Q&A: Crypto Hedge Fund Trader

Hello, I currently work as a trader at a crypto focused hedge fund. Our primary function is that of a market neutral liquidity provider and we work with our clients to transact in concentrated positions of illiquid, thinly traded coins. Prior to this role, I was a trader at Goldman in NYC, focused on fixed income. I was there just short of 10 years, so had a variety of roles spanning a large number of products. Education-wise I did the whole top MBA/CFA thing, so can answer questions there also, but would prefer to keep it in the crypto world since that is where there is not a lot of information available to aspiring students as well as professionals in all stages of their career. Also, just a quick note, please don't ask about comp, crypto HF pays just like any other HF and there is plenty of info on that within WSO and on other easily searched sources. Thanks, hopefully this will be helpful to those interested in the crypto space.

 

I have few questions hope they are good ones: - Do you use any specific exchange or the one requested by your clients? - Do you have any trading desks taking positions just in case a client might want this coin in the near future? - On the more HF side, how to you decide to take your positions(can't do ER/DCF model for coin, whats your approach and process). - How do you size your positions relative to your AUM - thoughts on USD/BTC being comparable to USD/EUR - Arbitrage trading between exchanges, any solution possible? - why leaving goldman after 10 years?

 
  • Do you use any specific exchange or the one requested by your clients? We go where the liquidity is. Some coins are only listed on one specific exchange, while others can be traded on several exchanges, in which case we look at the flow and figure out where is the most efficient place to execute. Occasionally it makes sense to chop up orders on different exchanges.
  • Do you have any trading desks taking positions just in case a client might want this coin in the near future? Very rarely does this happen, the volatility in these markets is way to high to be exposed in this manner unless you have a strong conviction with regards to directional bias
  • On the more HF side, how to you decide to take your positions(can't do ER/DCF model for coin, whats your approach and process). We just look at liquidity profiles and trade flow, do not really use valuation models on specific coins since our strategy is market neutral and we don't need the coins we trade to go up or down in value necessarily.
  • How do you size your positions relative to your AUM We focus on general risk management principles. Settlement risk can be tricky as every exchange and bank has their own ways of doing things, and things like counterparty exposure and concentration in any specific coin are things we look at
  • thoughts on USD/BTC being comparable to USD/EUR No comparison, the volatility profiles and technical as well as fundamental drivers are completely different.
  • Arbitrage trading between exchanges, any solution possible? Not 100% what you mean by 'solution' here, but assuming that you are asking how to take the arb out of the system, my answer would be that as the markets develop, arb will naturally fade away. Having said that, it is not as pronounced as you would think, its so insignificant, that this is something we don't even really look at.
  • why leaving goldman after 10 years? The traditional markets (especially in the liquidity space) are very inefficient as far as the technology and the piping works. What I mean is that, in 2018, markets are still using SWIFT technology (something that has been around since the 1980s, tickets are still being sent via faxes) and generally the whole infrastructure is in dire need of an overhaul. I really wanted to be at the forefront of technological development in the financial markets, which is why it made sense for me to join like-minded people in the space. Other than that, GS is a great place to work and I would recommend it to anyone who wants to learn about the markets and to see what they can be capable of.
 

Check out Reddit for specific coins. They should have a subreddit dedicated to them. Each project should have a way to communicate with their community. Many use Telegram. Following the right people on twitter is helpful for information as well.

 

You are correct that this is a very unanswerable question, but I personally like to look at it this way; as an example, lets say that you are in belief that BTC will replace gold as the official store of value and safety asset. So then assuming that all gold ever mined has an approximate USD value of $7.5 trillion, you can say that BTC will be worth X due to the constraint that BTC has a Y cap of minable coins. Then you can apply the same logic to whatever use you believe BTC will be eventually.

 

*There are a few pros and cons when thinking about decentralized exchanges. I think the main advantage is that with decentralization you get rid of most of your counterparty risk and eliminate the need for custody. However, the problem is that any exchange would need to build up their liquidity from scratch, they would be competing with established exchanges that have become very easy to use and finally, the mechanism design of a decentralized exchange is extremely difficult.

This article really goes in depth with regards to your question, https://blog.0xproject.com/front-running-griefing-and-the-perils-of-vir…

 
Crypto Jones:
*There are a few pros and cons when thinking about decentralized exchanges. I think the main advantage is that with decentralization you get rid of most of your counterparty risk and eliminate the need for custody. However, the problem is that any exchange would need to build up their liquidity from scratch, they would be competing with established exchanges that have become very easy to use and finally, the mechanism design of a decentralized exchange is extremely difficult.

