manner. I mean, of course, eventually that

could happen, Maybe it could even happen this year. But are we still at this point where there's just so much of the money is Bitcoin related that any Bitcoin decline sort of automatically creates triggers and liquidations across the

the across the ecosystem. Yeah, that's an interesting question because I think crypto market it evolves and involves at a pace that's that's that's pretty fast, sort of astounding in manuates in terms of like the narratives and kind of what people are doing and talking about or thinking about it's like you're almost on from one thing to the next. Like, you know, two weeks ago everyone hated Elon Must, now everyone loves Elon Must. Like what's happening? You know, there's

like that the shift in the narrative there. But speaking specifically about Bitcoin and its position in the market relative

to the others. Um, you know, I think for now, bitcoin it is the it does have like the most common sort of collateral use case all over the all over the place, whether that's at Genesis or even on like the exchanges, where a sell off in bitcoin will always kind of impact other markets because kind of the collateral need for for it to be acquired as well as kind of like alts are usually haircut as collateral even for us, Like you know, the the LTV that

we'd lend against bitcoin is very different than the LTV would lend against alts, and where we issue a margin call is different. So like if the alts were to sell off, you know, like it's going to be more likely that those have to kind of move into Bitcoin to support margin and things like that. Um. That being said, I think like we're going back to the fact that narratives can change very quickly. And the flipping being and

Eve and whatnot. Like, I think the market is transcending in many ways a lot of the ties to its past that it had before, like even for forgetting bitcoin for a second, but like tying assets to personalities, like you know it really like you know, everyone's like, oh, I think Tracy mentioned this on previous podcasts, like, oh, it's like decentralized. It's like the market's like, you know,

so out there and democratic. But like you know, a single tweet from a CEO could like move it right, but as that happens more and more, it could dilute the impact of that, and then the market sort of transcends that. So as you know, mapping that analogy to liquidations and collateral on bitcoin, like as all this stuff moves down quite a bit, and bitcoin you know, has

to be used as a collateral last resort. Like over time, I think more and more exchanges and even Genesis will will start using and and and liquidity will improve in other alts where we can use it more as collateral. And then you know, maybe bitcoin doesn't have to be that sort of de facto collateral piece um that's used in the market sort of transcends that nature. It's just gonna take time, and I think the fact that bitcoin is like the sort of underlying based layer denomination of

everything will probably stick around for a bit. But I do think don't be surprised if it changes and change as faster than we think. Right. Wait, can I push you just slightly on that, because this is something I've been thinking about as well. But like, the bitcoin is almost designed to what it is designed to sort of be this static, stable pool of value, and it's the supply is like destined to reach a certain amount. I can't remember exactly how much it is right now, but

then it will stay at that forever. Is there a point at which there's a mismatch between bitcoin the size of the market and it's usefulness as collateral versus the size of the overall crypto market, Like, is there just

a point at which crypto could outgrow bitcoin? Yeah? I know you're you guys are getting really into the weeds of the questions here, which I actually love because it's funny, like when you talk about long term bitcoin security and kind of the concerns that might be there, Like a lot of people that are involved in the bitcoin space will like really just shun you, like kind of dismiss it.

So maybe I'll get some hate for this response, but I will say that you bring up a good point, which is like, yes, bitcoin does have a finality to it, where if actively the the subsidy that's issued for you know, the blocks have to sort of ways of paying miners for securing the network. One is the block subsidy and

the other is transaction fees. So the block subsidies is the one that's declining in half every four years, and eventually it's going to asmotically approach zero, where it's basically nothing. So and and bitcoin is proof of work where miners have to spend energy and real you know, sort of uh power to secure the network, where they're going to

have to be compensated in some way. And at that point, the way that it's going to the conversation occurs is through the transaction fee, which is like the people that are trading or the people that have transactions in the block are effectively paying the miners a certain amount. So what needs to develop them the long term for bitcoin is a robust market for block space um so that

the miners are compensated to pay for it. What's happened now empirically in the past two years is you know, there's a robust mark it for blocks based on Ethereum, and people are paying to be included in transactions quite a bit there on Bitcoin less. So part of that is because you know, it is sort of a store value narrative now less so than a medium exchange. And it's not like it doesn't really have robust decentralized finance

protocols in it yet. So what I think would have to change there in order for that market to develop appropriately is like this type of stuff you see on ethereum where you can like borrow of lend even trade like you need swap deck style, like Bitcoin needs to figure out in many ways to incorporate that into its on chain layer one sort of status the way I see it, And this is like, you know, maybe there's some cryptographers out there that are going to argue with

me on this point in some ways, but I do think like at the end of the day, you're gonna need like applications built on bitcoin where people are paying to use them so that the miners can be compensated when there's no block reward. And I think how that develops in the future, like you know, in the past few years, it's it's really been ethereum show there. Could that change? I do think so? And do I think

it has to change at some point? Yeah, Like I think you know it's going to have to that market's gonna have to develop in many ways. I guess I just have one last question, and I just want to say I enjoy these conversations a lot because talk about market structured and future it doesn't hurt my head quite as much as the conversations about like staking and all that stuff, And I need to learn more about that.

