Comparing Today to Bear Markets of the Past with Dan Matuszewski

19:19Alex Thorn:Well, that question does persist. But for now, we've got some short term stuff to that seems to be overshadowing the broader market at this very moment. But yes, I agree. That remains the massive question in all markets globally and in the U.S. We'll connect again and follow up on that. bimnet abibi my friend from galaxy trading thank you so much thanks for having me it's been um and i'll note that we're recording i'll introduce you in a second i'll just go ahead i was going to talk about overall read on the market we can chit chat um i want to ask you about prediction markets that's new since we talked last year not new but like you know very like a thing right like they're like they matter yeah they matter a lot and every day there's like a new controversy about resolution logic or insider trading um did you see the gals you won last night yeah with the i mean i i i get why they don't want death as a resolution criteria because that's like assassination markets but still like surely they didn't the market wasn't

20:15Dan Matuszewski:will he be killed you know it was like yeah every market's like a death market in some level right like there's like a person like that's like a non-zero like outcome it's not like rooting

20:26Alex Thorn:like brian armstrong he'll say these words on the earnings call but then he happens to die like he didn't say i'm like that should be a reason that it goes to zero i agree that's it should be baked

20:36Dan Matuszewski:into the contract i think so so i didn't tell she fucked up i think that they they i think that was the wrong call i understand what their like logic was but like i i think they needed to publicly just say something that they're not making death markets but like they also needed to honor the

20:51Alex Thorn:contract i think that's right and they did the contract did say it though in the in the result I think they missed they shouldn't have written the the death clause as invalidating the contract into the resolution logic in the first place. I don't think it wasn't. Oh, wait.

21:04Dan Matuszewski:The contract said it doesn't resolve.

21:07Alex Thorn:Yes. It said in the event of death, it doesn't resolve, which.

21:10Dan Matuszewski:Oh, OK. I didn't know that. I thought it was just out. Dude, this is the problem with these things. You've got to meet all the weird minutiae. Like and then you get the nerds on the room of Orm and Polymarth are like fighting you. It's just like.

21:21Alex Thorn:Yeah.

21:21Dan Matuszewski:that's always my beef with like the ones where remember this was the big one when uh with Venezuela and they're like does it count as like was it was it war they're like well you did put

21:32Alex Thorn:boots on the ground but you know I yeah I agree this is super tricky before we go further let me just introduce Dan Matuszewski from CMS Holdings welcome back to Galaxy Brains Dan um I think we've now talked like we talked every year for like four years or something like that at this point right yeah how long you've been doing this i think we've been doing the show since 21 now so almost five years i think we started maybe in the spring of 21 so we're on we're on like episode like 150 or something 140 uh weekly that's a good run dude being at one employer for four years is like a deep itself i it's yeah dude it's pretty crazy there there were previous seasons of the show or years of the show where i wrapped the intro on every episode there's at least one or two about you on the show.

22:21Dan Matuszewski:I did. I mean, if you can make my last name work, that's a feat. It's up.

22:25Alex Thorn:I did. I can't remember. I think it was the rhyme, Matrushchevsky. I can't remember what I rhymed it with. I'll have to go back. Maybe I'll pull that into the show notes here. But let's keep talking about prediction markets because they matter so much more now than prior years we've talked. I mean, I think the point about this resolution logic, you know, it makes sense that there would be markets that theoretically could resolve if the participant died what before the market resolution like dimension markets you know if they say is Alex gonna say these x you know 10 words in his interview with Dan but then I just happen to have a heart attack well then I won't have said them and like shouldn't that should

23:03Dan Matuszewski:resolve I yeah I think you just like dance around it and you just never yeah I just split it because like that's obviously not the goal yeah exactly because you never create a market where like that That is like the only criteria of like why it resolves. That is a terrible moral hazard and just bad in general.

23:22Alex Thorn:Yeah, like just for extreme clarity for the audience, right? If the market is will Alex Thorne die by someday, then you could come and kill me and cause the market to resolve in your favor. That's what they call an assassination market. That's obviously bad and should not be allowed. But like, yeah, like death. I was giving this example to somebody earlier. like if let's say there's a high profile movie and a major actor is signed on to do it but for some reason like in the tabloids there might be a reason there's speculation the actor might not follow through with ultimately doing the movie obviously depending on how the market is worded like if that let's say the actor doesn't pull out but instead gets you know it dies in a car accident like well he didn't do the movie now like isn't that shit you know who knows who knows what the motivation for the better could be it could be that they think the actor is overweight and could die of a heart attack and that's why they're saying he won't do the movie not because you

24:16Dan Matuszewski:know you gotta hedge that and pick up a life insurance policy yeah exactly out of the market

24:21Alex Thorn:are you guys using like or thinking about watching prediction markets in event outcomes to help inform your investments in trading not really i mean like we watch them because like they're fun and liquid but like there's not first of all like those products that are like just crypto

24:38Dan Matuszewski:specific like the they're like option products yeah like the five minute like bitcoin price you're gonna get your face ripped off like you should not be trading those so like no we're not doing anything there and like it seems the people that are pricing are pretty sophisticated i assume that's like what jump and like sig and emerson are doing so like they're there's not like an inefficiency that we've seen there um except they've got like liquid so we're not doing anything there and that's just like not we don't have a need for trading those things they're like basically just gambling um and then like i don't know like the like trading the iranian situation in pie market just like doesn't like that's not we don't have any edge there and also like that's not like a thing we're looking to like make investments in right like that's just gambling again it's like the same thing with sports betting right like you can do it but that doesn't mean it's like a positive ev sort of business line so no we have we like um we i'm sure everybody here in their personal capacity is like traded in some like way but we're not like taking like structural bets yeah that makes sense and i think most of the macro stuff like is like i know people like to get a little ahead of themselves and be like these are better than like the existing like toolkit but i'm not i'm not bought on that either yeah what is it like better like what cpi is going to do is like not like a trade we're sort of putting on right right i've heard of examples

25:54Alex Thorn:though with some things like for big businesses putting on nine figure hedges on like elections for example like because you know if it goes one way it's better for their business and if it goes another way it's really bad for their business granted i think most of those like otc and not through like polymarket as an example but like there there could be like for certain types of businesses a hedging you know benefit right yeah you could i mean like the big ones like the big

26:21Dan Matuszewski:political outcomes like make sense but they're few and far between also i don't know i'm gonna if you can really put on them. Like, I feel like low eight figures, but like a nine-figure bet would be pretty material. I forget what like the open interest was in the presidential contract for the last cycle for Plymarket. Yeah, and that's, it's hard to find.

26:43Alex Thorn:That's another problem is the data.

26:45Dan Matuszewski:Yeah, they don't want you to see it. Yeah, and they also quote lifetime volume on the contracts, which is like kind of weird because it's like, like that's not super useful to me sometimes.

26:54Alex Thorn:Yeah, totally. And like the other thing I wanted to ask about, we've been debating a lot is like insider trading on these markets, right? Yeah, it's going to happen. because ostensibly it's actually i mean robin hansen this famous professor who kind of invented them academically explicitly says that incentivizing insiders to bet is uh the reason is one of their primary purposes right because that's how you surface that's how you turn them into information markets but that's obviously intention with you know the market regulators

27:25Dan Matuszewski:and stuff yeah it gets into a super dicey territory i mean like sometimes it's completely above board right like if i like if you're betting whether or not i'm going to say a word on the earnings call like i have the right to like trade on that information and then like

27:39Alex Thorn:right because there's a first amendment protection as well yeah there's no like and you're not

27:43Dan Matuszewski:stealing any information like i own it it's mine like i'm not taking it from anyone and people get really outraged about that because they think like that's insider trading and that should be but like insider trading is just like theft right it's that you have information that's valuable and you're taking it from somebody else when you're not like supposed to. But like in this instance, like that is my information. So like that doesn't sort of get covered. What you have problems with is corporate earnings, like M &A stuff. And then obviously the government does not think this is funny. And like they've been hammering people that they keep catching doing like military related stuff, which I think is going to probably be the most heavy handed because that is like clearly a breach.

28:22Dan Matuszewski:and also there's like real world implications that they are going to just bury you on yeah this is

28:28Alex Thorn:that's such a good example yeah we are and i saw there was one with two idf soldiers who bet on like will israel attack iran by some day this is back in january and israel caught them and they had obviously misappropriated classified intel in their jobs but the thing that's interesting to me about this is that's like a perfect example of something that could be very impactful to the world that the broader world might want to know like is that manipulating the market like to me is that a cftc issue it's definitely an idf issue no one i think disputes yeah well yeah it'll just

29:06Dan Matuszewski:never get to the same right like it's just gonna get like this is these people are never gonna like get past their like the military they're gonna handle themselves so like we probably just like won't ever see a resolution there but my guess would be that that is the same way you get all insider trading right like it's theft of information from the military in that instance and you have a clear responsibility to keep that information that's right yeah so i i think that's a layout

29:31Alex Thorn:yeah yeah you're right for certainly for the employer and if that employer is the government

29:36Dan Matuszewski:your government yeah you just like and then in the court of public opinion you just like nobody's on your side it's hard to defend that it was one more example that i thought that was

29:45Alex Thorn:recent that I that I liked a lot was somebody bet on the exact second length of the national anthem at the Super Bowl and they went and then they went to the stadium during the days preceding the Super Bowl and sat outside it and could hear them practicing and to me like that's fair game