This article really goes in depth with regards to your question, https://blog.0xproject.com/front-running-griefing-and-the-perils-of-vir…

Thank you for your answer. Will check out the article. As for building up liquidity, I can see that being a problem for new decentralized exchanges. However, afaik Binance is planning to eventually launch a decentralized exchange to replace their current exchange and I believe other major exchanges would follow in their steps.

 

I think that regulation is a good thing as long as its not going overboard. So far, the collective governing bodies around the world have been doing a good job taking an objective look at cryptos and issuing statements and regs that have generally been good for the markets in my opinion.

Tax situation is fine in my opinion, you make profits, you pay your taxes. Sure everyone does their best to minimize their tax bill using all sorts of strategies as long as they are compliant with the rules, but in general I don't think taxes are more complicated in crypto as they were in any of the traditional funds that I've managed before.

 

Thanks for doing this. I'm writing a paper on cryptocurrency atm so I appreciate your insight.

-How often do you see market manipulation, and what form does it typically take?

-Does your firm or other HF's you're aware of ever work together to drive prices up/down?

-What do you think the regulatory environment in crypto's is going to be like in 6 months, 2 years, etc.?

 

-How often do you see market manipulation, and what form does it typically take? Not particularly, there are definitely a lot of promoters hyping up coins that probably shouldn't be valued very highly, which generates some buying pressure, but nothing really outside of that -Does your firm or other HF's you're aware of ever work together to drive prices up/down? no -What do you think the regulatory environment in crypto's is going to be like in 6 months, 2 years, etc.? I think that governments will continue to evaluate crypto as something that is only going to grow and respond accordingly. I do not see any overbearing regulations coming in unless there is a Mt. Gox type of event that affects a large number of investors

 
Crypto Jones:
-How often do you see market manipulation, and what form does it typically take? Not particularly, there are definitely a lot of promoters hyping up coins that probably shouldn't be valued very highly, which generates some buying pressure, but nothing really outside of that
I have a hard time taking you and your hedge fund seriously if you are unaware that crypto markets' lack of regulation makes them full of manipulation. You address pump and dump, but wash trading and tape painting are known to be prevalent. I hope that you are intentionally ignoring this as it is a crucial part of your fund's strategy.
 

thoughts on NANO (formerly XRB)?

Disclaimer for the Kids: Any forward-looking statements are solely for informational purposes and cannot be taken as investment advice. Consult your moms before deciding where to invest.
 

-Do you have a favorite blockchain project? -What are your thoughts on the impact to the crypto markets of the Mt. Gox settlement selloff? -Do you do any large volume OTC deals? -Do you think alt season is upon us? -Does CrypoCobain know you stole his avatar?

Array
 

-Do you have a favorite blockchain project?
Not really, we don't necessarily endorse anything or have any conviction views, but I think Firelotto is a cool idea -What are your thoughts on the impact to the crypto markets of the Mt. Gox settlement selloff?
They're definitely very visible, I wanted to post a chart, but my low level of bananas won't let me do external link -Do you do any large volume OTC deals?
all day -Do you think alt season is upon us?
not necessarily, but a lot of other market participants think so, which benefits our business -Does CrypoCobain know you stole his avatar?
ah, I had no idea, I just googled 'bitcoin avatar' and this is the best one the had

 

This chart? This shows supposed correlation of Mt. Gox selloffs and market price declines.

![https://davidgerard.co.uk/blockchain/2018/03/09/mt-gox-crashes-bitcoin-…]

[https://davidgerard.co.uk/blockchain/2018/03/09/mt-gox-crashes-bitcoin-… https://davidgerard.co.uk/blockchain/wp-content/uploads/2018/03/mt-gox-…

What worries me most is the trustee has stated in their report that they are consulting with the court to "determine further sale of BTC and BCC". Should still have 160k+ BTC left to dump. However, Karpeles has stated he wants to give back the remaining BTC through civil rehabilitation. Here's hoping that happens.

Edit: Just more thoughts for conversation.... I'm not sure why they didn't OTC sell this BTC, or at least scale it out in smaller chunks on a longer time frame selling into strength to get a higher avg price, unless they were also shorting the market.

