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CRYPTO 101
Ep. 691 Navigating the Crypto Trading Landscape and Market Structure with CoinRoutes
00:37:46
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- [00:00]
Crypto 101 Host
Welcome to the Crypto 101 podcast presented by Gemini, your bridge to the future of money.
- [00:15]
Bryce
All right, everybody, gather round. I hope you're having a fantastic morning, noon or night, wherever you are in the world, you are certainly in the right place. We are going to be diving into some incredible, incredible things today, all around algorithmic trading and business building as well. We have an incredible guest, Mr. Ian Weisberger, the CEO and founder of Coin Routes. Ian, welcome to the show and how are you doing?
- [00:42]
Ian Weisberger
Yeah, thanks for having me, Bryce. It's been pretty good. I actually am on my way home back to Dubai from the Plan B conference that Tether put on in Lugano. So it's definitely been an interesting couple weeks in Crypto.
- [00:54]
Bryce
Man, that sounds awesome. Brendan, you ever made your way out to Dubai?
- [00:57]
Brendan
I've yet to do it, but I've seen a lot of people like it out there. Like, it looks like a cool place. I heard that the food's pretty good. Obviously it doesn't rain a lot, so it's already pretty different from Florida, but.
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Ian Weisberger
No.
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Bryce
Yeah, that's awesome. Yeah, I've been once and spent a couple weeks out there and really did fall in love with that city. So it's cool that you're living out there full time.
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Ian Weisberger
Yeah, yeah, yeah.
- [01:21]
Bryce
Well, so tell us before we dive into your background, tell us about the Plan B conference. What was that all about?
- [01:26]
Ian Weisberger
Yeah, I mean, it was really interesting to connect with all the ecosystem participants and Tether and if you guys remember when Bitfinex was a big exchange back originally they're kind of the OGs, but now most more people, I would say know about Tether versus Bitfinex. 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 stuff still. So they have a ton of assets. It's just the asset, the velocity of the actual trading is lower. And I think that's also really interesting to compare them versus Binance, who over the past couple weeks has seen I think 20 billion in outflows or something crazy like that. So it's been interesting to see the different exchanges in the ecosystem over the years.
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Bryce
Yeah, it seems like Bitfinex historically has had really good liquidity, but none of the wash volume that Binance and a lot of these offshore exchanges just generate.
- [02:19]
Ian Weisberger
Yeah, yeah, for sure. I mean, the thing is, everyone's been. Been. You know what's interesting is a couple was it like two weeks ago now Black. Black Friday and crypto. Oh, yeah. People, I think, realized that these perp future venues weren't like, real, if that makes sense, in that, you know, they thought they had a position. They thought they had. They were long 10 Bitcoin, but they got. Or short or whatever, but they got washed out by the auto deleveraging mechanism. So I think people now are realizing that, you know, trading on these perp venues is not actually the same as holding or, you know, shorting spot. So it's been. It's been interest. See how that's kind of evolving.
- [02:51]
Bryce
Yeah. Did. Did coin routes help folks navigate a little bit of that Black Friday event on October 10th? What was your experience?
- [03:00]
Ian Weisberger
Yeah, it's a good question. I mean, look, it's one of those things where when you're in it at the heat of the moment, you. You feel like the. The world's on fire. But actually, we 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. And sales guys to, you know, at the phone bank, 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. That shouldn't have. And we were on the phone on Telegram, you know, as it were, with clients, making sure that they were good. We heard some competing platforms went down, you know, through the grapevine, because some of our clients actually have, you know, multiple systems, and obviously they trade on multiple venues. But, yeah, a lot of exchanges were struggling, and so we actually called that out before the exchanges admitted to that. Typically, we can see, like, as an exchange starts falling down, the error. The error rates go up, and then we're like, okay, so. And so exchange is having problems, right, to kind of get our clients to get out before it's too late, before it goes hard down. So, yeah, it's definitely. When that sort of volatility happens, it's interesting to be able to see the whole market.
- [04:04]
Crypto 101 Host
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- [05:20]
Bryce
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- [06:18]
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- [07:32]
Ian Weisberger
Thank you.