30:03Dan Matuszewski:yeah that's fine yeah anyone is in a public place that I see no issue there yeah it's kind of interesting yeah if that guy were an employee of the stadium and was working like i don't think that flies then the stadium could have like real an argument and could like potentially make that an issue and like you could say that that was that's of information there but if he's just

30:25Alex Thorn:i don't know there's nothing he's on the street it's like if he's on the street it's kind of like those like pentagon pizza uh trackers right like you know all we did was see if like they ordered a bunch of pizza late at night at the pentagon right like it's not technically you have access to the pentagon pizza supply chain by following it yeah i people get hung up on the concept that

30:48Dan Matuszewski:like it's like a quality of information but that's not the case it's like who if the information has value who has a right to it and like do you have a duty to like protect that information that's kind of i don't know because they buried they buried the guys on the nft thing on open c like that was like a clear one where like it's less so that it's like and that people get caught up like oh it has to be stocks and it's like that's clearly not the case either um so anyway i don't know yeah very interesting it's gonna like continue to be a problem the problem generally is like there's junior employees at a lot of these places that i actually don't think understand this concept look if you work in finance you know this they beat this into you pretty quickly right that you like can't be doing this but if you work at say at random tech company and you have information and it could one market like somebody did with the spotify markets right like what was going to be like top it's probably unclear to you immediately that like you can't do that um if you haven't sort of been told by compliance that you shouldn't be doing it um so that's where i think people are going to get a little bit outraged and probably get caught yeah i think

31:52Alex Thorn:you're right and you're going to start to see employment contracts and stuff like start to include this probably explicitly um and obviously in the case of like a publicly listed company like galaxy we already know that you know misappropriating you know material non-public information is illegal but like if you're not a public company you're just some company right it's not as obvious

32:13Dan Matuszewski:uh maybe to those employees if you work yeah if you get hired right at just like a random sort of run-of-the-mill tech company like they're not going through like a compliance thing with you especially if the company's not public about like duty of keeping information i don't know

32:28Alex Thorn:Or like you said, the Super Bowl, like the staff of the Super Bowl, like they probably weren't saying like, hey, don't do mention markets or timing markets related.

32:38Dan Matuszewski:I would bet a lot of the sport like I don't know how it is now. Like, I assume that you're not if you're an employee of an NFL team, you're not allowed to gamble.

32:45Alex Thorn:Right.

32:46Dan Matuszewski:Like, I think that's probably the case. I don't know. But I would bet good money. I would bet that they're just going to wrap. They're going to just cover. Right. They're going to be like no prediction markets at all. Like, just like cut that shit out. Right. It's not part of your job. like we're just going to have to say that you can't do it which i think is it's the same way like if you work at fidelity you can't like just trade single stocks like all that you got to like get approval you got put like you can't you just kind of you take a really broad approach that you

33:09Alex Thorn:just ignore this problem entirely yeah that makes a lot of sense um look dan you guys at cms are some of the you know larger principal traders in crypto you you've been trading in crypto for i don't know has it been a decade probably i mean yeah usually because i i started doing a full-time in 2013 oh wow so more than a decade um you know what is your overall read on on crypto markets or you know bitcoin majors also but like where are we right now because we're obviously you know down 50 in bitcoin and worse than a lot of alt coins what's your sort of overall take yeah um it's

33:47Dan Matuszewski:Look, I think my read on the whole thing is there's this massive, like, sucking of capital in the world into, like, specifically AI, but, like, a lot of the AI Jason things, too, right? Like, all the pieces that go into that. And then you've got, like, robotics being, like, an interesting thing that people are putting. But, like, in space. Anyway, call it, like, cutting-edge tech, right? Like, where there's a ton of money just, like, coming in from every corner of the world. And it's like creating this like liquidity vacuum, where it's just all people want is exposure to that. And they're willing to sell other assets sort of like to get there.

34:20Dan Matuszewski:And I think that's been like the biggest trend is just all that money is getting like sucked out of like crypto and other things, by the way. Like crypto is not like the only unique one that's getting like obliterated on this thing, too. Right. Like there's a lot of traditional markets. Like the big one, obviously, that people like put up against it is like the SaaS companies. But like there's other sectors, too, of like traditional stuff that like it's just all the money sort of going there. um and that is like obviously like painful right like you can't like look at the funding like it's very little venture dollars being put into like new crypto sort of stuff nobody's really raising any funds like dragonfly had that one come out um mj had a little bit of money i think he had like 65 but that's like not a big raise um so there's like very little new sort of interest in sort of this as all the money's sort of getting sucked into that and you got a well you got four or five big ipo slated now in the next 12 months spacex opening eye um anthropic they're all looking to get out and that's another thing like that's just like sucking like capital in is like you see it like there's these spvs that are layered on top of each other everyone's just clamoring sort of getting to it so look it's like the least interesting sexy thing right now and the money's just sort of going elsewhere is it going to persist forever like no um do i know where the bottom is like also like no but i like to think we're like closer to the end than not i mean you're starting to see some real capitulation right like hash rates jack down a couple times that's usually like a predictor of like people like really puking it um these dads are just dead like they're like they have them like structurally unwound but they're basically like out of business um besides like a couple of the bigger ones like that's like a big thing and you've had like a handful of people sort of leave too which is like obviously not a net good but it's hard it's hard to know like where the end of sort of that trade is but it's not forever and like assets like it's not disappearing so and it's not being made illegal so it'll be here and you just got to sort of like survive like that's like kind of the biggest thing you got to just like make sure you can like live another

36:11Alex Thorn:day yeah i mean that's been the tale a couple times in in crypto's history and certainly as long as you've been in the market how would you compare like the sense of this bear market the sentiment the feeling compared to i don't know 22 18 you know 15 and 16 like is it is it different

36:27Dan Matuszewski:i would say 18 felt the least bad because like everybody knew it was coming like the hangover from like the ICO boom, like you just knew it was going to happen. Like it was just bananas. Like the top of that thing was like, I still say this today, having done this for a very long time, that was the wildest period I ever like traded through. And like, hands down, like there's just the shit that was going on there was like a whole nother level of sort of mania and like probably the purest mania I've ever like been a part of. And then like the second one was that didn't feel is bad was probably 22 despite like it actually being like locally like a real issue for us just because like we were like involved in trading on ftx a lot but that one sort of it was like here's the problem there's a credit crunch these entities are toast like it'll be fine on the back half of this um you just like gotta like live through and it's gonna suck for a while which was kind of how it went down the problem now is like there's not like a thing that happened where you're like oh like we just gotta get past this it's just gotta be like we gotta just stop we're sort of the bleeding and then like hopefully it'll come back organically so it's a little harder the only time the worst time by far and the time this is probably i'd say now is the second worst time the worst time was 2015 there's a period in 2015 where it was dead like it actually might have like felt like it was kind of over i remember so bobby one of the partners here was working at cumberland at the time i was at circle and we were looking at you remember trade block yeah yeah they were like we use them a lot for the pricing thing and they had on the right hand side the 24 hour volume of like top eight dollar exchanges right like that was like a little toolbar in bitfinex which was the biggest liquidity venue at the time had traded under a thousand bitcoin in the rolling 24 hours and bitcoin is probably like 300 or so so i was like all right i was like the biggest exchange in the world is gonna trade 300 grand for like the rolling 24 hours i was like this is just like not sustainable i was like none of these businesses can survive i was like we aren't making any money the exchanges aren't making any money i was like this is toast i was like nobody cares like this is like actually over and that didn't really change until like 2016 and eth got a little popular and then people started piling back into bitcoin and then it's sort of like obviously 2017 was mania so like that was the worst time this is probably coming up on the second worst time but i don't know it's it's when there's a catalyst and you can point to it and be like oh this is like why we're getting toasted it always feels a little bit better if it's just sort of like

38:51Alex Thorn:bleeding out for not a lot of reason like that sucks yeah i agree i feel like this time it you know especially when you had the president uh the vice president promoting it a wholesale improvement in the regulatory outlook and rollout and it's kind of like you know how much and yet we still you know experience the you know a topping and a pullback like this it's sort of like well what more could what more of an external catalyst can there be right than what we got last year yeah

39:18Dan Matuszewski:I also worry about like the looming like we have risk now politically the other way which is like not great like if the regime changes in the next presidential cycle we're going to get buried so I hate that like that sucks to have like on the horizon and I'm not making any opinion about what will or will not happen but like it's not a non-zero chance that like the admin changes like happens quite often so like we have that like lurking issue now which we like previously did

39:46Alex Thorn:Well, how important is it in your mind then that something like the Clarity Act gets passed into federal statute now to help prevent against a rollback then?

39:56Dan Matuszewski:You might not get it the next time. Yeah, I think it's pretty big to get that stuff. I mean, the midterms are soon. So I'd like to see that get done by summer. I don't it's hard. I don't have like real good inside baseball into that. But yeah, yeah, it's pretty important, I think, to get this stuff through what you can.

40:12Alex Thorn:Yeah, the risk of a rollback seems to be like one of the main, you know, in the case of a hostile administration, seems to be one of the main impetuses that people are pointing to for why you need clarity. Because otherwise, like, you know, big C clarity, right? Capital C clarity, the Clarity Act. Otherwise, it feels like we're getting most of what we wanted from the current regulatory agencies, right?

40:35Dan Matuszewski:Right, right. But if it's not codified in the law, that can change. So it's like, then you're just subject to the whims of whoever's in there. At least I think the OCC charters are kind of hard to roll back. So hopefully that has some stickiness to it, which will be helpful.

40:47Alex Thorn:Yeah, and there have been a bunch of them granted recently. What's your take on Erebor Bank? Do you have one? I mean, I only point that one out. They recently got an OCC charter. Yeah. A very fresh DeNovo bank.

40:59Dan Matuszewski:They do. I put a small check in it out, which I snuck in. And Rowe's there now, which is great. So we're onboarding with it. We haven't gotten it yet. So I, it's hard for me to like, I can't be like, this is the greatest thing since sliced bread. Cause like, I haven't used it. Um, like the pitch is great, but like, like I said, until I'm like using it, I don't want to like say anything. Um, but we're excited about it. I mean, like the stable coin in and out is like the big sell. Like I think, cause like our flow currently is kind of just like USDC to Coinbase or Circle to our bank to do stuff.

41:32Dan Matuszewski:Like there's really no reason to have that hop in between. So hopefully this is like the smooth transition. Um, and yeah, I'm excited to use it. But like I said, it's still really early on it. And there's a couple others that are looking to do a model.

41:45Alex Thorn:Yes, that's right. I don't know about each of their models, but Anchorage has had one. I saw Ripple is getting one or got one. There's a bunch of others that have applied as well. I wanted to ask. Yeah, go ahead.

41:59Dan Matuszewski:I think Ripple did get the OCC charter.

42:01Alex Thorn:Yeah. Yeah. Yeah, so, but, you know, one of the things that went down literally in 23 was the real-time payment networks at Silvergate and Signature, which sort of were the method to move cash around in a lightning-fast manner. And obviously those got taken out. Like, have stable coins, especially if you could get this, like, more seamless on-and-off ramping, have they, like, filled that gap by now for you guys?

42:33Dan Matuszewski:um yeah i'll say this like the most we ever really used the send network was like obviously like when we were otc trading um i think most settlement just happens in stables and i don't think it's really a function of the banks like falling down it was just like easier you just needed sort of everyone to do it um but i would say even by 23 like when those networks got toasted like we were still pretty much settling in stable coins if we were doing any otc activity it's just like cleaner and like as long as there wasn't like a ridiculous like charge for doing it um like people just i think most of the time it's just easier especially if you have them like we we would avoid like having a like this is the scenario you don't want it's like i gotta pull usdc out of like the crypto world into the bank to then send a wire to get crypto in like that's just silly so like it got gotten short-circuited probably like going into there um but yeah i mean like those banks getting popped i think the bigger issue was just like that was like the only like people use them for payroll ops like just normal sort of like expenses like that was the bigger issue was like people didn't have like an operating bank for a while um and the backup like the thing was always you use silvergate you had signatures the backup and then they both got like whites i mean like we were like like i personally got popped at spb and first republic within like three months and then like here we lost silvergate and signature probably in like an even faster timeline and like we had kept an operating account at bank of america that we like didn't use but it was like a real like emergency bank account which we were able to lean on until we got uh western alliance stood up after they were like filling the void but like the problem was like you it's like all the other banks that would be willing to bank you were like the ones that the people on the news were like this is the next one to go down and it's like well i don't really have a choice here so like what am i like obviously they're willing to take my business because they're in trouble so like i might have to like sort of go where they're like um and like there was a list that was going around of like all the banks you could use that people kept like trading they were like yeah they'll thank you but um it's been good now like that's that's really not a concern for us that we think about too much anymore but there was definitely a period of time where we're like what are we yeah like if we lose all our bank accounts like what are we going to do like that was the core

44:35Alex Thorn:of the operation choke point 2.0 wasn't even the destruction of the payments networks but the riskiness via supervision of just normal banking of crypto that made it impossible for most banks to even you know again provide cms with payroll accounts right like basic banking the one thing

44:53Dan Matuszewski:I will say on the bank's behalf, not that I'm like in the business of sort of defending them, is like the fraud that flows through crypto is real. And like, it's like a very expensive business to like bank. And if you're just like running regular banking services as a customer, you're kind of like a terrible client. Like you cost probably more money in compliance, like stuff than you're like keeping in the bank to justify sort of the business. So like, I, I understand a lot of their, a lot of like, why a lot of businesses were like, I just like, don't want to bank you like i can't like this is like a losing proposition for me so like i'm not interested in it it's just like it's unfortunate that like crypto is a great thing to steal because it's a bear asset and like anytime you touch the tradition banking thing you just like it sucks

45:34Alex Thorn:you just like in a like world of pain yeah let's can we talk about perps markets because i mean they've been around for a long time at least like since bit bitmex which was huge in perps but now you know there was a whole trade and meta around the launch of new on-chain perps markets last year following you know hyperliquid's ascendancy how important is hyperliquid generally uh to what you guys do or is that where you're trading perps these days or or where are people trading perps

46:00Dan Matuszewski:so i mean i still think that look i mean it's definitely one of the biggest venues now um i still think binance is bigger okx is like bigger um it's hard because like those volumes are a little fugazi sometimes but it's useful right it's really useful because it's there's no kyc and it's seamless and you can just like onboard and sort of like start you can just you could be onboarded trading in like five minutes like it's very very convenient to sort of doing it it's great that they've moved into a larger product suite i think that's like super important for them to like hedge some of the like crypto sort of exposure of the business um i my biggest concern with the whole thing is if they're opening themselves up to regulatory scrutiny um i don't like here's the here's where i think it gets a little iffy is you effectively have people trading u.s stocks but like you don't own like you're not really because you're trading the forwards on it but you're changing the underlying right like it's not like happening in a vacuum and you don't have like the kyc info on those people and i don't know how the regulatory regime obviously right now it's the friendly it's going to be but i don't know if that's going to be a permanent thing through time um so i don't know i remember this was always because when circle had polo this was always like a thing they were like we should launch like stock trading and like let it happen and like the pushback then and this was obviously into the Biden era was like under no circumstances can you be like having like non-US people like trading this thing right just in like a black box so that was I I know that there's regimes that definitely think that is like a thought um so anyway but I think it's very useful for them like it I think if you even look at the OI on some of those they're like materially higher than some of the altcoin markets now I mean that's what people want to

47:33Alex Thorn:trade you got to like give them what they want yeah there was this weekend uh during the you know attacks on iran and vice versa in the middle east i saw that even bloomberg was quoting

47:43Dan Matuszewski:hyperliquids you know perps on oil yeah i mean it's liquid and it's open yeah i mean you'll probably see his glowbacks go to like 24 7 right like they'll just have to like they're not going

47:55Alex Thorn:to just like take it lying down yeah that makes sense what about perps on equities like through cme like regulated ones i know cftc under like under caroline fam has been working on this and

48:05Dan Matuszewski:now mike see like it's kind of so so single stock futures used to be a thing and then nobody really wanted to trade them so they kind of got rid of it like this isn't the first time in history that we've had sort of single stock futures but retail has gotten like really into trading perps instead of options where they can so like this is just like what they're going to have to like feed them so yeah you're going to see it i mean it's really just like a leverage sort of instrument than it is like a hedging sort of tool yeah but people like it better than options so i think you're going to continue to see pushing forward to that in like the trad fi world you talked about earlier dan

48:40Alex Thorn:the like leverage unwinding and stuff credit crunch from 22 how do you view the leverage

48:45Dan Matuszewski:and credit landscape in crypto today there isn't much like you don't have like there was a lot of shoddily collateralized if not uncollateralized lending going on in 22 right between block five

48:59Alex Thorn:celsius um what was the other big one like voyager uh voyager um yeah genesis genesis like

49:09Dan Matuszewski:obviously like like look there was they were gigantic and like we borrowed a ton of money from pretty much all those and it was a great time to be a borrower but it was a terrible time a year forward to be a lender right so it all the problem was it was very daisy chained and like nobody really had a good risk look i'm sure there's a pretty good amount of lying going on from like some of the counterparties too of like what their like actual exposure was. But they were all very daisy chained, right? And like one lender's counterparty was on the other lender and like they were posting the collateral here.

49:40Dan Matuszewski:It was pretty much a mess. So when 3AC toasted and the whole thing just sort of unwound pretty quickly, that was the first time there was a real credit contraction in crypto because then it actually built up pretty big. And that unwound pretty quick, right? From the start in May to FTX falling down is like eight months. so that was a pretty quick sort of through it but it was like every other month you'd have a lender fall down and the thing was like in may they were all insolvent just like nobody was owning up to it and like it was just like sort of one which was like they couldn't fake it anymore and they would like drop every two months later um but that was a shitty time because we had a lot of outstanding borrow in like every month somebody would come in and be like hey i have to call all the borrow back in and be like what the fuck like i just like you know you got to just keep on winding stuff um and if you had anything termed it was like okay but you knew like that was going to be a problem coming forward so yeah it was not great um dealing with that but that's that's kind of gone there's not

50:33Alex Thorn:really that leverage in the market yeah a lot of defy usage now i think our data shows that defy is bigger than cefi lending um i bet just barely and that's all overclad i mean like maple's gotten

50:45Dan Matuszewski:kind of big like they're out there we'll see our border is now like um but the credit quality is a lot better and they're just not giving you enough rope to hang yourself anymore

50:53Alex Thorn:Yeah, it seems like maybe some self-regulatory, you know, vibe has, especially among the C-Fi or C-Fi slash DeFi lenders, right? Like, but DeFi has been good. Yeah.