Array
 

Thanks for doing this! Three questions: 1). I'm curious why you decided to get your MBA even though you were a trader at Goldman? It is my understanding that most traders don't need to go back to graduate school in order to move the ranks as moving up the ladder is based on performance.(assuming that was your reason)

2). Given that you been in the business for a decade, what are your thoughts on a long-term career in S&T(sales or trading) considering desks are becoming more automated, pending recession, and VOL/prop trading is not what it used to be. * I'm going to top BB this summer for an S&T internship and really trying to grapple with what skills I will gain for the future and if I can make this a long-term career(10+ years).

3). This is a follow up to question #2, Are most traders or salespersons leaving banking after 5-7 years to HF? Curious to know the trend and what you've seen over the past 2-5 years in the industry.

 

1). I'm curious why you decided to get your MBA even though you were a trader at Goldman? It is my understanding that most traders don't need to go back to graduate school in order to move the ranks as moving up the ladder is based on performance.(assuming that was your reason)
I was about 5 years into GS career and needed a vacation

2). Given that you been in the business for a decade, what are your thoughts on a long-term career in S&T(sales or trading) considering desks are becoming more automated, pending recession, and VOL/prop trading is not what it used to be. * I'm going to top BB this summer for an S&T internship and really trying to grapple with what skills I will gain for the future and if I can make this a long-term career(10+ years).
I think doing an analyst stint at an S&T desk can still be very good experience, you can't really replicate an institutional trading environment otherwise. I think you can still gain a very deep understanding of how the financial markets work in the shortest amount of time possible while also picking up skills like coding, pricing, mental math as well as learning how to communicate very complex information in a very succinct and clear way while under pressure, which in my opinion is probably the most underrated skill for people who want to be professional traders.

3). This is a follow up to question #2, Are most traders or salespersons leaving banking after 5-7 years to HF? Curious to know the trend and what you've seen over the past 2-5 years in the industry.
Hard to say, trends can differ from one product to the next, HF strategies pop-up and die-down with market cycles, but those who want to go the buy side route and are interested in being PMs always figure out a way.

 

How do you deal with forks? Pull out the market or research in adv a lot? Any issues with exchanges going down for a small amount of time? Risk management processes if a coin goes to zero or 70% move? Exchange hack? Do the traders know all the cross settlement issues off by heart? Have you had to actively market the fund to institutions? Any non electric trades? If so with no clearer any issues RE settlement, fill issues? Rough balance sheet? >50 mio East/ West coast?

Off topic- any thoughts if CC goes to shit for a while any thoughts, if this doesn't pan out on where you'd like to settle, i.e non trading role in the space or?

 

How do you deal with forks? Pull out the market or research in adv a lot?
We look at forks on a case by case basis, if we feel that there is a good opportunity there, we will definitely research, and if it is a major coin then we would recover the forked asset and liquidate to improve our nav, if its a smaller forked asset then weigh the added NAV value against the custodial risk Any issues with exchanges going down for a small amount of time?
It's mildly annoying, but par for the course Risk management processes if a coin goes to zero or 70% move? Exchange hack?
Difficult to say here, without revealing specific risk management processes, so no comment Do the traders know all the cross settlement issues off by heart?
After you trade something more than once, you typically remember any specific settlement issues, especially if they are problematic. Have you had to actively market the fund to institutions?
Yes, majority of our clients are institutional Any non electric trades? If so with no clearer any issues RE settlement, fill issues?
Not sure what an electric trade is, feel free to clarify and I can try to answer Rough balance sheet? >50 mio
no comment East/ West coast?
Bay Area*

Off topic- any thoughts if CC goes to shit for a while any thoughts, if this doesn't pan out on where you'd like to settle, i.e non trading role in the space or?
I am a true believer in CC for the long term, short term volatility does not bother me much, its just part of being a trader, but I have no plans to leave the space anytime soon

 
Best Response

Sooooo trading shitcoins on price action? But at the same time, helping your clients move out of large positions on thin-books (which is really thin in Crypto world) sounds like market manipulation so you can sell into fabricated demand. Institutional investors in this case are probably VC’s or other hedge funds that have stakes in shitty projects and want to off-load failed project coins to which there very little volume (e.g. Blockcaps’ dogs).

Your description as to what it Is that your firm does is cryptic. I’ve been trying to figure it out all day ;)

Could you speak to organizational structure and the positions that your firm staffs? With what I think your describing, you don’t need anything other than maybe TradingView Pro / Coinigy and MAYBE an automated trade bot to prop up an order book / manipulate volume profiles. But from a staffing perspective, just an institutional sales guy to source cheap coins, a tech guy to orchestrate the market and a few other guys to trade price action to keep the doors open between deals and manage the books.

