[SPEAKER_01]: All right, ladies and gentlemen, gather around.
[SPEAKER_01]: I hope you're having a fantastic morning, noon, or night, wherever you are in the world.
[SPEAKER_01]: You're certainly in the right place, because we're out east, at the out east summit, I've got Josh Lim, the global cohead of markets at Falcon X joining me, I'm so excited to have you Josh, yeah, thanks for having me.
[SPEAKER_01]: You bet, totally an expert market practitioner, former Goldman, former galaxy, former circle,
[SPEAKER_01]: You've been at all the big shops and now you're heading up markets globally for Falcon X You know incredible firm.
[SPEAKER_01]: They do you know exchanging custody I mean pretty much everything and we're gonna dive into all of that But first we just want to kind of get you acquainted with the audience tell us a little bit about why you left Wall Street Why you and and came to crypto?
[SPEAKER_01]: What was it about crypto that was kind of like screaming your name?
[SPEAKER_01]: Yeah, well, this is kind of
[SPEAKER_01]: Looking all the way back to 2014.
[SPEAKER_01]: Sure.
[SPEAKER_02]: When that happened.
[SPEAKER_02]: You were early.
[SPEAKER_02]: Yeah, I mean, it was a very different place.
[SPEAKER_02]: Obviously crypto was much more of like, you know, a place to be if you were kind of rebelling against the machines and all that kind of stuff.
[SPEAKER_02]: So yeah, I think it was, um,
[SPEAKER_02]: One motivated me was like being in front of your asset class.
[SPEAKER_02]: Yeah, you know, one that did have like very uh, ossified kind of infrastructure and clientele and everything.
[SPEAKER_02]: It was constantly evolving into something new.
[SPEAKER_02]: That was what crypto was back then.
[SPEAKER_02]: Yeah, and you know, a chance to really work in a, like a FinTech company, like a start-up, you know, and I was coming from a bank.
[SPEAKER_02]: I was coming from Goldman and I landed in a seat at Circle.
[SPEAKER_02]: Yeah, I'd really open up my eyes to like one how I start up works, you know, like being in an operator seat there.
[SPEAKER_02]: Yeah, working with a team, like trying roll product out the door.
[SPEAKER_02]: Yep.
[SPEAKER_02]: And then two, I think it was just like the Mason Sea of crypto and like how to.
[SPEAKER_02]: build a network, build a network goes liquidity sources, how to build connectivity to early venues and things like that.
[SPEAKER_02]: And that was all very exciting.
[SPEAKER_02]: And I think over time, like what we've seen, obviously it's like the markets become more institutional, just like every asset class over time, it just becomes more professional investors, less retail driven.
[SPEAKER_02]: But it's still fun, right?
[SPEAKER_02]: It's just constantly becoming the asset class is reinventing itself like every couple of months.
[SPEAKER_01]: And it's funny.
[SPEAKER_01]: It's like the only asset class that eventually wants to kind of replace every other asset class, right?
[SPEAKER_01]: Like everything wants like an equity is going to be on change.
[SPEAKER_01]: That's right.
[SPEAKER_01]: Commodities, you know, are going to be on change.
[SPEAKER_01]: And it's just kind of an interesting evolution, right?
[SPEAKER_01]: Because is it an asset class?
[SPEAKER_01]: Is it an industry like how do you kind of define?
[SPEAKER_02]: Yeah.
[SPEAKER_02]: I mean, it's, that's a good point, right?
[SPEAKER_02]: Like I think the thesis for crypto, why crypto, why blockchain has changed a lot.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: They used to be, hey, this is an asset class, a store of value, maybe a currency, yeah, maybe in some cases, it's like a way to have self-sovereign to, like, you know, I want something that isn't within the confines of a government or a centralized scheme or whatever, yeah.
[SPEAKER_02]: But over time, it's become more of like a technology player, payment rails, like a way to kind
[SPEAKER_02]: uh you know infrastructure and the sort of like plumbing for traditional markets and I think along the way right like it's we've lost some people for sure we've lost like a lot of the crypto anarchists like rest in peace and i'm not even free to well yes but also like you know the people who are like idealistic about
[SPEAKER_02]: for Sherwin, as this sort of non-sovereign store value.
[SPEAKER_01]: Like, oh, everybody sold out.
[SPEAKER_02]: Yeah, and I think that's like, when you think about market price action today, it's like, I think it's reflecting that sort of long-term transition in an elderly usage and shareholder base and all that kind of stuff around crypto.
[SPEAKER_01]: It seems like it's a a large turnover, right?
[SPEAKER_01]: I mean, I remember back in September, October, time frame.