- [07:33]
Brendan
Yeah, it's been interesting in recent weeks. It feels like there's been a lot of outages. It's happened with Coinbase and Robin Hood and like, it felt like everyone was going down, whether it was that event or some of the other big ones that we kind of had leading up to this. There's been a lot and so it's been interesting. But, you know, it's good to hear that you guys were able to stay up and you had the experience to back it up. In fact, I gotta know if this is true. I was looking into you before we started the podcast. I saw that you started building in tech when you were 12, you launched your first business at 14, and then you co founded Coin Roots in 2017. Is that right?
- [08:11]
Ian Weisberger
Yes. Yeah. Wow.
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Bryce
Yeah, tell us about it.
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Ian Weisberger
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 any other job. I'm just, you know, I'm much better with computers than with people. But, you know, recently I've dealt with a lot of people in my role as CEO and so I don't really do that much tech anymore actually. It's kind of funny. But yeah, look, I started my career in tech in high school. I actually had a web hosting business in 2008 when I was in high school. And one of the core pain points I had was my merchant processing account were always getting like flagged and shut down because I was selling web hosting plans and whatever and literally like I had five different merchant processing accounts and at 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 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 do tech support. Kind of a funny story. But yeah, anyway, just the merchant processing situation back then was not good and it, you know, and so that's kind of why I started getting into crypto, why I realized that crypto was the future.
- [09:29]
Bryce
Yeah, it totally makes sense. And it's funny, I love crypto because everybody comes at it from a different angle. Sometimes, you know, we speak to folks who came at it from, you know, executive or Wall Street. Some people come, you know, cypher punk cryptographers, some people like yourself come, you know, know from the tech world. And you know, we really want to get a good understanding just at the outset of, of exactly what Coin Routes is. We've kind of alluded to it, it, you know, helps folks manage their positions on exchanges, but give us the, the deep sort of understanding of, of Coin Routes here.
- [10:01]
Ian Weisberger
Yeah, so Coin Routes is the market leading platform for institutional trading across all of the different crypto venues. So you imagine you're a crypto hedge fund, you have accounts at Binance and Coinbase and you might trade on hyper liquid and you need a central place to manage all of, manage your risk thresholds and just do a better job trading. Because if you're only looking at one exchange, you're not going to get good prices. 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. And what ends up happening with a lot of these crypto markets is they're kind of mean reverting around each other. So one minute hyper liquid might be a better bid than Binance, but it reverts around each other. So not only having multiple exchange accounts at once, but knowing where all the other markets are, you can do a better job trading on a single venue. So to that end we allow people to do things like arbitrage where you can sell a propensity petrol future and buy spot or you want to do a T wop order, or you want to do a pairs trade or you Want to do a basket. And so we have these really sophisticated institutional order types now. More recently we've also gone down to high net worth individuals. So if you're a pro trader and you, you know, you have a one to, you know, $10 million account on Bybit or whatever, you, you need a better way to trade than just swing trading on Bybit directly on their gui. Or if you have a, you know, 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.
- [11:19]
Bryce
It's almost like a brain or like a central nervous system for a crypto hedge fund.
- [11:25]
Ian Weisberger
Yeah. And so we like where 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. Now we kind of democratize that by allowing even smaller hedge funds to have it. That said, we do have the largest 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. So we service kind of the whole market of trading firms down to the pro trader individual.
- [11:49]
Bryce
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 has that kind of changed the market structure from your perspective?
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Ian Weisberger
Yeah, I think when the ETFs got approved a couple years ago now, it really changed things. It really signaled to the market that the institutions are here. And you know, you're going to now be able to hold this in your retirement account if you use certain brokers. Obviously some retirement account administrators still said no, you can't buy this thing. Right. And to this day we're still fighting that. But it seems like everyone I would say that's probably listening to this would understand that that war has been won in that institutions and retail now have access to this asset class that it's not going anywhere. Right. And if you Compare that to 2017 when we started this business, I mean that was not for sure at all. There was no ETF there. You know, banks were talk were shutting down people's bank accounts for even purchasing Bitcoin. Right. In many countries in the world you saw multi like tens of percent differences in the spot instrument price between exchanges. Right. Like I remember when there was a $3,000 price difference between Kraken and Coinbase and that was just spot. Like you could just make free money, people were printing money. Now it's a bit more nuanced. You have to be a bit smarter to make money trading in, in the current market structure. Right. Like you might have to buy a future on perp on one exchange and sell it on the other and collect the basis between that. Funding rate arbitrage is more popular now. It's a bit more complicated. There's less like free money available in the ecosystem and the markets have gotten quite a bit more efficient.
- [13:26]
Brendan
Yeah, it's been fascinating and I know all of us have kind of been here to watch crypto and especially the trading side evolve and it's been fascinating to see like a lot of those tradfi kind of concepts come into crypto, which makes the tradfi 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? Because this is the topic that we get a lot of questions about. The algorithmic side versus the manual side.
- [13:59]
Ian Weisberger
Yeah, 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, on telegram. Right. And then that switched to single dealer platforms, which is when you, you know, you have an account with the B2C2 or an immediate or whatever and they give you a nice little GUI where you can buy and sell electronically. Right. This market is undeniably moving electronically. And so what we're allowing our clients to do is rather than 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. And so it's better for certain types of trading where you don't need the immediacy of trading kind of voice. Right. 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.
- [14:45]
Brendan
Yeah. 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. Because the way that I look at it is there's a lot of people that get lured into this trading bot dream, right? 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. They don't work. They underperform and over, over promise. But on the institutional side, like that's a real thing. But they also spend a lot more money kind of building out these things. And I think it makes a lot more sense for an institution to use it. But do you think that it makes as much sense for retail to use it as well?
- [15:34]
Ian Weisberger
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 hoping to go up, or selling them and hoping they go down. They're directional. We also have a large constituency of our clients that are market neutral. And so those market neutral clients are happy to make 15 to 20% on a mostly delta neutral, market neutral basis. And they're going and raising a ton of cash to do that. And institutional investors are happy to make 15 or 20% on a relatively risk free basis. If you're a retail guy, a lot of them look at 15 to 20% and say that there's no way this is an off flat. I want, you know, 20% a month. Like that. Yeah, that's not real. Right. Like you're going to underperform. Right. You're probably better off just buying and holding at that point if someone's promising you that kind of return. But we are seeing, I would say 15 to 20% relatively risk free in the market right now.
- [16:17]
Bryce
On an annualized basis.
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Ian Weisberger
On an annualized basis, exactly. On what our clients are running, the successful ones, I would say that's reasonable.
- [16:24]
Brendan
And it seems like that like, is a smart way to go about it. 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, you know, want to get levered up and they want to do that every day when in reality that's just not really possible to make that kind of consistent return every day, every week, every month. Like there's going to be times where it fails. And I think that's where algorithmic trading and trading bots and all these things like thrive is. When you're looking at a smaller return that's still relative, 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 yeah, it's just the misconception That I see a lot of retail traders have where they have this misunderstanding of, like, how these kind of things work and the rewards that could be earned with something like this.
- [17:24]
Ian Weisberger
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, 10 guaranteed return per month crypto scam. And I was like, no, like, you can't do that. That's a scam. You know, And I, I have to say I think I've seen a little less of that this cycle, but it's still out there. And yeah, I think retail should be wary of that because that doesn't, that's not, that's not right. That's not realistic. Right.
- [17:46]
Bryce
Yeah. Like, I, I've heard so many people, you know, ask me or, or just show, you know, oh, hey, you know, I could do this program and it's 2% a day. I'm like, if you compounded 2% a day and you started with like 10,000 bucks, it'd be worth like, well over $10 million. And that would just be in one year, and then the next year it would be like a billion dollars. It's like, you think everybody's gonna be making a billion dollars off this. You're, you, you're gonna. But people don't think about the math behind it, and they just, they get scammed. So anybody who's listening, if you're, if you're trapped in one of these products, don't send any money to them. A lot of the times they're just out there.
- [18:24]
Ian Weisberger
Yeah, I mean, I've seen, unfortunately, some of them where, oh, you deposit, I don't know, like a one Bitcoin, and then, okay, we're going to lock you your account if you don't send more. And it's really. Yeah, I mean, it's really unfortunate.
- [18:35]
Bryce
It's so sad.
- [18:35]
Ian Weisberger
You know what's kind of. It's, it's sad. What's, what's happened in this market. I mean, I remember seeing back in the day, like, Anchor Protocol, and I was like, how are they generating this yield? Like, what's going on? 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 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's 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% with certain counterparties. That's kind of where it's at. And if you're doing some market making where there's like a little bit of legging risk, then up to 20%. But I would say above that is, is not realistic. You know, it's interesting strategies.