 

You are correct that our role is to help clients move in and out of positions. Not sure what you are saying by "fabricated demand", for example, when a client wants to sell, we just take their position and sell it , while limiting market impact as much as possible.

The firm is simple, a group of traders and developers as we develop all of our tech internally.

 

I wanted to understand what financial instruments you use. I currently trade derivatives on Bitmex but I am guessing that your firm goes off of the CME futures market. In that case, do you trade only bitcoin derivatives or do you also trade alt-coin derivatives.

In terms of market due-diligence, pulling the data for crypto price fluctuations is fairly difficult since there aren't any good resources. I'm guessing this plays to the advantage of early funds?

How does the firm deal with mass "whale" manipulation in terms of trades?

 

I wanted to understand what financial instruments you use. I currently trade derivatives on Bitmex but I am guessing that your firm goes off of the CME futures market. In that case, do you trade only bitcoin derivatives or do you also trade alt-coin derivatives.
We generally stay away from the derivatives. The way those markets look at this point in time do not really serve our purposes, so our use of them is limited. In terms of market due-diligence, pulling the data for crypto price fluctuations is fairly difficult since there aren't any good resources. I'm guessing this plays to the advantage of early funds?
I think that between the major exchanges, there are enough tools available to gauge how the market looks, given that we are not directional in nature, we don't really look at trends that are past more than a week or so, for which there are plenty of resources. How does the firm deal with mass "whale" manipulation in terms of trades?
I don't think this is as pronounced as you would think. The whales typically do not like making a disturbance, so they go through great lengths to ensure that their trades have minimal market impact through a variety of methods. I don't think that you would see someone come in one day and just drop a 15% market order in one go. The execution is usually much more structured for minimal impact.

 

How much did the fund return to investors/partners since the start?

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.
 

I'm still amazed we're seeing an AMA on this topic. power to this dude for capitalizing on it, but wow.

also, really curious to see if he is, in fact, paid in USD instead of a cryptocurrency.

Thanks, I really wanted to do the AMA for a while, a lot of my friends and acquaintances ask me about the industry all the time and there is not much info out there from any insiders on the finance side. I definitely do not have all the answers and am learning as well, but hopefully you are all picking up some useful info from this AMA.

Regarding how I get paid, like I said in the very first post, I would prefer not to touch on anything comp related, so apologize if this is something you are genuinely curious about it.

 

We don't make commissions, but we take a spread to the spot price. We try to price in all of the risks into that spread, but given the volatility of these markets, sometimes the price action goes against us as we try to hedge, so its not quite as easy as just earning a guaranteed commission.

Regarding, the article, it is true, the majority of crypto funds are down year to date. However, the top losers are for the most part directional funds that take views on specific coins, so when the broader markets drop, these funds' performance is correlated with them. That's why I think its good to be a market maker in volatile markets because it is possible to outperform as long as there is volatility, but having said that, we probably will never achieve astronomical returns like the ones a lot of the directional funds reported for 2017 either, so its a trade off in that regard.

 

I believe the biggest problem in the crypto space are people not being able to value anything properly. Don't get me wrong, the markets are inefficient in the stock exchanges, for example, but at least there are generally accepted ways of valuating securities to some extent.

You mentioned in another comment you go off liquidity profiles - do you look for unique value propositions as well?

IE would your fund care is a coin has long run potential (which only a few do, but might not perform as well in the short term such as XMR, NANO, ARK, etc), vs a coin that will be profitable in the short term (possibly) but not in the long term (since it'll fail eventually, like BCH, ETC, TRX, XVG, etc)?

 

Think that I was pretty clear in the posts so far, but as a market maker, we do not invest for the long term on any specific coin at all, so liquidity profiles are our bread and butter as far as evaluating trades go.
As far as how valuations of different crypto companies and currencies goes for their long run potential? I don't think anyone really has this figured out, in my opinion I think it will be a long time before there are any widely accepted methods of valuation in the crypto space. Best example being, when I suggested one basic BTC valuation method earlier in this thread, I got MS all over it, so taking that into consideration, you can see that there are no widely accepted methods. Would be happy to hear if any other users have valuation methods they can share.

 

Hello, thank you for your informative post and for answering our questions.

What are your thoughts on an aspiring trader going into the cryptocurrency world straight out of undergrad as opposed to starting at S&T or a prop trading firm?

Assuming the individual is fairly certain (88.69420%) he wants to get into the industry early on during the growth phase. Also note the individual has had previous trading and market-making/fintech internships. As well he has taken part in implementing an ICO ($100+ MM raised).

He has made roughly the same amount trading cryptocurrencies than he would as a FT analyst (hugely due to pure luck during summer boom). To him, it seems like a trade-off of interest in an volatile, developing industry vs. experience/social connections/prestige in a structured environment. With that said, this individual doesn't give a shit about prestige.

However, would choosing to go into cryptocurrency trading/business development/financial services pigeon-hole him and limit future opportunities in other industries if he does happen to want to transition?

Thanks!

 

Hello, thank you for your informative post and for answering our questions.

What are your thoughts on an aspiring trader going into the cryptocurrency world straight out of undergrad as opposed to starting at S&T or a prop trading firm?

Assuming the individual is fairly certain (88.69420%) he wants to get into the industry early on during the growth phase. Also note the individual has had previous trading and market-making/fintech internships. As well he has taken part in implementing an ICO ($100+ MM raised).

He has made roughly the same amount trading cryptocurrencies than he would as a FT analyst (hugely due to pure luck during summer boom). To him, it seems like a trade-off of interest in an volatile, developing industry vs. experience/social connections/prestige in a structured environment. With that said, this individual doesn't give a shit about prestige.

However, would choosing to go into cryptocurrency trading/business development/financial services pigeon-hole him and limit future opportunities in other industries if he does happen to want to transition?

if you can find a position where you can learn to trade crypto, then go for it. Just keep in mind, the most important thing is that you can work for someone who you can directly learn from. Unfortunately the only big crypto trading desks (Circle, Cumberland, etc) typically hire experienced traders who understand dynamics of institutional trading, and I am not sure exactly what their outlook is on taking on junior traders. Perhaps S&T or established prop would be a good way to go, because the two most important things you can learn to be a successful crypto trader is buy/sell dynamics in an institutional environment and how all of the post-trade back-office stuff works (i.e. operations, accounting, risk, etc.) among some of the things I listed earlier in the thread.

other than that, your experience would definitely give you a leg up, (particularly realizing that most of your success is luck, you would be surprised how many young traders think they are "geniuses" because of their 4Q 2017 success)

I wouldn't worry about pigeon-holing too much, this early in your career. A good trader can trade most anything anyway.

 

No direct opinion on Chainlink as a platform, however, I will say that back office automation is most definitely coming as it relates to the financial sector. There are several companies working on this (Chainlink being on of them), I am not sure who will emerge on top as I am no expert on the underlying tech, but there will become a point where revenues at the big banks will be challenged and the executives will have no choice but to go the cost cutting route to maintain profit margins. Once they will see that using blockchain technology is a cost effective and efficient way to replace the current back office infrastructure, these companies will do well. I guess its going to depend on a mix of who has best tech and ability to execute on its sales pitch.

 

I have never been a true prop trader, but in my opinion a prop trader is a prop trader, no matter what the product that he/she focuses on. You could definitely design an FX or Crypto trading program with almost identical Risk/Reward profiles. I think, the more important question that you need to ask yourself is "why crypto", "do I want to learn the tech" etc.

As far as being pingeonholed goes, I wouldn't quite look at it like that. I will try to draw parallels between the FX and crypto markets as an example. What both asset classes have in common is that the fundamental analysis around them is very macro-focused, while the way they trade and the supply/demand economics around them (more FX than Crypto) are, instead, very technical.

What I am saying is that as someone who understands, geopolitics and other macro themes through trading these products, you will never be truly pigeon holed as those skills will lead to a wide variety of jobs in finance or in certain other industries. The technical skillset will allow you to trade most anything in the future as well.

Those are my 2 cents on the topic, hope its somewhat helpful.

 

Thank you. That was very helpful.

I view it as a way to get into an emerging asset class at the very earliest stages. Should it continue to grow and gain legitimacy than I would have unique knowledge and experience - a once in a generation opportunity as well as some presumably very in demand skills.

My concern is very much around the transferability of the knowledge and skills I would learn but what I understand from your comment is that would not be much of an issue. Is that correct?

 

I got a little big headed last fall, fancying myself some sort of investor by putting money down and seeing it go up 300x in a matter of months. December and the following months of 2018 really taught me a lesson that it was a rising tide and not any of the trades that really filled my account.

What would your suggestion be for someone looking to learn more about the market to navigate it and manage a personal portfolio?

Also, how would one go from IB to cryptos? its sort fo a wildest and there are not any certifications and such, so what does someone need to make it in cryptos professionally?

 

The personal portfolio question is a bit broad, so not sure how to answer. I guess the answer is, read as much as possible about investing in a sector that interests you and go from there.

IB to crypto is a very un-natural jump. For the most part, there are no widely accepted valuation models in the crypto space. You don't have things like DCF, comparable transactions, comparable companies, liquidation value and whatever else you IB folk use nowadays. The valuation of businesses comes as an amalgamation of two methods:
1) Deep understanding of how the technology works and how different crypto companies apply their version of this technology to a real world issue.
2) Following a VC model of funding everything under the sun, hoping that you get 1 or 2 100x plays within a reasonable time.

To make it in crypto professionally, I would recommend starting to read about how the tech works. Start with the Bitcoin white paper by Satoshi. Then check out this Princeton Coursera class which is accompanied by this textbook. There is about 20 hours of video and the book is quite large, the class is a couple years old, but still I think is the best primer on how blockchain and crypto works on a very technical level.

 
Crypto Jones:
The personal portfolio question is a bit broad, so not sure how to answer. I guess the answer is, read as much as possible about investing in a sector that interests you and go from there.

IB to crypto is a very un-natural jump. For the most part, there are no widely accepted valuation models in the crypto space. You don't have things like DCF, comparable transactions, comparable companies, liquidation value and whatever else you IB folk use nowadays. The valuation of businesses comes as an amalgamation of two methods:
1) Deep understanding of how the technology works and how different crypto companies apply their version of this technology to a real world issue.
2) Following a VC model of funding everything under the sun, hoping that you get 1 or 2 100x plays within a reasonable time.

To make it in crypto professionally, I would recommend starting to read about how the tech works. Start with the Bitcoin white paper by Satoshi. Then check out this [Princeton Coursera class] which is accompanied by [this textbook] There is about 20 hours of video and the book is quite large, the class is a couple years old, but still I think is the best primer on how blockchain and crypto works on a very technical level.

Thanks for the Princeton Coursera class, very helpful and well made. On a side note, I'd like to pick your brain on the current BTC/USD downward trend: when do you think we might reach a resistance? I understand you work for a market maker and not a directional fund but I'd still like to get your expert opinion.

 

Yeah, I see wash trading on some pairs on specific exchanges from time to time. I would actually say that a lot of this manufactured volume has died down since April, but thats not to say it is gone or won't be back. Overall, I think most bots present on large exchanges are very unsophisticated and a trader who knows what he/she is doing can spot them and work around them with relative ease.

Regarding price support, I don't notice it too much, like I mentioned in the very beginning of this Q&A, I typically clear my risk within 24 hours of any trades, and the majority of the time, much less than that, so if there is artificial price support, it just doesn't impact me enough for me to notice.

 

Thanks for your post. I currently manage some clients' BTC on Bitmex in Asia, and I get some further inquiries these days. so I may have a chance later this year to increase AUM. I'm curious about OTC trading. How is the liquidity? Can I buy/sell instantly with an order around $1 mm? Is OTC a better place to do day-trading?

 

Not all cryptos are created equal. If you want to do a $1mm order in BTC/ETH/XRP/XLM or any of the other top 10 marketcap currencies, an OTC desk can get that done for you right away with a relatively tight spread. However, as you go down the liquidity spectrum, the spreads start widening out and it may be more economical for you to break that $1mm into smaller pieces. When you get to coins that are 50+ on the marketcap list, you're looking at 5%+ spreads for $100k orders.

As far as day trading goes, I am not really an expert here, but you are probably better off doing it on exchanges, but if you're doing $1mm orders of a single asset, you're not really day trading, you're running a fund and need to think like a fund manager and not a day trader.

 

Interesting, not a cryptocurrency desk but instead an entire hedge fund operated around its liquidity.

I have a question. assuming that cryptos go obselete in 5-10 years, is there going to be a transition to similar spaces such as blockchain, or is the hedge fund just going to stop operating then?

 

I think that the transition to any other type of fund trading any other financial assets would be fairly seamless. In crypto, we still examine the macro environment in extreme detail. The relative value analysis as well as pricing is also the same for crypto as it would be for any FX trade or a bond. Crypto can also be lent via a repo contract or shorted using the same mechanisms used in traditional markets, so the trading and data analysis skill sets are more or less the same. The only difference is that in crypto, you also have the blockchain analysis component and you need to have an understanding of how the underlying tech works (for example what happens to asset prices when there is a fork).

Generally with any hedge fund, you don't just stop operating when a strategy stops working, you just adapt to your environment and keep making money any way you can (unless you blow up LTCM style, but prudent risk management can go a long way in preventing that).

 

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Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
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