[SPEAKER_01]: There was some really large transactions of these old wood wallets that sold like $9 billion dollars.
[SPEAKER_01]: And it was basically just people saying, hey, I've held since $100, 100K was my price target.
[SPEAKER_01]: I'm rotating out.
[SPEAKER_01]: I've sailing off into the sunset, and it felt like if we kind of take a look at why the market is where it's at right now, I think to your point, there's a maturation process where the innovators and the startup people have now kind of phased out, and now you have sort of the institutions here and stuff.
[SPEAKER_01]: You have a turnover of positions, but I think like
[SPEAKER_01]: in my opinion, you can't have this conversation of why are we down so much without looking at what happened on Binance on 1010, right?
[SPEAKER_01]: You know, uh, can you walk us through from a really high level of what went wrong?
[SPEAKER_01]: And is the market stronger for that having happened?
[SPEAKER_01]: Is there new things in place to make sure we don't have just these market-wide, you know, liquidations?
[SPEAKER_01]: Yeah.
[SPEAKER_01]: Or is that still a present risk?
[SPEAKER_02]: Yeah, I mean, it's I think it's just to take a global view like it definitely affected the broader landscape of crypto liquidity venues and liquidity providers like us a lot of other firms out there, I think generally speaking what happened was like the market has thinned out over the last year or so right.
[SPEAKER_02]: I think there's been a concentration of liquidity and investor interest in the top, let's say like four or five tokens.
[SPEAKER_02]: So, got coins, and I think a lot of it is because there's like a broad recognition that not everything can, as actually a true value, right?
[SPEAKER_02]: It's nothing to not everything is backed by revenue and cash flows and,
[SPEAKER_02]: Despite what the white hydros say, he's at.
[SPEAKER_02]: This was the ember has no close moment.
[SPEAKER_02]: Yeah, and crypto, like if you look at the numbers of, like, let's say, how many hall coins launched in any year, right?
[SPEAKER_02]: Like, by far, the last couple of years have seen Paramahal, like, Paramahal, like, growth.
[SPEAKER_02]: And that is a delusion of investor attention to good point.
[SPEAKER_02]: And at some point, people get, you know, when you lose money on all coins, many, many times over, like, you just, you realize like, if there's only a handful of things that are, like, long-term investible.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: Okay, so that's part of the backdrop and now you have these venues globally that thrive on retail trading, right?
[SPEAKER_02]: That's how they make their money and When you attenuate like the retail capital and and it's not just because crypto, it's all became
[SPEAKER_02]: Um, to dilute it, but it was also like, there was more exciting stuff outside of crypto, but there was like, yeah, and there's like, yeah, supply chain stuff.
[SPEAKER_02]: There's, you know, whatever.
[SPEAKER_01]: Yeah, I was buying critical minerals for the first time.
[SPEAKER_01]: I bought them stocks.
[SPEAKER_01]: It was like, yes.
[SPEAKER_01]: Who needs crypto anymore?
[SPEAKER_02]: Yeah, it was like, Adam's not bits, right?
[SPEAKER_02]: Right.
[SPEAKER_02]: So I think that's, um, another reason why you had this sort of
[SPEAKER_02]: liquidity.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And so now you have these, um, uh, this event where maybe there was like a large initial sort of drawdown in crypto prices.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And that triggered sort of a broad like disappearance or evaporation of liquidity on all these like long tail-uptoed assets.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And once you have that, that really cascades to like people's portfolios getting marked down, um, people's collateral folks being marked down are sure.
[SPEAKER_02]: and then that, that, the extra self, the whole issue.
[SPEAKER_02]: Yeah, self reflexive, but I think the real primary cause is the fact that there's just an intanguation of liquidity across the whole ecosystem, and it's carried through to this day where, yeah, there is now only a concentration of tokens that people can view as like long-term and noticeable.
[SPEAKER_01]: Yeah, I think that makes a ton of sense.
[SPEAKER_01]: And I want to dive into a couple of things here to swim through office primarily what makes a token in this one.
[SPEAKER_01]: I think a lot of people watching, you know, they might say, okay, well, we have Bitcoin, we have Ethereum.
[SPEAKER_01]: We kind of get, that's the big platform.
[SPEAKER_01]: That's the big currency, but they might not understand the value of cruel dynamics of what a guy like you really views is like, hey, this is maybe not saying, here's the tokens I'm going to hold.
[SPEAKER_01]: But here's the qualities of what token a guy like
[SPEAKER_02]: Well, I think, I mean, like, we're at the end of the day, we're a self-sidealer.
[SPEAKER_02]: Like, we respond to what our clients are interested in.