Do you worry or is there concerned about like this sort of like whether the future of crypto is entirely on chane trading at some point, I mean, Genesis is a regulated financial institution, point bases, all these are. Is there like a threat long term to these sort of like I guess middle ground companies that handle what you do, which is like you're dealing on the chain and dealing

with wires and traditional finance companies. And do you think about like risk of getting squeezed by more activity just people trading directly on the decentralized exchanges without the knee need for a GENEFF. I think, you know, in the long term, there's going to be more of a harmony between centralized finance and decentralized finance. They're gonna have to work together in many ways, um more so than they are now in order to kind of provide services to

the broader marketplace. I do think the future, you know, broadly and like ultimate finality speaking, is going to have a lot of more on chain activity than it does now. But I think the way, you know, kind of bringing this more high level back to kind of like the user and the participant in the marketplace, at the end of the day, they're they're humans, right, like you know,

we're all we're all humans. We we view counterparty risk to protocols, to exchanges, um to to to really banks whatever in different ways you know, f d i C

non f d i C, things like that. There's always going to be in need and desire for market participants to have things that are not completely bearer because like you want that as like a as an asset holder, as like a diversified and responsible whether you're an individual or a family office, hedge fund or whatever, Like you shouldn't have everything be in your control or nothing be

in your control. There should be a balance in a ratio, and I think a lot of services like Genesis and other companies in space, you're going to kind of be there to help marry that that difference and and and provide that diversification that holders want. But I do think of course that yes, DeFi is going to be it's it's going to be big in the future, and there's

gonna be a lot of stuff going on chain. I think another thing to think about when thinking when like kind of looking at the outlook, there is like the pie is growing right now year over year, a day over a day really where like nothing is cannibalizing into each other quite yet. Where it's like as long as the market is growing, there's more and more stuff to to to do in trade, and more clients are entering

and more participants are entering. So you know that that as long as that's going on, that's going to be you know, not very competitive and more like sort of collaborative. Of course, like once Crypto is that it's like finals, they were like every single human on the planet is like involved in it, and there's now like three thousand exchanges like yes, then then gets a little bit more

competitive and cannibalistic. But like there's like a lot of room there right, Like you know, it's like not that many people are using this stuff just yet, like you we talked about it. But when you look at like

this sheer number of people out there. I was listening to like CNBC this morning or wherever, it's like, you know, they're like asking people that have never used Defy if they think Defies the future or or on Chaine is the future, and they're like no, and then then everyone's agreeing, like yeah, like look at this guy brings up a good point. It's like no one's using this yet, Like you know, you're asking people that aren't using it if if they think it's real. So I think there's a

lot more room to grow. And you know, CFI and d FI will have a lot of sort of harmony in the future. Broh. That was great. That was a fantastic conversation, Super helpful both on the sort of what just happened over the last several days, but also the big picture and the long picture. I love talking to you and thanks for coming out on a lot. Yeah, thank you guys so much for having me. This is awesome. Thanks for that was so good. All right, take care of man. You know, I sort of got got there

in my last question. But I do find like, you know, like I know we have some DeFi episodes coming up, but some of these questions about market structure and futures trading and arbitrage and hedge funds and prime brokerages, it's just like I feel like like I've been a cozy like blanket or like hoodie we're talking about it. I still like sort of like feels like I kind of

get it in a way, you know what I'm saying. Absolutely, I definitely feel more comfortable having these kind of conversations than they old farming one with Um Aaron for instance, that was a bit tough. Um. But I gotta say, like the thing that jumps out at me, the thing that jumps out at me is just this idea of

how far the market has actually come. So I think there are people, you know, probably my self included, but I think of a bitcoin minor, and you know, it's some guy that maybe has a few computers hooked up somewhere slightly cold, um, with good temperatures and cheap energy, and he's sort of like doing it in his basement or backyard or whatever. But the way Row was describing the ecosystem, now, you know, you have huge miners basically computer farms doing this and taking out futures to hedge

their exposure. Like that is such a sea change from where we were at the beginning of all of this, and I think it's still kind of like, I don't know, it's really noteworthy, I have to say, like my misconceptions

of it are probably the flip. Like I feel like I've been like conceiving of miners for quite a long time, as these like super industrial operations largely out of China and other or not even largely out of China, but it's sort of all around the world where there's cheap energy and good temperatures and stuff like that, and that

like that that's been this industrial thing. But the speed with which, like the sort of like pure financialization of it, and the the existence of crypto prime brokerages and the popularity of stable coins to move money in a way that's in many ways, I actually do think it's probably

much better than the traditional wire system. That's the part that I would say in recent you know, not now but it's sort of like thinking about mentally updating my model of the space, the swaps market, the derivatives market. How big that's gotten is the part where I've like sort of most needed to sort of like update my mental model, so to speak. That's a really good way

of putting it, updating mental models. I gotta say the point about you know, um crypto sort of getting worried over settlement times that are something like T plus one when most of the traditional financial market deals with something like T plus two or T plus three, and I think some parts of the corporate ball market like still

send trade settlements by facts and things like that. It's it's pretty amazing, and it does speak to really interesting things happening in the space that could potentially be applicable to more traditional finance. Yeah. Also Rose just like so good at uh so clear um and I love like just sort of like getting the full lay of the land from him, in the full picture and sort of like going back and forth between translating crypto speak to traditional finance speak. Uh is. It's a real treat to

get to speak with someone like that. Absolutely, and I gotta say I appreciate his um willingness to risk the ire of the Bitcoin maximalists by talking about potential downsides there. It's a it's a risky strategy as I personally know. Yes, exactly. Wait Tracy before we go, Uh, how do you enjoy blogging these days? Um? It's fun. I've had a like a slightly difficult time getting back into it, but I am starting to ratch it up my volume, so I'm looking forward to that. How about you. I love it.

I love getting to write. I'm super excited. And I don't just say this as a plug, but people should go check out the Low Odd Lots blog because I'm I feel like I'm home again, getting to uh to be a blogger again, and I'm really enjoying it. Shall we leave it there? Yeah, let's leave it there? All right? This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why isn't all? You can

follow me on Twitter at the start? Everyone should go follow our guest on Twitter, Roshan Patel. He's at Roshan Patel, the VP of lending at Genesis Trading. Very clear, very great. Follow on this whole crypto space. Follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg head of podcast, Francesca Levie at Francesca Today. And check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening to