Inside Crypto’s Trading Desks: The Market Outlook

Transcript

We got a pretty exciting discussion today. Uh let's just do a quick round of introductions very briefly and then we'll get started. Yan. >> First I didn't know Tom had such moves but it's good goes with the hair. Um so I'm Yan. I co with Yini and and Har people don't know but uh nine years ago it's my fourth venture. I'm a bit of a workaholic. So, what I do on holidays, I trade US markets and Asian hours. Um, what else? We've uh I'm just going to keep it there. [laughter] >> Um, hello everybody. I'm Thomas.

Weirdly, QRT might be the least well-known um firm on the on the stage. Um, which is probably not surprising as we've kept a pretty low profile to this point. But, uh, Cube or QRT is a global multi-asset investment manager. Uh we currently manage over $60 billion in assets. That's 6. Uh including two billion over $2 billion in a dedicated digital asset fund called Mobius which was started in 2021. Um I joined cube to help build out some of the more external facing businesses um such as OTC liquidity providing uh and marketing.

Excited to be here today. >> Uh I'm Darius. I'm the founder of QCP. We are the Singapore homeboys. uh [laughter] started about 10 years ago now in Singapore and uh we are an institutional trading desk and asset management firm. >> Hey everyone, Shen Tong from GSR in advance of my voice cuz join this panel too much talking this week and then the haze that's enveloped the city for the last few weeks probably for anyone. >> You sound great though. >> Yeah, thanks. It's not for long. Yeah. Uh so GSR is uh best known as a liquidity provider in in digital assets but we're growing a full scale capital markets partner business across advisory a trading business and an asset management about 250 people globally based I'm based in Singapore.

>> Great. I'm Josh Barker. I'm the global head of sales of Falcon X. Falcon X is the global prime broker across spot derivatives credit and most recently going into RWA with per uh preipo TRS commodities prediction markets and compute. And with that, let's talk about the main topic, what's going on in the market. We've seen the market rally over the last few weeks, triggered by the Treasury Department's debasement narrative and Trump uttering the word hyperlquid, and that triggered it all. And then we saw the Fed hike rates, and that weakened that narrative. What do you think of the most recent rally? Is this the beginning of another bull run or are you skeptical of the most recent rally?

>> So, I disclaimer, I tend to be the the most bullish person in the room every time. Uh if you look at the the CPI and PPI that we had ahead of the Fed, people were clearly hoping for at least no rate move or actually if anything the rates going down. It's pretty obvious that they reacted quite negatively to actually the just slightly higher figure for inflation. Turned out that uh after all the bad news came through, we had a rate hike. We had some very hish language. Um, still a bit of the backdrop of essentially some money some some bro some money printing from the from the states. Um, I think everything that

could be negative happened and being already bullish I became even more bullish thinking that well everything has gone through and uh and we did go up a bit higher. Not sure what happened yesterday. I'm assuming that people are selling because they need to finance token events. But um but yeah, essentially it's just a I think it's it would be quite quite interesting in the next few months. >> I agree. I agree. Especially with the what we're seeing in the in the Treasury rates, right? Rates really rallying the highest levels in decades, right? That's obviously not good for the market. But um to that point, do you think that what's driving crypto price action are cryptospecific catalysts or is it the same forces that are driving macro markets, equities, credit rates? What

are your thoughts, Darius? >> Well, I think uh you know, crypto to some extent or bitcoin specifically has be has become a bit of a hedge for chaos. uh the more chaotic the the markets seem to be they they it tends to to uh you know have positive price action um and what we're seeing also is uh you know I think in terms of money flow you know you know money is deciding where to flow at any point in time when there was AI rally crypto looked a bit a bit like the the bastard child of capital markets and everyone was going to AI when there's a bit of uh questions about you know whether the AI rally continues some of that flow comes back the crypto. So a