[SPEAKER_01]: You'll trade any variety.
[SPEAKER_01]: So there's a difference between trading and investing, right?
[SPEAKER_01]: Yeah, right, right, sure.
[SPEAKER_01]: We're a liquidity provider, but if I think through, like, what our customer base cares about, right?
[SPEAKER_02]: Yeah.
[SPEAKER_01]: smart money.
[SPEAKER_02]: Yes, I do think because the cops now are not, you know, a dog coin that went from 10 million to a billion dollars, the cops are like, okay, real businesses that are building AI infrastructure or whatever.
[SPEAKER_02]: So that's like,
[SPEAKER_02]: Okay, so you need to have, you need to hold something long-term that continual compounds.
[SPEAKER_02]: Sure, and the compounding part comes from a note, some kind of like a long-term defense, like a real business model.
[SPEAKER_02]: Yes.
[SPEAKER_01]: We're going back to real-enact with that.
[SPEAKER_02]: So what are those things in crypto?
[SPEAKER_02]: They're not the minute, right?
[SPEAKER_02]: There's like any stable coins, like that's an invisible theme, right?
[SPEAKER_02]: Payments, that's actually generating revenue, right?
[SPEAKER_02]: Because it's coming from real user interactions, moving coins,
[SPEAKER_02]: you take a cut of that or you take some net interest margin or whatever.
[SPEAKER_02]: That makes sense.
[SPEAKER_02]: Then there's speculation.
[SPEAKER_02]: Yeah, and there's like the culture is on the polymarket, it's on the hyper liquids and those things make money.
[SPEAKER_02]: And if you think about what venture investors and crypto have been doing and what the hot sectors are, it's really those those two things.
[SPEAKER_02]: Right.
[SPEAKER_02]: And that's those are the tokens associated with those two things that work.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And I mean, you could argue things like Bitcoin and Bitcoin has a place as this sort of
[SPEAKER_02]: You know, neutral bull collateral asset, the people kind of use and move around on change to support positions and to, you know, back other types of transactions.
[SPEAKER_02]: Sure.
[SPEAKER_02]: And then with ETH, you can, you could say maybe ETH is usable as a, um, rail for civil coins and other RWA, right?
[SPEAKER_02]: So,
[SPEAKER_02]: Those are kind of in Seoul, you know, maybe argument and then hype is obviously on the speculations out of the things so it's it's sort of like that's those are the things those are what you can invest in yeah And that's I think that's how people are looking at it right now no like is that always going to be the case of probably not right right at some point retail capital comes back from
[SPEAKER_02]: Acquities or wherever else it's gone back in Dixia of Tell and then you'll see like a proliferation of ideas that Do do like highly convex, you know returns again for sure.
[SPEAKER_01]: Yeah, I was thinking It was something that Tom Lee from Funstrad and B.M.N.R.
[SPEAKER_01]: He kind of tweeted out
[SPEAKER_01]: about the relative performance of like DRAM, the ETF versus Ethereum recently, and so Ethereum's been like, you know, in the past month, as DRAM has been falling down, and the semiconductor has been compressing, crypto's kind of caught a bid, and it sparked my mind this idea that like capital that chases tech, is scarce.
[SPEAKER_01]: Attention is scarce, and so everybody's been chasing AI.
[SPEAKER_01]: Do you think that now as AI might be cooling off a little bit?
[SPEAKER_01]: and cryptos down 50 to 80% off the highs.
[SPEAKER_01]: Do you think like that is enough for people to start stepping back in and saying, you know, now the momentum might come to crypto and maybe set another way.
[SPEAKER_01]: If that's not the case, what will it take for crypto to kind of get its bojo back?
[SPEAKER_02]: Sure, sure.
[SPEAKER_02]: I mean, in my head, there's like two scenarios here.
[SPEAKER_02]: One is just like,
[SPEAKER_02]: It's a time-based bear market.
[SPEAKER_02]: Oh, sure, because there's a big one's been sort of range bound and at the lowest for quite a time now.
[SPEAKER_02]: And a lot of money is left to space.
[SPEAKER_02]: Yeah, and like crypto's the most cyclical asset class in the world.
[SPEAKER_02]: Yeah, no, no, no, no, no.
[SPEAKER_02]: Exactly.
[SPEAKER_02]: So like people will...
[SPEAKER_02]: See something pop off and crypto.
[SPEAKER_02]: Yeah, I'll be like, oh, I'm not going to get back in.
[SPEAKER_02]: Like, oh, I still got my coin base account.
[SPEAKER_02]: Let me like bun did or whatever.
[SPEAKER_02]: Yeah, that's one scenario.
