Crypto Derivatives Markets are Overtaking Spot. Is this Healthy? | EBC11

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Thank you so much for making it today. I mean, it's tough for because you guys probably after lunch and I don't know if you had anything better to do. It's tough actually. I want to ask how many Spanish people are in the audience. That's it. I mean, this is lunch time at Spain, so couldn't be couldn't be worse. And then you have a lot of people going to to wherever they go. But, um, thanks so much for making the time. Uh, we promise that we're going to make it good for you. Um, this a super relevant uh panel. I think it's probably one of the best panels I've been in my life.

Um, and not just the topic, but the people that we have here. Um, it's a luxury to have them and they're going to introduce themselves and also it's very timely the back of what happened over the weekend, last weekend, and Taro and I were just talking about this. So, uh, there's going to be a lot of tough questions for Charles. Um, so with that, um, if you guys can introduce yourself and then we can get started, that'd be great. >> Absolutely. Hello everyone. My name is Anestis. I'm the co-founder of uh Central Markets. It's a joint venture with DB Trading. We are a specialized structure product desk for crypto and digital assets options. We trade approximately 4 to500 million a month on structure products of Bitcoin, ETH, and

the top 100 tokens. Sometimes we go even further down the risk curve from basic vanillaas to sophisticated exotics and structure nodes. >> Okay. My name is Charles. I'm the CEO of DYDX Foundation. Dydx is an OG project in the world of decentralized exchange for PES. Uh since inception, DYDX recorded $1.5 trillion of trading volume and nowadays we move about a billion dollar a week on uh on per uh and we also built and migrated away from Ethereum to our own chain. So today we have a Formula 1 to essentially host uh our users and uh and business logics.

Hi, I'm Tara McCaulay, CEO of Ferros Fund. I've been uh trading derivatives in this market for about a decade now. Uh originally was the co-founder of Alama Research. Then uh still doing basically the same kind of market neutral arbitrage-like trading at Ferros Fund across centralized and decentralized exchanges. >> Hello everyone, my name is Yayer Kleper. I'm the co-founder of Magma Devs. We are a contributor to Lava Network. Uh, Lava Network is building the access layer for crypto. Uh, same like uh, Cloudflare uh, giving access to um to the internet anywhere around. Uh, Lava Network is doing that in crypto by aggregating all the node runners everywhere around. Uh

so if you think about opening Netflix and always watching the stream uh so you need to be aware that when you open the wallet you always went want always want to have access to your funds to see your balance and so forth. That's the promise that we are bringing. >> Excellent. Thanks so much. Um let's get started. Um so over the weekend last weekend we saw a lot of liquidations. Um many most of those liquidations coming from the derivatives market which has become much bigger than the spot market at this point. Um usually in traditional finance what you see is when derivatives are there or derivatives trader it as price discovery stabilization it means

maturity of the market. Is that happening in crypto? Are we there or is we just becoming a casino? Well, um I believe that uh derivatives trading is the first and one of the most important steps for a market to mature. Of course, it takes some times for maturity to happen and uh some blood bath alongside it, right? Because these derivatives are very powerful tools uh that have a lot of danger in them and unfortunately in crypto market is no different than any other market. has been dominated by grid and people sometimes make the mistake to actually utilize a weapon they're not very familiar with and that loses to a lot of losses. But derivatives utilization

helps a lot with liquidity, tax efficiency, safety because you can trade on leverage having your tokens on custody. So overall is a big positive effect for the market. It will be some turbulence until you get to a level where everybody is comfortable and remimicking the trade markets. Yeah, I think the derivatives market is incredibly important in this space that this is where all of price discovery is happening in crypto and the same is true in traditional markets. And while we've now reached a point where I think the derivatives market in crypto is about twice the volume of the spot market in Tradfi that's at least three times and if you include OTC 10 or even 100 times as much volume goes through in derivative products and we see price discovery happening there because it's where you have lots of different market participants also it's much more capital

efficient. So I think it's really important that retail traders get access to the markets with the cheapest fees and with the best pricing mechanism rather than confining them just to spot and that we will see the markets mature. Though of course in crypto we like to innovate and so we have new things like per we have ADL that do require a lot of consumer education so that they can be used safely and efficiently. what I see happening at DYDX over the years. So DYDX is in this business since 2018 and probably the early days of DYDX is mostly driven by retail volumes and with the industry growing you see more and more market participants which are coming from the institutional space and their ask to venues is essentially high

performance excellent quality of execution transparency uh and to give you maybe a number to get a sense of what's happening on the decks for for per today 80% of the trading volume on the WDX depending via API. So we can take the assumption API users are mostly institutional or very sophisticated retail users. Um and probably we will see the market while the market expand. We will see some some specialization for different venues. Uh and uh PYDX spend more time now improving the uh the chain itself, the performance of the chain. We cut the block time by uh by by half going from 1 second to 500 millisecond.

We work on order gateways. So all of this is to accommodate essentially one subset of the market which is extremely demanding the new the new money coming in and um there is a value proposition in decentralized venues as well whereas the order book is transparent when you where you don't have the custody to come back to your questions is it a big casino uh you have the options on many venues centralized or decentralized to get leverage up to 100x sometimes sometimes more. uh but the data we have is on average and I think on centralized venue you will find the same kind of data on average user will be between 2.3 2.5x so what it means is that you will always have some outliers here and there you will see on Twitter people going 50x

100x on things but like in the full scheme of things people are uh more and more mature at least what we see on dydx they they do risk management carefully and therefore they don't take like uh unreasonable type of leverage. So there is different type of audiences and I think putting all the purse market under just one label a big casino it's it's a place where you can express your opinion but you've got many different people coming in this market while it expands. Yeah. >> Thanks Charles.

>> Yeah. Um so if you think about that per volume is bigger than spot it it's not necessarily say we in a bubble right now. Um it's all leverage that needs the good rails to go on and continue you know the increasing adoption I think in general uh I have a question actually to the audience who think we are in a bull market now who thinks we are in a bare market now who doesn't listen no I'm kidding uh okay so as you see you know I always like to quote uh Chris Dixon uh in his book read write own you know he said that um any industrial financial has to come backed by gamblers. Okay, like in

order to make sure that the right rails are built and the right infrastructure is built to the mass adoption. So I think in general we're in a good spot. >> Thanks. >> Um on that last point, I wanted to pick up on Jar's last point. I mean we were talking about infrastructure. Everybody knows that this is a nent uh asset class. So we still building some of the infrastructure. Do we need to give retail investors the possibility to lever themselves 100x 50x right uh any movement in the market it's it's lethal right and that sometimes bring very bad reputation to our industry.

Oh, Tara maybe. >> Yeah, I think that look I'll echo what Charles was saying which is that for most users and most positions they actually use very limited leverage and while exchanges like to advertise that they offer 100x leverage they mostly do this to bring people in and you can have your maximum position size at that leverage is tiny. Uh so your maximum loss is also capped and if you want to say have a million dollar position uh for most venues then the max leverage you could use might be 5x or 10x 20x depending on the token. So there are a lot of risk checks that have been bought in over the years as per have matured as a product to make it a safer space and I think to strike the right balance

between offering retail users leverage because they are demanding access to leverage and they are going to platforms that offer it uh and creating safety. I think it's important to remember that no exchange wants their users to go bankrupt because then they'll stop generating fees. uh so we we have seen a lot of advances in how pers are operated over the years product. I think one thing that was dangerous over say October is that this is the first uh big crash we've seen since there's been more than 10% of volume and open interest on per dexes and they have a very different implementation for for margining uh for ADL than we see on some of the centralized exchanges and so we we saw sort of open interest on per dexes over

50% got wiped out on on hyperlquid uh whereas it was kind of more like 5 10% on centralized exchanges where there are a lot more of these controls in place >> to illustrate a little bit what Tara is is explaining very very well here on DYDX we've got permissionless listings right so users can trade about 250 more or less trading pairs and whenever they see a new market and this market is launchable uh they can launch essentially on a permissionless way as this market and there there are different ways you can build DeFi and hopefully we we're trying to be as diligent as possible so when you want to launch a new market. This market needs to be like properly priced from from oracles. So it's kind of a slowing down.

Uh many people sometimes and users will pressure you to launch market but if the market is not healthy yet will not be launched just by the architecture of the system and then the the margining kind of freedom of the users will also scale step by step with with the market maturing in terms of volumes in terms of activity on dydx or elsewhere. So it's not systematically like you list a market and boom you've got 100x like proper operators usually will get like some rules Sah was describing to not burn the fingers of of anyone but yet if the people wants to trade uh and they feel confident you won't stop them also if I want three big Macs at McDonald and five giant Coca-Cola I'm going to get

sick but uh yes they're going to sell it to me. Yeah, on on my side, I'm a free capital markets guy. I believe that everybody should be able to operate in a free and ethical way. I don't like third parties or bureaucrats telling me what I can and I cannot do. With that being said, on the retail side, the safest way to custo your Bitcoin is to buy it and hold it and not do anything with it. The moment you want to play with leverage, you are actually wanting to take on some risk. And as uh people say there is no crying in the casino. The moment you want to take some risk on you need to understand that you are make a very educated calculation of how this market works, how leverage works, how cross margin collateral works, what are the

margin ratios that the exchanges offer and what happens on times of excessive draw down. The problem is that people are overestimating the capabilities of what how they're able to operate on a 247 environment. their capabilities to deliver in a very direct way when the ball is hot and they don't also spend any time reading the disclaimers of how margin works itself. So yes, I believe on free markets, but if you're getting into that game, you know, you're taking on risk and with risk comes losses. >> So on that point, what would you do? Would you regulate it? Will you to have disclaimers? What are you advocating for?

>> Well, I'm an institutional guy, right? So we trade 4 500 million bucks a month and the one thing I'm proud of is this weekend not only I didn't have a single margin call as a desk but none of my counterparties had the marginal but the way to do that is because you know you need to understand what are your limits as a desk to avoid extreme leverage to understand how custody works in regards with the exchanges and also to understand your counterparties very well not allow them lever now as I mentioned once before store your assets in custody that's the only safe way. The moment you want to take up some risk, take some smart risk. You know, if you're long an asset, you want to sell a covered call and collect some yield, go over it. If you want to buy in Bitcoin, you already

have the cash. Instead of want to buy spot, sell a put. But anything else has a high riskreward with many people out there being smarter than the average retail guy. And by the way, many retail guys being smarter, as you were saying earlier, than the average institution. So, it's a wild wild west. And you need to be very careful if you want to thread these waters. I really I really uh like what you mentioned about Wild Wild West. Um you know when we uh when we jumped into uh crypto four years ago, we realized that the infrop piece to allow all these settlements to allow these um you know big volumes coming up on chain.

uh we realized that uh basically there is a single point of failure there and uh one of our customers last year the uh Fireblocks so they they approached us and said guys we really like what you're building the decentralized access piece giving to everything but at the same time we have 2,000 institutions that need 100% uptime so every second that they have a downtime it's millions of dollars cost to them right so we want what you built as an open-source, but we want to wrap it as a product. And actually two months ago, they um they announced that they rolling out the smart router solution to all the chains

that they used and it came after Trump memecoin event in Trump memecoin. They needed and they provided 100% they were the only one that provided 100% uptime to their end customers. So if we want the rails to continue, we we have to make sure that once it doesn't matter the size of the transaction, you can get it right away in the lowest latency. >> Tara, you want to say something? I thought you wanted to jump on. Yeah, I think I was going to mention this uh point that so when we you know we trade we most primarily trade when there's a lot of volume in a market which means that we're often trading against retail traders and one thing

that has stuck out over the years is that our trades routinely lose money over a long time period. So we make money on a short time scale where we're hedging that exposure immediately on another venue or in another contract. But this is the one market I've operated in where I think that the retail traders are actually better informed about the tokens we're trading than any of the professional traders in the space. Um, so I I do think that's an important thing to remember is that these are sophisticated individuals for the most part who have done their research on a lot of these products and to be sure there's a lot of uh intricacies in how the products work and the financial infrastructure that might not be their forte. But I think pricing them out would reduce the efficiency of the market considerably. And I I was also

curious and estus for your in the OC market. I think like what fraction of customers coming to you do you think are hedging legitimate exposure versus sort of gambling or making speculative bets? >> What what percentage? >> Well, I would say that there is two types of markets. There is Bitcoin and there is everything else. And uh actually in this stage last year I said that uh the difference between Bitcoin and the rest of the space is that that Bitcoin has investors. The digital market space has day traders and by default on the long term the investor will always overperform the day trader because nobody can make money

consistently on short time frames. >> Ethereum is a stable. one of the bonuses of Bitcoin because the investors will not be leveraged will hold it will not intraate it and that's why you have lower drawbacks on the digital asset space it's the polar opposite you have people trading for grid the arbitrage it's not bad but is that's the type of temperament so I dare say on the derivative side more than 70 or 80% is aggressive swing trades and u you know trying to make money not locals here to stay >> I think there's been a real shift in the market though in the last year or so since we've seen particularly uptake in staking where now we actually think a lot of per exposure is a hedge on long-term staked assets that are

otherwise locked up and similarly we see a lot of flow that we think is tied to you know teams paying uh their developers in tokens in lock tokens and then those developers want to hedge the exposure over a period of time so I think that see shows how much the market has matured that now we see a lot more kind of legit legitimate flow looking to hedge their exposures than we did even a year or two ago. >> Absolutely. And to add on that uh what has affected a lot of the swing in this market is both the treasuries and the ETFs. I think a lot of people are now running ARB on the debt, the equity, the options on the equity, the options on the centralized exchanges and the per funding. So this is fantastic for the

market. It creates a liquid environment and you know for me look what happened this weekend. is not Bitcoin's jobs to tell us what's the price of Bitcoin. The job of Bitcoin is to have a beat and offer 24/7 and let the market dictate the price. And in my opinion, uh crypto is already succeeding in that because there is no market on trade fight that can do that. If you if you take away the limit up limit down uh fees on u NASDAQ, you're going to go down 50% in a day, no problem. So I believe that we have already succeeded on being the most efficient uh market to trade and we are the de facto macro heads on the weekend when the rest of the world is sleeping.

>> Even if CME is not yet totally seven days a week, I think it's one new new player in our industry as well. Uh historically we've been looking at the purse market sex versus dexes and now we've got CME and the numbers of CME are just going exponential. So they're not exactly on the same game. their uh opening hours and everything are different but I'm sure there will be a convergence accelerating on this and it's going to change also very much the type of of of traders you're going to find on the other books if they want to go in DeFi uh but yes to build on on what you were saying also earlier like a lot of these per activity is basically edging against your staking or your ETF positions and you've got a very fresh

new earth coming fizable on these traditional venues which are offering more and more access to this uh derivative or or per when they are exactly the same. Let's not forget this industry started in 2018 with BitMax and over time it has been evolving so quickly, right? So Bitmax was for the most part retail and then uh you started to see some decentralized venues like DYDX and then centralized venues just run after this market which is a very sizable one and now we've got some kind of master venues like CME coming in. So I think the growth will keep will keep keep growing but the audience and your counterparts on on those trades are also changing very quickly. What one thing that I'm really wary of in this space is

that we're always fighting the last war. And I think that happens everywhere, but you've seen that evolution where now I think that the interest in perexes is kind of fueled by wanting to control your assets and have non-custodial wallets for your trading uh because of what we saw happen in 2022 with FTX and everyone else blowing up in this space. Uh but I still think that by shifting we're introducing a lot of new risks that we've just now seen come about where many of we're putting a lot of assets into platforms that are relatively untested. Um and I think that as much as we want to celebrate the innovation in the crypto space, we also need to look at innovations that have happened in Tradfi and what protections we can bring over from that into this space. Like I think we've talked about whether we should have limit down uh

protections. One thing that I would really like to see is that market makers on exchange should have uh minimum quoting requirements that they have to adhere to even during periods of extreme market volatility because on an event like Friday uh us and everyone else like us we are going to stop providing quotes because there is 10% arbitrage spreads to be had and so it is just you are so strongly incentivized to go where the best returns are at the expense of providing a stable market for everyone else to trade on. And this is handled by making it a a like a condition of your participation as a market maker in this space that you have to continue providing quotes even when it is not profitable for you to do so. So I want to see that and I want to see a lot of

the other protections that have come about through the lessons of 2008 and many other crashes long before crypto was a big thing bought into our industry as well. >> Thank you. Um we're talking about well we were talking you were talking about protections we were talking about centralized exchanges the trend it's been for the last year Charles I mean you were you guys were one of the first decentralized exchanges back probably eight years ago six years ago right and you had 100% the market the way the industry is moving and the infrastructure is moving is 23 25% of the per volume is traded on on the centralized exchanges. You had

hyperl that didn't exist it a few a few months ago then you had aster then now you have lighter and it's just making it easier for everyone to trade per um Charles you see since you're coming from from on the centralized and we've been talking about centralized quite a lot um is there any risk on this is this a risk for them for for the market is some of these markets are not tested yet um Tara was talking about um safeguards. How do you see that?

>> So maybe maybe two years ago there was about 2% two to 5% of the per market and trading volume being being onchain. Uh with the rise of hyperlquid and the rise of the onchain per overall we are between 11 to 15% if I if I got the numbers right. So still the majority of the trading is happening is happening on on centralized venues because this market is so big and because uh especially in DeFi when when you you can launch a new per exchange very quickly without much friction it brings a lot of different players but overall defy I think still brings this core proposition like you don't have the custody risk or you take the responsibility of the custody you don't lose the ownership of

your asset when you trade on D5 if you deposit your your your your collaterals on on a centralized venue. It belongs to them essentially. Um and there is also I think over the years we see at least this is what we're trying to to deliver on a very unique value proposition you will find on DeFi. And I think the the obvious one is basically transparency and openness and that's probably going to help with what you you were saying in terms of risk management and and and some other things we can do to improve the markets. Whereas the other book is open when the um when the code is open source as well. And if you compare that to a trade happening on Binance for example where it's happening on a black box uh offchain you basically trading against like a black box. So I don't

think it's a risk but there is still sometimes bad apples in a in the basket and people needs to basically uh be be smarter and be kind of conservative in choosing the trading venues where they want to go. But you've got some quality DeFi being built with very unique proposition which you cannot replicate on C5 today. I I think the transparency is a hu potentially a huge risk like you you know reduce the custody risk but in exchange all of the trades are open which means it's much more subject to market manipulation like what we see happen whenever we have large positions on any per desk is that traders will identify our wallet and they will try to hunt our liquidation price. Um and you know in a normal market that would be

illegal but it is rampant throughout the deck space. Um, and so again, you're we're solving one problem, swapping it out for a different one. So I think we need to see another couple of years of maturation in the deck space before I think it can really grow and take off. And we need to handle some of those issues and think about say privacy preservation or different order types to really grow. >> The problem with scaling defy is that the large institutions that operate within the regulatory framework cannot touch it. So if the citadels the the black rocks the 72s cannot make markets on that they will never be able to go because they don't want the legal exposure. Now with that being said that's also the benefit

of defy because if you don't have high frequency market traders that are very good in what they do you also have higher yield and riskreward outcomes because the moment the big money come in the yield is actually shrinking. So I think there is a big the positive and a negative in both of those. Personally, I prefer trustless transactions. Um, I almost don't face any exchange directly. We face them all via three-party agreements through Bitco Loop, all the exchanges. And you know, I believe in trustless transactions and trustless trading. So, instead of depending on the venue, I'd rather make sure that my positions will be solid no matter how the venue performs.

>> Jar, any anything to add? >> Can you repeat the question? I'm >> sorry. Infrastructure uh DeFi versus centralized exchanges your views. So um in general it depends what is your goals right because um what what I've seen in the last year is exactly this strong inflows coming from different ETFs and stuff but you know what's concerning for me is to see this Friday um for example the tagging of Athena uh the USD right on Binance right how come it's the only exchange that drove Athena I can explain >> 165 and uh yeah please

>> yeah I I think that this event was a quirk of the portfolio margining rules on Binance and that I think a lot of we we've heard from Binance that now 85% of their users have switched to using portfolio margin and I think the majority have probably not read all of the documentation of exactly what will happen when the account goes into liquidation. Binance has a tiering system for assets. When you are when they need to meet a margin call first, they'll liquidate your tether and your USD and your Bitcoin. That those are tier one assets. Tier two includes USDE, WA, all of these tokens that deped. And I think that they should never have put those assets in tier 2. You should not be liquidating into thin markets rather than >> especially in this size, you know.

>> Yeah. Especially with the size of liquidations. And I think that what happened was customers deposited a ton of USDE to Binance because they had a promotion where they were paying 12% yield. And so it was much more USD available on Binance than typical. And so that meant when this hit, all of that was sold to liquidate positions. Um, you know, and that that should never have happened. They should have been liquidating Ripple, ETH, Salana, very liquid altcoin tokens that are actually high value collateral. So you don't you don't think it's a oracle price driven by a fail failure of a market maker?

>> No, not at all. I think that you know there were Binance has a lot of kind of backs stop liquidity providers as well trying to buy out liquidations and that was functioning but in order to try to buy the liquidations to stabilize those markets you have to pull capital from somewhere else. So I think that's what all ourselves and what all the other market makers were probably doing as well. I want to add something on that because I think one of the biggest misunderstandings in the space is that the exchange wants to liquidate you and there are bad market makers out there that they are trying to liquidate the market. And I'm not saying that they're not bad actors, several. But what people need to understand is that a multi-billion dollar market maker that is trying to make 10 20 basis points a

day has so hardcore risk limits through a committee of 50 people that there is no way that under no circumstances they would take a five or 10% bet and bet 50 or $100 million just so they liquidate someone. This is an unrealistic thought that no desk under no circumstances will allow for the large institutional players. In fact, I think that's more likely on defy with large retail accounts that they have no limits within they operate. But the very large institutions, they have hardcore Greek limits, which means the moment they are violated, you are forced to go back no matter how powerful you are, you are within the institution.

>> The spectrum of users and risk appetites is just massive. And then depend depending on the venues because there are so many different venues in in our space then sometime we come into corners where like last Friday where where things get uh get painful >> I think like so again this is one of the great innovations of the space. So in in traditional markets, say in our brokerage account, um if we have a deficit, they'll margin call us and then we're just on the hook for whatever the shortfall is and we have to send them capital and if we don't send it to them on time, they will sue us. Whereas in crypto markets, that never happens. Your account is not allowed to go into deficit. The exchange will try to liquidate you ahead of time to make sure

that they can still make everyone whole. And if that fails, there's ADL and there's insurance funds to serve as a backs stop to protect the rest of the community. Um, and so yeah, ADL, I guess auto deleveraging is something that's quite unique to this space, but it is, as much as it can be incredibly painful, it happens in a mechanistic fashion. It is something that you can read about and understand. So you can model it as part of your risk management framework. You know, we got over 60 ADL fills on Friday. uh that was roughly what we we expected to get many more with a market event uh of that magnitude. Uh but if you know how it is going to happen and when it is going to happen you can prepare for that. No, it's just uh one cause you know we in the last one months

the leveraging is higher and higher and higher you know so at that point of time somebody has to pay for that right so and ADL really this first time I bumped into that is uh thanks to you're doing on and hyperlid and yeah that's uh that's a that's a brain um you know it's a brainchanging topic like uh with uh how you basically give so much power to the sex or the DEX what to do with your money but at the same time it's derisk you from from stronger liquidation um yeah >> yeah I mean though ultimately we've got to be real ADL protects the platform right and keeps them solvent

>> but at least you see some transparency about that what you don't see in the traditional market in the trade fight >> yeah that's true it's totally not true behind I mean I do I do have to say like say Binance is probably among the most transparent for how they implement ADL and what sort of ordering looks like. Uh and then on various exchanges, everyone has a very different mechanism for when it's triggered, how many accounts will be triggered, if they do it sequentially or all in one go, whether they'll liquidate your positions proportionally or just like go down. Some do it by the total size of your position. Some do it by your percentage P&L. So, you've really got to read the contract terms to know what's what's going to happen.