lot of it is like you know animal spirits, money flow, capital flow. Um and I think as uh the crypto markets get more and more institutional, you know, you see the capacity increase as well because I mean if you look at relative size of like Bitcoin to the stock markets is still really tiny. So the potential for the potential for long-term growth from just a bit of the capital reallocating is is still there. So I would say you know uh generally still quite quite, you know, bullish. >> Yeah. I just go ahead Jen. Just wanted to add just feels way less correlated than previous moves, right? Yeah. So, you know, Bitcoin and equities and gold, they're all reacting differently to news than we've seen before. Bitcoin has rallied, but you know, the [snorts] with

with bond yields like 20 year highs and gold depressed and uh you know, we we feel like there's much more a move within crypto to fundamental value, right? like the proto and you know I that will will continue in the future that that it's been a deep pegging with with gold and other assets. Yeah. >> So where do you think the strongest institutional inflows are coming from? Is it ETFs? Is it futures? Is it derivatives? Thomas, >> I can tell you what's happening inside cube and maybe that's a little bit of a microcosm for for the rest of the market and you know our experience is very specific but actually so Mobius was started as a digital asset fund a way for investors get access to digital uh to crypto and digital assets uh in 2021

but what we're seeing now is it's sort of metamorphosizing into sort of a liquidity and execution platform for a way to connect the rest of cube proper to the outside world. And so what that means is like we have equity guys who are coming to us and asking us oh well what's going on with SKH heinix purps and you know we have our ECM team going oh what's what's going on with the SpaceX PRP that's listing um that's listing next week [snorts] and same thing with the FX guys and the fixed income guys and so they're using Mobius as a way of understanding and then eventually executing on you know on digital rails but at the same time part of what we're building out is the

ability for external firms to access liquidity from the rest of Q. And so if you're actually looking to do like a tokenized or an equity per trade, you're not just accessing the liquidity of the Mobius fund, but actually of the whole firm, you know, and and Cube is a firm that, you know, because of our aggreate size, we might have equity exposures in the hundreds of billions in any given moment. So the idea of and we're mid-frequency, we tend to be mid-frequency anyway. And so the idea of holding risk on a few million dollars over the weekend is a very comfortable thing for us. And we can continue to add market depth in these products, you know, that is kind of external to just, you know, what is the Binance or the Hyperlquid Mid at this point in time.

And so I think we're seeing a lot of demand for uh for digital representations of assets from internally and people from externally who are trying to understand how these markets fit in with a with a broader ecosystem. And you touched on something. You touched on SKHX PES, SpaceX PES that touches on the convergence narrative that we've seen for the better part of the year now uh between traditional assets and digital assets across equities, commodities, prediction markets, compute, per how much demand are you seeing on your trading desk for these products?

>> Quite quite a few. I would say CFDs especially has been you know the the the fastest growing segment for SOTC. um overlapping with uh commodities, overlapping with essentially tokenized stocks. So you end up with essentially so everyone is trying to catch up for the speculator. the speculator was in crypto let's say 20 you know 17 2021 or so and then um the speculator somehow dares to leave the crypto space once in a while you know in 2023 they dare to actually just go and trade effects and 24 or so they do a bit of FX they do a bit of gold of oil actually earlier this year and now every time it's just people

are just trying to drag the cover back to themselves so what do we do we just do a tokenized version of equities and so on so so we end up with you catching for let's say for gold we we provide essentially tokenized gold to a lot of CFD providers so they don't they don't they wouldn't receive it as such so we we would we would hold the tokenized gold and we give them a CFD for example so that that's one thing uh on some platforms I don't know if we can name uh here but some uh some neo banks and some you know web two trading platforms then would offer equity trading over the weekend um and that's the question actually for the future is a Well, whatever happens to everyone's jobs with AI, people will basically be have more time to be entertained and to