- [19:24]
Bryce
Yeah, no, it's super interesting. You bring bring this up and anchor protocol was, you know, part of the whole Terra Luna explosion back in the day, you know, promising 20% yield and then everybody declared the death of the algorithmic stablecoin. However, there's been now, you know, other algorithmic stablecoins. You know, I think most notably Athena's USDE and it.
- [19:45]
Ian Weisberger
What do you think? Different? Yeah, yeah, yeah. So actually, the way that Athena USDE work is basically is this arbitrage that I talked about where you're buying under the spot, so you buy Bitcoin spot, for instance, and then you sell the future against it. And so on the whole, usually you should be generating positive return. Now, of course, when the markets go gap out and go crazy volatile, those funding rates can actually turn negative and the pool actually loses money. But if you look at what happened to Athena during the whole Black Friday, it actually stayed solvent. The protocol was able to create and redeem units of USCE at par value at $1. But the issue was the way that the exchanges were pricing it as collateral. Binance basically said, okay, this thing isn't actually worth the net asset value. It's worth what our order book says it's worth. And so that created this huge mismatch where people got liquidated. And Binance said, oh, actually we messed up a little bit here, have some money back. And it wasn't enough 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 $1, because I can redeem this for $1 worth of coding. Yeah, it's worth what our order book says it's worth. Right. 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, and So I think people need to take a look at how they're actually pricing these, these asset. These assets are basically kind of like a tokenized money market fund, right? Like they're a tokenized fund. 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. It doesn't go way below if it's redeemable, right?
- [21:16]
Bryce
Yeah, no, it's super crazy. And. And the defi stuff seemed to hold up pretty well while a lot of the CEFI stuff kind of went kaput. And I was reading some postmortems about maybe, like, why this happened. And yeah, like, some of these defi protocols had hard coded $1 equals 1 USDE. And that was able to like, help them not, you know, liquidate, you know, people unfairly and stuff. But did you see any other triumphs or catastrophes in the defi world during the past recent times?
- [21:45]
Ian Weisberger
You know, I think so. If you look at the. I think the big thing that people are now finding out about because they'd never heard about it before this event is the auto deleveraging. And so basically what that is, if your position goes so far, like let's say you're long, you're short Bitcoin, like, so even if your position would be profitable, you shorted at 125, Bitcoin goes to 102. The whole system would be insolvent 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. And even though technically you should have, 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 insolent.
- [22:17]
Bryce
And the exchange would be bankrupt.
- [22:19]
Ian Weisberger
And the exchange would be bankrupt. And. Exactly. 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 basically stop you out at a price that wasn't real, at a worse price than you otherwise would have gotten. And, and that happened across the board. So if you look at what some of the centralized exchanges do to avoid the crazy auto deleveraging, like Bybit, for instance, they actually smooth it out over time. So they, they have like a little bit of a rate limit on it. So when we went to V, when we had the V from like, you know, 125 to 102 and then from 102 to 108. But like some of the exchanges didn't actually go all the way to 102. They kind of smoothed it out. So they let it recover a little bit. And so what that means is less people get liquidated, but the risk that you have is if you're smoothing it out, if it actually kept falling and settled below 102 or at 102, 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 an insurance fund that's big, we've made a lot of money for years, fine, like we'll take that risk. And it turned out that in that instance it didn't go to zero, it stopped at 102 and it bounced, bounced to 108 almost immediately. But the defi protocols don't necessarily have that ability to do that. They don't necessarily have the huge insurance funds and they don't want to have losses socialized so they stop you out faster. So I would say that more people got auto deleveraged on a hyperliquid than on BYBIT because they had less of a smoothing. Right. It's hard to pick which one is the correct way to do it. I think there's merits for both, but that's just how these things tend to work. But also, I think a lot of people didn't know what ADL meant or what the mechanics of the futures exchanges were before that event because they never had to worry about it.
- [23:48]
Bryce
They didn't read the fine print. They just took the free 125 times leverage and, and cross margined their account and said, let's do this thing.
- [23:57]
Ian Weisberger
Yeah. Crazy.
- [23:59]
Bryce
Do you think that like, you know, not to like, you know, I know you're not a lawyer to like get into 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 gonna see some kind of self policing or some standards to make sure we don't have something similar?
- [24:20]
Ian Weisberger
It's a really good point. I mean it's just different. Right. So if you want to trade futures in US pockets, let's, let's say you're trading on the cme, you have to open an account with what's called a futures clearing merchant, an fcm. Right. And you put up collateral with them and then margin calls are once a day because there's no real time liquidation, no real time lending. And if someone in the system goes insolvent, then you have this whole like insurance fund and mutualization model. Long story short, it's extremely convoluted. It's not real time. It requires a lot of extra capital in the system to ensure against losses. And I just don't see that full methodology working in crypto. It's a lot different in crypto where anyone can just go and sign up and get an account. Like in, 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. It's a bit weird. Whereas in crypto you're only really able to lose what you put in in terms of collateral, so you have to do real time liquidation. So it's just a bit of a different game. But that said, I think there should be some self policing in terms of what we're doing to protect consumers. 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. The liquidation price that it shows you changes as the price of bitcoin goes up or down. So a lot of people didn't realize that actually it only took a 20% move to wipe them out. They thought they had a 30 or 40% move. Right. It's really confusing to see like what a stress test scenario looks like in these markets. It's not completely straightforward. And so I think people just thought that they were trading bitcoin on leverage. They didn't realize what, how the liquidation prices worked and whatever and they just got wiped out.
- [25:56]
Bryce
Yeah, no, it's kind of, kind of a bizarro 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, you help them save money. And you know, there's. I know you guys have been doing a lot of transaction cost analysis, but I just kind of want to understand a little bit, you know, about that and 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 realize about the fees and stuff?
- [26:33]
Ian Weisberger
Yeah, I would say if you're a retail user, I mean, a lot of people trade on Coinbase and Robinhood and whatever, and you're 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 up to 1% in fees. I think as you start buying and selling and if you're doing what you know, 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 going to use the Coinbase app. You probably use what they call Coinbase Advanced trade or whatever. And so it's important. If you're just buying and holding, it probably doesn't matter that you're paying 1% because this asset moves by more than that in a couple hours and in a day, for sure, it moves by, by more than that. Where I think it really gets interesting is when you're trading kind of smaller names. Like if you're trading meme stock, meme Coins, you're trading these smaller names, then a buy order for a couple thousand dollars could potentially move the market. Then it makes sense to, you know, be smart in how you're in how you're trading these things. And so what a lot of people were previously doing that are our clients where they were just going to the interface, typing in limit prices and trading it manually. That's not the best way to trade these things. Right. You probably want to scale into it over time. And that's where you would use a system like coinrops to be able to trade in and out and break up your orders into small pieces and post them on the order book. So you're not moving the price.
- [27:44]
Brendan
Yeah. And I mean, speaking of big orders, I mean, you all are doing over 40 billion in monthly volume, is that right?
- [27:51]
Ian Weisberger
Yes. Yeah.
- [27:53]
Brendan
Where is most of that liquidity coming from today?
- [27:58]
Ian Weisberger
I mean, the usual suspects are more around like 70 to 80% of our volume is futures. Right. So it's trading on the big futures venues, Hyper Liquid, Binance, Bybit, okx, the big, you know, exchanges. Right. And, but we definitely are seeing more interest, interest in perp Dexes. I would say, especially after the finance debacle. More and more people are wanting to trade on Hyper Liquid and some other, some other Dexes. And we're, we're facilitating what, a couple billion dollars a month in, in perp Dex transactions now, and that's growing pretty rapidly.
- [28:25]
Brendan
How, I mean, how does hyper liquid, you just mentioned it. How does it compare to Some of these other options that are, that are out there because it feels like it's exploded onto the scene. It's taken the vast majority of market cap. Everyone raves about it. It's hard for us in the U.S. i mean, we really can't use it as much, but you probably have a much better understanding, like how does this compare to everything else? And no pun intended, does it live up to the hype?
- [28:50]
Ian Weisberger
Yeah, I mean, look, a lot of our clients are trading on it. I can't really comment on regulatory matters of who is or isn't allowed to use it. It's not really, you know, what we do. But ultimately a lot of people, a lot of people are using it. And if you look at the fee schedule, it's pretty cheap. It was cheaper than most of the centralized venues. And the rules are somewhat transparent. I would say they got into like a little bit of trouble on the, on Black Friday, but not anywhere nearly as much as the centralized venues. Overall, they held up really well. They didn't go down a lot. I would, as I was kind of mentioning earlier, like, it's more, they're, they're. You will be quicker to liquidate it than on trading like something like a buybit if there's a crazy market move. 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. I don't think, I think a lot of the other, the other issue with these centralized venues is they're giving preferential treatment to certain clients. So, you know, one of the things that happened was people were worried that Athena was insolvent because they thought that they might have been auto deleveraged. Now it turns out they had special deals with the centralized exchanges where they were kind of more or less exempt from that auto deleveraging. They had a special deal and that's one of the reasons why they stayed solvent. But on a perp Dex venue like Hyper Liquid, it's much harder for people to have special deals. And so I think that's another reason why they've gotten so popular is people are mistrustful. Like if you look at the special deal that Alameda had with ftx, they had no liquidations, they had unlimited credit, et cetera, et cetera. 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 than the centralized venues.