>> Excellent. with four minutes. Um, last question, one minute each, please. Um, debt and derivatives are been the cause of crisis in the past, economic crisis. Are derivatives going to take us to the next bur market? >> Well, I don't believe that derivatives themselves can take us anywhere. Um but what I like telling people is risk management in an individual basis is a vote of confidence for the broader market. So the moment each individual in this room figures out how to stop getting liquidated or into a for sale this is when the market will actually

grow higher. So I would focus on utilizing derivatives in a mature and risk averse way in order to make sure that you will be around on the next bare market rather than trying to leverage trade in order to make money quicker because in the end of the day the reason you sell off aggressively is because people are taking great risk to get money quicker. I think the growth of the volume from institutionals and very sophisticated institutions is kind of plateau this risk. Back in the maybe two three years ago the the audience and the the spectrum of users was much less sophisticated. So you could get you could get into into crisis or or triggering things more but nowadays it's it's much more mature. I don't think you

will ask these questions on derivative uh potentially triggering a crisis for equity for example because I think on the equity market the derivative uh derivative market has matured and is very diversified. There is more it's more homogeneous and how they work in different part of the world. We are not there yet in crypto but again the audience and the type of players we see coming is changing a little bit the twisting the rules and and and twisting the outcome. No, the derivative uh I think it's it's it's super important for the the the next bull run that we all uh waiting for. Um from my perspective, it still didn't happen until uh we alltime high

except of Bitcoin. Uh but at the same time, I see the big players coming in. It's becoming more sophisticated play. It's becoming much more deep pockets play. Uh and what's my goal for the next months is to make sure that the infrastructure is bulletproof. Uh we're working with uh big institutions. We're working with uh one of the top five exchanges in the last two weeks. So uh I'm not sure how to uh how to comment on the liquidation, but one of them did less than the others. Um that's what we should focus on. At the same time, it's um we're getting into the end of the year and there's a lot of books that needs to be cleared from Black Rockck

from all the profits. So, I'm a bit concerned about that. >> I I think that it hasn't actually been derivatives that have caused um market instability. It is just where that has played out. The trigger for most of these big crisis events has actually been a liquidity crunch. And that's the main risk that keeps me awake at night and that I spend a lot of time thinking about is where is there hidden illiquidity in the market that when that becomes stressed is going to cause a breakdown in market structure. And for this event, what's changed compared to the last big liquidation is there is there growth in staking and restaking and there is kind of hidden looped leverage in the space that's not transparent that can't be unwound quickly. And so when that gets

stressed, people resort to derivatives in order to try and get liquidity or hedge their exposures until they can unlock their assets. So we know now that for tokens that have a large fraction of uh the supply staked, we're going to see bigger liquidations on pers, we're going to see more price discrepancies until that staking queue is is is cleared. And so for reststaking, I think that's a that's a huge risk into the space that that it does need to be tested when we need to see this uh all this TVL unwound. I think that's where we're looking for the big next liberation event to occur. I know we are out of time but very briefly I'm a little bit optimistic on AI not

for talking to Chad GPT and saying go and buy sell buy and sell these things but I think there is there is an avenue where we might see AI implemented the right way to essentially put to work and bringing liquidity building on your point uh and decisive uh capital and something maybe some of you might not have captured yet but about 80% of the money sitting on exchanges is not taking decision is not trading anything. So basically many people are using Binance and so on as a custody they don't have time to trade they don't have decisions to be to be made or they're just undecisive. So it's a lot of liquidity coming back to your point which is stagnant and there is an avenue there is a track where AI will not be there for

all kind of uh good to have things not very useful but possibly putting to work a portion of those assets which are dominant on exchanges D5 or CFI and helping with some safe strategies to essentially mitigate this kind of of triggered event of of low liquidity and therefore crisis. Well, I don't think we have much more time. We could have been continuing this for for much longer and with more many interesting questions. But thank you so much. Really appreciate everybody's time and um thank you.

>> Thank you. Thank you.