[SPEAKER_02]: The other scenario is like, just a big cataclysmic thing, right?
[SPEAKER_02]: Like, okay, hey, there's like if you remember, you know, a couple years ago, there was like the SVV bank.
[SPEAKER_02]: Yes, crisis.
[SPEAKER_01]: Yeah, the total, this 2023 margin thing.
[SPEAKER_02]: And that sort of triggered like a run up in Bitcoin, right?
[SPEAKER_02]: So people are like, well, can't trust the banks any right.
[SPEAKER_02]: And Prime, do you like, okay, if there's an issue with the financial system or with markets generally, you want to flock to like, save assets.
[SPEAKER_02]: Yeah, I'm like not to save Bitcoin's like, you know, a zero of all, you know, safe, even, but it's one of these things that people think it was like, if I'm, if I'm worried about the financial system.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: like this is something that's outside of it.
[SPEAKER_01]: Yeah, it's a flight to safety.
[SPEAKER_01]: Yes, yes.
[SPEAKER_02]: Of course, you could say that.
[SPEAKER_02]: That aspect of Bitcoin has been eroded in a way because it's in sort of like so integrated to think like.
[SPEAKER_02]: That's right into like strategy Microsoft strategy and into things like the ETF like I bit right and so now it's like okay Is it actually uncorrelated is it sitting outside of the banking system and the financial system broadly?
[SPEAKER_02]: I still think there's a place for yeah as that sort of like The place you position to to hedge into stay out.
[SPEAKER_02]: So yeah everything else
[SPEAKER_01]: It almost feels like that's what like Bitcoin's aspiring to be like Larry Fink was talking about how like you know crypto will do really well in a period of like government distrust and it's like an inflation and stuff and it's crazy to hear that from the largest asset manager in the world right and so it's like even though crypto might not be that today that's how these asset managers with a hundred year time horizon are thinking like this is what it can grow into that's right.
[SPEAKER_01]: And so yeah, it's just fascinating and you know, I kind of want to take a look in your mind like when you look at like one of the quite like I do a lot of different reading and like with wealth managers and they say one of the questions our clients are most concerned about is like government debt level sure it does this come to bear on your work at all or do you just think okay the bedrock of finance everything's build out the risk free rate US treasury that's as good as gold forever or is there ever question your clients come and ask you like hey.
[SPEAKER_01]: Is this sovereign debt complex ever going to have a crisis?
[SPEAKER_01]: Right, right.
[SPEAKER_02]: So I think, yeah, the sort of like inflation period sure around Bitcoin, that was much more prevalent.
[SPEAKER_02]: You know, let's say like a year ago or two years ago.
[SPEAKER_02]: At since then, Bitcoin has not kept peace with gold.
[SPEAKER_02]: Right, right.
[SPEAKER_02]: I think we all have observed that phenomenon.
[SPEAKER_01]: or M2, right?
[SPEAKER_01]: And then all started to decorulate on October 10th, right?
[SPEAKER_01]: When Bitcoin really started to collapse.
[SPEAKER_02]: And so I think, you know, I don't think October 10th like caused it, but I think it created a lot of questions.
[SPEAKER_02]: It spurred a lot of conversation for sure, like macro allocators.
[SPEAKER_02]: And, you know, even, you know, let's say sovereigns or like, you know, pensions and elements, like all these folks that had historically thought about crypto and investing into a long term.
[SPEAKER_02]: The questions that created were, you know, first around like, okay, the stability of this asset class, like if we can have these sort of large down moves and in fact, the entire universe of all coins had even worse moves, you know, like let's say down 90% of the day or whatever, right, like is that.
[SPEAKER_02]: Is that something I want to be associated with and put my career on the line for, you know, and now like a small like whatever 2% allocation and do right now right now that created those questions, but then like in the months since I think there's been.
[SPEAKER_02]: sort of increase in concerns, sort of like a wall of rarer on Bitcoin specifically.
[SPEAKER_02]: Yeah, and that is, you know, around things like the quantum risk of Darwin, right?
[SPEAKER_02]: Quantum people are scared about, you know, exactly.
[SPEAKER_02]: It's around like the concentration risk.
[SPEAKER_02]: Yeah, my personal attitude.
[SPEAKER_02]: Exactly.
[SPEAKER_02]: It's around like the political sort of ethoscaredity.
[SPEAKER_01]: The police.
[SPEAKER_01]: Yeah.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And then there's finally other issues around the long-term sustainability of even things that are very fundamental to Bitcoin, like the block rewards.
[SPEAKER_02]: Right.
[SPEAKER_02]: Like is this security budget of Bitcoin enough to sustain Bitcoin security long-term?
[SPEAKER_02]: Yeah.
[SPEAKER_02]: Big question.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: So I think all those things got surfaced.
[SPEAKER_02]: These shows of what happened.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: So I think that's what we're seeing now.
[SPEAKER_02]: We just take like a couple quarters, right?
[SPEAKER_02]: Yeah.
[SPEAKER_02]: we're building answer cities things slowly as an industry, yeah.
[SPEAKER_02]: But then once you answer those questions, not to say they're easy questions to answer, but once there are more clear indications at the community, like the deaf community, even like the people building around Bitcoin, and that could include farms like BlackRock, Farms like Coinbase,
[SPEAKER_02]: the core data, so whatever, yeah, like once they come up with better solutions to these things and clear answers that do they communicate to investors, then it regains this like, okay, this is sort of a neutral store value asset narrative, like dollar inflation hedge, all like kind of stuff.
[SPEAKER_01]: Yeah, I mean, there's just so many directions I want to take this, but I want to make sure we spend some time as well talking about Falcon X, their products you offer,
[SPEAKER_01]: the clients you work with, but I have to keep diving in on a couple of things here with the four-year cycle.
[SPEAKER_01]: Typically there's three-year, you know, there's a year that's like a sideways year and then two years of up and then one year that's like the bear market where you're down 78% we're in that fourth year sort of the two years after the having where Bitcoin typically has about a
[SPEAKER_01]: You know, do you think the four-year cycle will kind of keep perpetuating and, you know, Q4 is potentially the the quarter where we start to tick back up, or do you think it's just been spurious?
[SPEAKER_01]: Um, or random.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: It's almost like hard to dismiss as random and the employer, like you've seen these cycles play off so many times.
[SPEAKER_02]: Um, I think it's like an element of of crypto being a little bit on tether to like,
[SPEAKER_02]: real fundamental value.
[SPEAKER_02]: Sure, sure, sure, sure.
[SPEAKER_02]: It's not like something where you were like, okay, where revenues are going down or like GDP is throwing a story here.
[SPEAKER_02]: Yeah, it's a lot of it is just has to do of like humans like ecology.
[SPEAKER_02]: That's what crypto is.
[SPEAKER_02]: It's like the desire to have some new asset be like a place you can store your assets and value, right?
[SPEAKER_02]: So I do think that's why you have this sick with both phenomenon.
[SPEAKER_01]: That makes a hummusense.
[SPEAKER_01]: Yeah.
[SPEAKER_01]: when you invest for yourself personally or when you invest or actually say trade on the half of the sell side firm at Falcon X, what indicators do you think our listeners could find most useful?
[SPEAKER_01]: Because everybody knows, oh, technical analysis or whatever, but are you paying attention to volatility curves and funding rates?
[SPEAKER_01]: Tell us a little bit about, you know, how we could get into the side of your mind.
[SPEAKER_01]: Right, right, right, right.
[SPEAKER_01]: Well,
[SPEAKER_02]: like my background before crypto was trading equity derivatives, okay, and as I've gone through crypto, like both I'll see it's and helping to build the business about next, like a lot of what we do is focusing on the derivatives market, specifically the options market, okay, and the options market is special in crypto because it's really the place where a lot of institutional risk expression happened.
[SPEAKER_02]: Sure, right.
[SPEAKER_02]: Whereas in the spot markets and the per market, it might be more retail.
[SPEAKER_02]: Yeah, activity.
[SPEAKER_02]: Like in the options market, I think the dominant volume is coming from hedge funds that are active in our space.
[SPEAKER_02]: Yeah, right.
[SPEAKER_01]: So as you really can't get exposure to crypto options unless you're a hedge fund or as well, you can.
[SPEAKER_02]: There's like a place like there of it.
[SPEAKER_02]: Or okay.
[SPEAKER_02]: Now I bet options are widely accessible.
[SPEAKER_02]: But I think like what's driving a lot of the vol dynamics and the...
[SPEAKER_02]: forward curve dynamics are really from hedge fund flows okay so I would say the things that we look at are things like okay what kind of risk framing is the market expressing risk framing yeah tell us what that means yeah it's it's sort of like okay um implied fall for it so right implied fall is um the price of an option sure it's how expensive it is relative to the relisball right because like in theory an option's prices based solely on how
[SPEAKER_02]: but there's also sometimes a premium on top of that that reflects like the market demand for protection.
[SPEAKER_01]: The expectation of all there's going to be a big earnings report or some people bid it up a little bit.
[SPEAKER_01]: Is that what you're saying?
[SPEAKER_01]: Exactly.
[SPEAKER_02]: We look at that a lot, right?
[SPEAKER_02]: Like both kind of the implied vote level on an absolute level.
[SPEAKER_02]: As well as like the implied vote versus relays.
[SPEAKER_02]: And if you look at those metrics today, it's low.
[SPEAKER_02]: I mean, those metrics are low.
[SPEAKER_02]: And Bitcoin realizes actually very, very low, because Bitcoin's in stuck in a range for so long, right?
[SPEAKER_02]: And I would say on top of that, there's sort of this market expectation that strategy and other large holders,
[SPEAKER_02]: are not necessarily buying in, and they might actually be not suppliers of Bitcoin.
[SPEAKER_02]: Yeah, in the fourth term, especially on any kind of like moves higher.
[SPEAKER_02]: So, what does that mean?
[SPEAKER_02]: I mean, we should say range bound, and the right trade, and this is the trade that's been expressed by a lot of people is actually just like ball-selling.
[SPEAKER_02]: You know, the whole overwriting, like seeking yield in an environment where actual volumes and activity and volatility is very compressed.
[SPEAKER_01]: Yeah, so I think that's what's driving the market today, and certainly an indicator work watching.
[SPEAKER_02]: Another one is obviously things like the funding rate on perpetual swaps.
[SPEAKER_02]: So some measure of like forward curve demand.
[SPEAKER_02]: And I think that is also near lows, right?
[SPEAKER_02]: Like one trade that you streak this to like, except that it's just the basis trade between.
[SPEAKER_02]: Perps and forwards.
[SPEAKER_02]: You'd be like 30% at the peak.
[SPEAKER_02]: Yeah, yeah, that's crazy.
[SPEAKER_02]: And that's cool for us to line.
[SPEAKER_02]: That's the sign that there's a lot of capital in crypto now.
[SPEAKER_02]: They do these trades, but it's also an indication that there's not a lot of demand for leverage.
[SPEAKER_02]: Okay.
[SPEAKER_02]: And when markets like, you know, just range bound and flat, like you're not going to see a lot of people be like, oh, it's today's the day I'm going to take 20x long.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: Right.
[SPEAKER_02]: But, you know, I think over time, like all these things have normalized to levels that you kind of see in traditional markets, yeah, whereas before you used to view like, you know, there was more euphoria in these things that came from a lot of retail capital coming in.
[SPEAKER_02]: Yeah.
[SPEAKER_01]: But now it's like, yeah, the leverage and the sort of the volatility that comes from people, you know, speculating on this asset class, how do we damn it?
[SPEAKER_01]: Yeah, love it.
[SPEAKER_01]: If you could
[SPEAKER_01]: bear market.
[SPEAKER_01]: So after we kind of come, there's always some exogenous event that whether it's the FTX, I mean FTX actually happened on the lows.
[SPEAKER_01]: But it was the Luna 3AC on wind.
[SPEAKER_01]: We had like the gray scale fund that like was closed.
[SPEAKER_01]: Obviously in 2017 we had the CME futures that top ticked it.
[SPEAKER_01]: If you peer over to the edge into the, what's catalyzes the next fair market after we have a big run or market, what do you think will be like that risks the systemic risk thing go is it going to be like, you know, a fucking ETF just like blows up and like you could see that like where can you game out like that could technically actually happen and or like microstrategy gets liquidated or something like that feel like we've only talked about negatives.
[SPEAKER_01]: But this is a bear market.
[SPEAKER_02]: It's so true.
[SPEAKER_02]: And we should be prepared, right?
[SPEAKER_02]: We should be able to bear it.
[SPEAKER_02]: I mean, yeah.
[SPEAKER_02]: So there are a lot of systemic risks, right?
[SPEAKER_02]: Like one is obviously.
[SPEAKER_01]: And you're the risk mate.
[SPEAKER_01]: I brought all these questions to you because like these are the questions I genuinely have.
[SPEAKER_02]: And you're the book think about all the time.
[SPEAKER_01]: Yeah, exactly.
[SPEAKER_02]: So the things that could settle is like another like down.
[SPEAKER_02]: Let's say I would do, you know, there's obviously like the risk around AI.
[SPEAKER_02]: Okay.
[SPEAKER_02]: Like the mythos risk is what people hack using AI to hack.
[SPEAKER_02]: crypto based we've already seen that happen a couple times on chan reality smart contracts that are exploited because people have come up with new ways to sort of uh
[SPEAKER_02]: uh, hack, it can use different protocols.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: So, okay.
[SPEAKER_02]: So that's one avenue and that can be very disruptive.
[SPEAKER_02]: Like we saw that earlier this year with like other, it felt like Z-cash as well.
[SPEAKER_02]: Like there was rumors that open-sack Z-cash.
[SPEAKER_02]: Right.
[SPEAKER_02]: So that's one major category of risk.
[SPEAKER_02]: I think the other one is you know what you said, which is basically custodians, large holders of crypto, while many of them have
[SPEAKER_02]: years now of tri-fragile sort of situationally storing digital assets.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: Like obviously there's many unknowns around this stuff.
[SPEAKER_02]: Especially when there's going to be more, let's say types of attacks, social injury attacks, all kinds of things that are maybe enabled by AI as well.
[SPEAKER_02]: So that's another category.
[SPEAKER_02]: I think a third major category is around
[SPEAKER_02]: the financial engineering that's happening on chain.
[SPEAKER_02]: So a lot of this is being looping or ering, or it's sort of like tokenization.
[SPEAKER_01]: To enter.
[SPEAKER_02]: But what's tokenized is not, let's say, a simple spot asset.
[SPEAKER_02]: It could be like actively managed trade.
[SPEAKER_02]: Tokenization.
[SPEAKER_02]: Yes, strategy or something else.
[SPEAKER_02]: I could also see scenarios where even if it is a smart asset, like it's a tokenized stock, let's say, gets dislocated from the real thing or like a bad issue or issues tokenized stock on an underlying that doesn't exist.
[SPEAKER_01]: Yeah, like that, right?
[SPEAKER_01]: So there's like this sort of class of systemic issues around,
[SPEAKER_02]: like tokenize to real-world assets, for sure, or actively managed.
[SPEAKER_01]: I hope I'm hoping stuff like this doesn't happen, but it's good to know that all that's out there.
[SPEAKER_01]: And then final question on AI, and then I want to talk about Falcon X, because I know there's a lot of good stuff.
[SPEAKER_01]: Oh, she's going in there.
[SPEAKER_01]: But give us a super prompt.
[SPEAKER_01]: If we want to be a small, say we have a few thousand bucks in we're testing the new agentic trading systems,
[SPEAKER_01]: Cloth hooked up to your brokerage account if you just had you know a few thousand dollars Because I know there's a lot of strategies that like don't scare if you have a billion dollars like you can't do it But like what would be an ideal superprompter whatever to tell in LLM's that you could be printing money on the bison with option No, I think yeah, like the key to using air for this stop is really like describe I think it's it's not like okay, I have this strategy.
[SPEAKER_02]: I want to implement it's sort of like
[SPEAKER_02]: a good implementation or AI system would basically you tell your intent.
[SPEAKER_02]: It's like, my intent is like, I want to make money by allocating let's say capital to like the highest risk adjusted yield odd chain.
[SPEAKER_02]: Yeah, and that it should really try to figure out like where to allocate all that.
[SPEAKER_02]: Right.
[SPEAKER_02]: So that would be like the prompt and then like you have to kind of define a universe of things like, or I want to do basis trades on, you know, crypto assets, RWA's, you know, equity's commodities, all the stockboard.
[SPEAKER_02]: And then, you know, hopefully, we're at this point almost like where it can sort of like deploy the capital for you and manage it and revalent it and all this stuff.
[SPEAKER_02]: Yeah, that's cool.
[SPEAKER_02]: So yeah, that's what I would do.
[SPEAKER_02]: Yeah, that's what I would do.
[SPEAKER_02]: That's what I would do.
[SPEAKER_02]: Yeah, that's what I would do.
[SPEAKER_01]: Yeah, that's what I would do.
[SPEAKER_01]: I like it.
[SPEAKER_01]: Well, at Falcon X, you guys touch a lot of different parts of the market from like I said, custody, OTC services, you're obviously making markets for options.
[SPEAKER_01]: You know, tell us, you know, kind of in your view, you know, what at the core is Falcon X?
[SPEAKER_01]: What's the plan for growth?
[SPEAKER_01]: Like, who do you guys want to beat?
[SPEAKER_01]: Like, are you now and who do you want to be?
[SPEAKER_02]: Yeah, yeah, that's a good question.
[SPEAKER_02]: So we've been around since 2018, 2018, top-ranking.
[SPEAKER_02]: The firm is originally conceived as a prime broker's business.
[SPEAKER_02]: So I mean, we provide access to sophisticated investors, hedge funds, asset managers, you know, BCUs.
[SPEAKER_02]: who want to access crypto markets, and they use our pipes to trade on exchanges, and they use our trading thus to access markets that are more esoteric.
[SPEAKER_02]: Like things that aren't listed on an exchange, they might autotus on something, and we provide that liquidity on a principal basis to that.