- [30:23]
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- [31:06]
Bryce
No, I, I totally agree. It's transparent. Like all those liquidations that happened on Bybit or Binance, apparently they were rate limiting it to you know, one per second or something like that. And so when you have, you know, you could 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 you know, they basically said on chain you could see every single liquidation that happened. But you know, not to get too in the weeds. But I am curious about, you know, hooking up defi 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? Is it multiple approvals? How does that kind of work?
- [31:55]
Ian Weisberger
We have a couple modes like for institution. So for Hyper Liquid it's fine. They have trade only keys that, that we have. So for the perp dexs that we support it via that workflow. For Uniswap we either require you to use a custodian like a fireblock. So we did a partnership with fireblocks where we don't have to have access to your keys and that's how we do it in that. And then we are working on some other methodologies to trade on defi 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.
- [32:26]
Brendan
No.
- [32:26]
Bryce
That's awesome.
- [32:27]
Ian Weisberger
Without taking custody. Yeah, yeah.
- [32:29]
Bryce
It's certainly something that we, we're excited to learn more about. And you know, maybe we'll have you back on when, when there's some more updates on the defi 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 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 you know, when they're blown out one way or another, that's an indicator. Do you see other things around like order size or order book liquidity that tips you off?
- [33:02]
Ian Weisberger
Yeah, it just feels different this time. I mean, I remember when, when Black Friday happened and it kind of, it just like V bottoms like there was no, it didn't really crash. I mean everyone was saying doom and gloom and it's going to go down 75 or 80. It just didn't happen. And now it looks like things are, you know, recovering. S and P is at an all time high. You know, gold's off its highs now. Seems like people are rotating basket back into risk assets. It just seems like we're not, you know, like a lot of people were saying, okay, 125 was the top. I just don't believe that's the case anymore. I think that will get higher in the cycle based on what's happened, based on how nicely it's recovered.
- [33:33]
Brendan
Yeah. And like I'd 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. And I think that that's like a pretty. I, I don't even think it's a hot take anymore. 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 and again, I don't think that's really as much of a hot take anymore. So that's kind of my thought is number one, I do believe that we can go further than $125,000. I would say that in my opinion that's a probability. It's a likelihood, not just a possibility. I'd also say that it's pretty probable that we see an extended run. 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, they have been elongating as adoption has been increasing. So that's kind of the way that I'M looking.
- [34:27]
Ian Weisberger
I mean, it's a global. It's a global risk asset. Now. It wasn't really like, totally. We didn't really have this level of, of assets in the ETF last cycle. We didn't. 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.
- [34:42]
Bryce
And, you know, on that point, it's kind of a perfect segue. Like, you know, you're in Dubai, you see sort of the Middle east and North Africa regions. I hear all the time about, you know, these sovereign wealth funds that are secretly accumulating bitcoin. Some of them have announced that they have like, you know, shares of MicroStrategy or, you know, some bitcoin. What are you seeing in terms of the, you know, institutional adoption trends in your area?
- [35:09]
Ian Weisberger
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 on 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, you know, in large part by the sovereign wealth fund. So I do think that that trend will accelerate, and I do think that the adoption will accelerate throughout the region and globally. I think if some of the people that we're working with are issuing stablecoins right. In the UAE and abroad. Right. That will increase adoption. Ultimately, the more stablecoin issuance that exists, the more the crypto market cap can exist based on. Can grow based on that. Like, there's been a link between the market cap of tether and the market cap of bitcoin that's been, you know, undeniable over, over the years. And so the more entry points into crypto that, that exist globally, the more that that's going to accrue value to the crypto ecosystem.