51:06Dan Matuszewski:It's still in everybody's back of their mind, right? I mean, like, you still think back to it.

51:10Alex Thorn:Yeah, you do. And Aave, a massive lending platform or protocol these days that undergoing a major governance debate at the moment, too, because it's one of the, you know, biggest lending facilities in the world. and also is decentralized. It's very interesting. And it also is one of the only ones that's making money consistently.

51:31Dan Matuszewski:Right. And of course, then they got to start fighting. Right. Yeah. I don't have a dog in the fight, but I do hope they can come to a good conclusion because it's pretty important that that doesn't die.

51:42Alex Thorn:Yeah.

51:42Dan Matuszewski:It's like the one thing you can point to in crypto and be like, oh, this works. It'd be great if that was not going to disappear on us. So it seems Morpho has been taking a good chunk of their market share now. Yeah.

51:52Alex Thorn:What do you think about, I've been doing a lot of work on this with tokenized securities, specifically equities. Obviously there are some in the market, including tokenized GLXY and then, but then on one sort of one design side of the spectrum and then X stocks and Ando on sort of a different side of the spectrum. Do you think this has a chance of becoming big one day?

52:13Dan Matuszewski:yeah my biggest concern with is that i don't think people totally understand what they're buying all the time i think like and i'm not like a huge like the market regulators need to be sort of in there but i do think there should be pretty good disclosure about like what the exact thing that you're buying is and what happens in the event like the issuer goes bankrupt or if something like this is this is how it ends poorly right is like i'm not gonna name it but like an issuer goes out there puts a ton of tokenized stock in there they go bankrupt and like suddenly there's like no claim to like the stock inside the thing right like and i and i don't know anything about how these things are structured in any capacity but i just know that it's not clean cut like you're not just like in your brokerage like buying right yeah like it's a little bit different so like people should understand exactly what they're getting but you do think they're

52:58Alex Thorn:going to be popular though yeah i think um you know this is one view i i agree with you on the the structure mattering and disclosure of what the structure is being crucial it's one of the reasons for tokenized galaxy we ourselves the issuer uh tokenized it and we didn't file new issuance we didn't issue new shares you know or we haven't i should say instead we just let you convert them you know on our books and records into a tokenized format that's much and thus they are literally our securities according to us the issuer as opposed to some third party but that's also impeded the utility of them because there's so many regulatory questions if they are real

53:38Dan Matuszewski:securities yeah yeah yeah my my concern is that who's playing the fastest and loosest is gonna like right i do where you're gonna get in a scenario where somebody's just gonna be issuing stock they don't even have and they're just like putting it out there right and be like oh well you i mean i get very concerned because people have pushed this obviously already and they're putting like tokai's anthropic and andril and stuff like that out there and i'm like do you even know if this person has shares anywhere in the stack of this thing like yeah the private but it's in spv and i'm like well does that spv actually have the shares i was like you like there's a lot of risk

54:09Alex Thorn:on this thing yeah absolutely um before we wrap too i wanted to ask you just generally about alt coins you've been posting hilarious and great uh memes about the christmas alt coin market was some of my favorites around christmas i mean the sentiment feels very bit negative on not just you know obviously like meme coins nfts you know the sort of long tail risk on the risk curve of of altcoins but even in the you know the l1 space right like it's it's the sentiment is people questioning the overall utility of the future of blockchains and it feels like that's impeding sort of the even even some of the majors i don't know where do you where do you think the altcoin

54:51Dan Matuszewski:market is i think it's just general with the market right like i mean like if bitcoin catches a cold like old coins get the flu right like that's like the kind of and like people when they're scrambling for liquidity they're selling that stuff and it just like there's there's not a buyer of last resort in a lot of that stuff right so like it just bleeds out hard and if like not goes to zero so i do think it's a function of like the market just being weak and it's just like the weakest of the week um and you never really saw a lot of interest in it in the sort of run up in Bitcoin, right? To kind of like skip the whole cycle.

55:26Dan Matuszewski:I mean, look, you see this in the venture stuff in particular, right? They're not raising new funding to invest in new sort of deals. So what should happen is the universe of investable names should shrink. Stuff will die off. Hopefully that has some more quality and some stick to it will stick around and that'll sort of catch a bid. But there's just too many names and the universe has got to get shrunk. But it's weak, right? Most stuff is opening materially lower than its last round raised at.