[SPEAKER_02]: So, I mean, it's your firm's money.
[SPEAKER_02]: Exactly, we're on the other side of the trade and then we figure out a way to hedge it, got it.
[SPEAKER_02]: So, that's been over time like the set of things that we provide this sort of liquidity service around has expanded dramatically.
[SPEAKER_02]: Yeah, right, it used to just be like spot trading and then it became like maybe a forward and toward turn swabs and now it's like, you know, options and more exotic things.
[SPEAKER_02]: and maybe systematic strategies.
[SPEAKER_02]: And over time, the firm's added sort of peep bits and pieces that are supplementing the core business.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: So, you know, we bought like a set of asset managers.
[SPEAKER_02]: One is called 21 shares, which is the ETF is sure.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And then, um, more recently, we bought a firm called Blocks Route.
[SPEAKER_02]: Block on her out.
[SPEAKER_02]: Blocks route.
[SPEAKER_01]: Oh, Blocks?
[SPEAKER_01]: Yeah.
[SPEAKER_01]: Hurry, hurry, hurry.
[SPEAKER_02]: So, that's a very recent one, but tell with the networking and stuff, correct.
[SPEAKER_02]: Like, we believe, you know, has more real-world assets move on chain, that latency of these, like, networks, these blockchain networks is going to be a much bigger consideration.
[SPEAKER_01]: Yeah.
[SPEAKER_02]: For sophisticated investors.
[SPEAKER_02]: So, that's kind of another area that we're investing in.
[SPEAKER_02]: But I would say, like, yeah, it's basically market access to crypto and then finding the best price, whether it's through routing directly to exchanges or using
[SPEAKER_01]: And how big is the firm in terms of capital you guys work with or your customers?
[SPEAKER_02]: Yeah, we're about like 300 people, you know, in terms of customer base, it tends to be you know, there's a lot of crypto-native firms that we've worked with over the years, almost like everyone in this space, like you're pro-occurring.
[SPEAKER_02]: And then more recently, it's like newer entrance would be trapped by firms, right?
[SPEAKER_02]: Like Yacro, Heshbans,
[SPEAKER_02]: you know, even equity, like long-shard guys, you know, banks, fintechs, or sure payments companies, like they all kind of use our, whether it's our trading services or our financing and kind of like our, our, our credit book.
[SPEAKER_02]: And one way or another, they're sort of interacting with us to source access or liquidity and crypto markets.
[SPEAKER_01]: makes ton of sense.
[SPEAKER_01]: Well, leave our viewers with a positive note on top of their mind.
[SPEAKER_01]: Of course, anywhere that you kind of want to take it, right?
[SPEAKER_01]: Like, is there something that you've seen recently a product you're using, a strategy you're using, an institution that you've been, you know, working with, or you're just like, this gets me hyped up for, you know, the next bull market.
[SPEAKER_01]: This gets me hyped up on, you know, coming to work every day.
[SPEAKER_01]: Yeah, for sure.
[SPEAKER_02]: Well, I would say I had a good opportunity, I think it was a couple of weeks ago to go to London to see the Robin Hood product launch.
[SPEAKER_02]: For sure.
[SPEAKER_02]: And that was a very exciting time.
[SPEAKER_02]: I think, you know, I think the one thing people say in crypto a lot is like, oh, there needs to be more applications.
[SPEAKER_02]: Like, right, do we're happy to share more?
[SPEAKER_02]: thing they're delivering people on change yeah i think robinhood is really trying to do that now we're actually partnered with arcus which is one of the uh uh like r w a perp dexes yeah that are launching on robinhood change we're one of the market was that formally uidx or yeah yeah that's the input you want for sure that is so um we think there's going to be more of that happening where it's like um you know global access to these r w a mark is
[SPEAKER_02]: Okay, that's that's honestly the most exciting trust.
[SPEAKER_02]: I love it.
[SPEAKER_01]: All right, everybody.
[SPEAKER_01]: Well, that's Josh Lim co-head global markets Falcon X Josh, thank you so much for joining us here on the crypto one-on-one broadcast.
[SPEAKER_01]: Where could people follow you on X linkedin?
[SPEAKER_01]: Where do you like to kind of send people obviously Falcon X dot com dot com or dot I Falcon X dot I oh not dot com and don't go there
[SPEAKER_02]: Yeah, my Twitter, or my ex is Joshua Under Sword J on the score plan.
[SPEAKER_02]: L.I.A., awesome.
[SPEAKER_01]: Alright everybody, well stay tuned, we're going to have some more great guests for you.
[SPEAKER_01]: Take care, enjoy the rest of the summit.
[SPEAKER_01]: Thank you.