- [36:10]
Bryce
Fascinating. I. I love that, that take. And, you know, stablecoins. I think Scott Bessant, the Treasury Secretary in the United States, said that he thinks that stablecoins in the wake of the Genius act are going to go up to something like 10 times the amount of market cap they have currently by the end of the decade. So, like in five years. So that would be incredible for crypto. A lot more liquidity. And, you know, I think the case is Fully, you know, understood for Bitcoin pretty much. Although allocations globally are pretty low. But like pretty much everybody gets it, everybody's heard about it. I think Ethereum and Solana are starting to, starting to get there with you know, some of the digital asset treasuries and the ETFs. But what do you make of like the, the smorgasbord of altcoins that are out there? 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?
- [37:04]
Ian Weisberger
Yeah, I mean, look, I am not a mean coin trader. Maybe someone else would have more, you know, input on that. But I do think we are seeing the emergence of certain, what you could call altcoins that actually have real protocol revenue. And I do think that over time those, those are going to win. So I mean if you look at hyper liquid, they're making over a billion dollars a year and 90 plus percent of that value is accruing to their token. There are other new Dexes that have launched as well that have similar mechanics. Ultimately the killer app for crypto right now is trading and payments. 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. I mean means 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, I think those days are over. And I don't think that those coins will be successful long term. People are demanding that value accrue to the token holders now directly.
- [38:00]
Brendan
Yeah, fair enough, man. There's a, there really is a lot of speculation when it comes into 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. They have actually working products and we like to pay attention to those. But obviously there's a lot of noise. You look at CoinMarketCap and I checked this a couple of days ago and it said that they had, and I'll check it again right now, but it said that they had around 22 million altcoins. Okay, so now it's, it's up to almost 26 million altcoins that are listed. So there is a lot of noise and you got to be careful with all of them. But I want to loop in one final Question here. What do you think is the biggest myth about crypto trading or maybe even market structure that you wish that more people understood?
- [38:44]
Ian Weisberger
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, 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. There's no additional losses, there's no mutualized loss system usually. And so it's a very different system. So the traditional things like if you look at the way that US equities work and by proxy, the indexes, the futures that could be based on them, they have circuit breakers, 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. 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 market. Like the mechanics are going to be different. It's not going to be exactly the same as equities and futures and fx. And I meet a lot of people from TRADFI that say, oh, this is going to be exactly the same as, as, as traffic. That's just not, that's not going to happen. There's going to be a lot of similarities. But fundamentally this is a 24 7, 365 global real time market that is not going to be exactly the same as, as equities and then futures. 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 are going to have to go out and buy things or, you know, partner to, to, to get the full functionality.
- [40:09]
Brendan
Yeah. And there's a lot of people who come in here and they get warned, hey, crypto is volatile. And they go, oh, I know, I know. And then they come in and they experience a Black Friday event like we did the other week, where they're, you're right, there's no circuit breakers when things are going down double digits. And then some of these are down 50% in a day and they go crying, crying. And there's Bryce. What's the saying? What's our favorite saying? There's no crying in the casino. We were using that.
- [40:37]
Ian Weisberger
Yeah, I mean, it's about your risk appetite. The biggest issue was a lot of people didn't realize that these were cross margin. They had like one portfolio with their, their, like they had Atom and bitcoin sitting in the same thing. And then Adam was down 90 on one exchange and okay, they. Their whole thing got wiped out. Like, you need to have different risk buckets for, for your trading accounts. You need to have sub accounts for your different portfolios. That's, that's very important. You can't expect that these things aren't going to crash very, like a lot and be bottom right. Totally.
- [41:03]
Bryce
Man, this, this was awesome. Ian, we, we greatly appreciate your time. I know you guys got a YouTube, some travel ahead, so we don't want to make you miss your flight or anything.
- [41:10]
Ian Weisberger
This is great.
- [41:11]
Bryce
Yeah, this was a ton of fun and hopefully everybody at home listening was able to pick up some golden nuggets, make some better trades, be more informed and where can people kind of check you out, check out coin routes if they're qualified and you know, just generally learn more and stay in touch.
- [41:28]
Ian Weisberger
Yeah, I mean, I post a lot of market intel on my Twitter and LinkedIn and same on the. The coin routes. So it's just burger and then coin routes on LinkedIn and Twitter. Awesome.
- [41:38]
Bryce
We will be posting those in the show notes. Ian, thank you so much. Safe travels and everybody at home listening. Thanks for joining. We'll see you back next week, same time, same place, with some more great guests.
- [41:58]
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