55:52Alex Thorn:Yeah, so there's some brush fire.

55:54Dan Matuszewski:And that stuff has a lot, right? So like you can get liquid on a lot of these names at a third of the cost of the venture guys who did it a year ago, and they're subject to the lock. I also think the locks, I think the lock stuff is going away. I think that's just like a terrible market dynamic.

56:12Alex Thorn:Yeah, well, do you think we're going to get like a new like token issuance framework? Because I know Hester Peirce, the SEC commissioner has talked about like a safe harbor for token launches for a long time, sort of as a regulated pathway alternative to the ICO because you didn't have the locked dynamics with the ICOs in 17 the way you do now with the private to public token launches.

56:32Dan Matuszewski:I mean, you see people doing it, right? Like right now, like people are just ripping it. Like they're just putting it out there. So I think that'll continue. I just think this idea that like you lock investors up for four years and you just like bleed supply out there is bad because you have you have this like boom bust scenario that just ends poorly because you're just like you're not matching supply and demand like well at all you're just like you have supply at this like fixed constant sort of thing and you could argue be like well bitcoin did that and it worked and i was like yeah that's true and that they worked for them because they were the first but for like the rest of the stuff that's like issued it has just like been a disaster like it is just it obliterates the chart people get angry so i don't know there was one i remember algorand did this and they changed it and i thought it was a really good idea at the time i actually think the way it played out was a little poor because it was too aggressive but the supply unlocked as a function of price so like you basically had these call options where you like your tokens became liquid but also they had um like had a time-based vesting but then it defaulted also back to the price-based vesting and like that was able to sort of like match the supply and demand like as it was like coming online the problem was it was like too aggressively skewed toward the like unlocking it'll unlock too fast yeah but i don't know there's ways to like jigger it i think yeah i think the the best thing is going to come in yeah i think they some teams are starting to talk

57:58Alex Thorn:about for the team supply like some sort of um you know milestone based on locks right like if the team you know develops the thing to xyz volume or whatever um which seems better

58:12Dan Matuszewski:But I actually think the team vesting on a fixed cadence of time makes sense. I mean, that's what you see in equities anyway, right? Like, I mean, because that's their comp. Like, I just think it's a little weird for, like, people that have, like, given cash to then be subject to, I don't know.

58:26Alex Thorn:Maybe it could be warrants or something, like, based on their, you know, involvement and support of the project and sort of treat them like that.

58:33Dan Matuszewski:But, yeah, I'd love to see you just go back to, like, the ICO model. Yeah, just open the off. The back half of the ICO model wasn't great either. But like the biggest projects that still stand did that. Right. Right. I mean, it was an open ICO.

58:48Alex Thorn:You could imagine with like an SEC regulated pathway with like significant disclosures and stuff like that, that a return of the ICO could could make sense. And sort of some with some guardrails could be, you know, better for the investors than 17 was, but at least allow, you know, projects to get directly to interested investors rather than just bleed them out over time. Yeah. You could imagine it.

59:13Dan Matuszewski:People are definitely looking at it with, like, how do we do this better? I mean, Coinbase, they've only done one, but in theory, they were going to get in this business.

59:21Alex Thorn:Yeah, I wonder maybe why they stopped. They made it seem like there would be one a month, and that was, you know, four months ago.

59:26Dan Matuszewski:I don't think there's any demand. I think they're like, this is fucking great, so we're going to wait. And I think a lot of the teams they had queued up are like, we want to wait.

59:34Alex Thorn:Yeah, true, and to bad market conditions, it makes sense as well. before we wrap Dan you know we talked a lot about various things of this but what either has you excited or worried or any catalysts on your mind for the rest of the year like what you guys are tracking as important to follow that you'd love to share would love to hear it

59:52Dan Matuszewski:I think the biggest things for crypto are not really crypto related I think it's like you have a massive boom still in all this like IEO and frontier tech right that's like clearly driving the whole narrative and then you've obviously got like geopolitical issues all over the place like I think those are going to just drive markets for a while like I don't think we control our own destiny

1:00:15Alex Thorn:I think it's just like we're along for the ride so it's survive is the mantra yeah survive and hope they cut rates that's great Dan Matuszewski from CMS Holdings thank you so much Dan awesome thanks for having me that's it for this week's episode of Galaxy Brains thank you to our guest Dan Matuszewski from CMS Holdings, and our friend Bimnet Abibi from Galaxy Trading. Everyone have a safe and happy weekend, and we will see you next week.

1:00:57Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firm-wide research at Galaxy. Follow me on X at IntangibleCoins. Follow Galaxy Research on X at GLXYResearch. Read our written reports at Galaxy.com slash research. And don't forget, if you like Galaxy Brands, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.