trade and the time to trade is is very much, you know, on the weekend at this stage. So, um, so there's an interesting, you know, w interesting overlap between crypto and five from from that perspective. So, very much CFD is very much, you know, a wrapper around the traditional assets. >> Right. So, I want to touch on one thing. You guys have a very unique view into what's going on in markets with your respective desks. Market pulls back. Do you think that that capital rotates into crypto or do you think the crypto market pulls back with the equity market? >> The the sort of mega cap sort of AI IPOs happen and that might still suck up the attention and the capital. We we'll go old school. See like good technology fix there. Um and uh time will time will

tell. You know, it depends how quickly. I think shortterm it'll be a you know a a retracement and then you know over over the longer term then hopefully it will be you know a a rotation into crypto assets again >> and related to that with respect to risk what would you say is the best riskreward trade in the market that you're seeing in your desks Darius >> just to answer your previous question as well I think I'm going to give a bit of a left field answer right 2025 October 10th we we saw a credit event happen in the crypton native world uh I don't think I think we've actually fully addressed that yet, right? Uh you know that there was uh credit events know everyone has sort of moved on and and now it's we're expanding the trading of both cryptonative assets

as well as tokenized RWAS and tokenized equities expanding the universe of assets that are trading on venues that still have the same vulnerabilities. Um I mean now we're seeing you know some some of that being mitigated with Robin Hood Coinbase to some extent but that October 10th vulnerability of uh you know single venue single point of failure in a cryptonative venue risk the credit risk still remains uh and now we are expanding the universe of assets being traded there um I think that's the elephant in the room actually uh and especially like uh you know what is the solution to this is it more regulation is it you know having a credit waterfall on some of these venues. I'm not sure.

Um but I think at October 10 thing could happen again. Uh right, unless we address that that credit mitigation issue. No, >> that's a very good point and you did touch on one area. You touched on regulatory risk. And so to that point, we just saw the Clarity Act fail and now the SEC and CFTC are proposing their own rules. How important was the Clarity Act to the actual market and do you think we're going to get the regulatory framework we need to accelerate traditional financial institutions coming into the space? Thomas? Well, uh, keeping in mind, I should caveat this by saying I've been living in London for the last 20 years, and so I would not consider myself like a a DC insider. Um, I will say that, uh, there was the view that clarity was going to be crucial and I do think that ultimately legislation

is going to be important for institutions to come in. Like it's hard to do capex unless there's like a very clear rule set. And so if you're going to make like a large multi-year investment or create a roadmap for your organization, it's hard to do it without that sort of legislative um you know uh approval or structure in place. Now the SEC and CFTC engaging in this rulem is incredible and shows the pace and the sophistication of the regulators in the US which is a very sharp difference than you know what we've seen kind of in the past in the very recent past.

Um but you know I think it we should keep in mind that you know the rule making that is done by the regulators is lot is less persistent over time uh when it comes to permanent change like I don't know how I'm probably dating myself a little bit here but there was this there was this a rule that was put out by the SEC um called SAB 121. SAB stood for staff accounting bullet bulletin and it essentially laid the laid the the rule set that if a bank were to engage in crypto they would have to hold it uh like hold capital on any asset that was on their balance sheet in a way that was really really really punitive for any sort of capital ratios

which essentially took a lot of the US banks out of this business and SAB 121 ended up getting repealed or revoked but it's one of those things that if there is a significant change in the leadership at the at either the regulator um you know potentially in two years uh then it it's it's harder to make long-term plans just based on um these sort of rulemaking. >> Sorry, I just wanted to chip in on long-term plans absolutely but I think short term it doesn't actually really matter. I think on in the short term the agencies the SEC and and the CFTC have shown that they're able to pursue with with you know their own regulatory frameworks. SEC's allowed the the safe harbor for you know token issuance you

up to you know $5 million and $75 million. We think some good web three companies will take advantage of that. We see the innovation exemption for tokenized US equities on Texas. We're going to be a designated market maker for that. So it's progressing right and the CFTC is doing their own thing. you know, US regulated PES where participating in those markets as well. In the long term, I think Thomas is right like agency policies can be reversed. So, you know, having something at the federal level is is going to be massively helpful for institutions to weigh in. But short term, we're not worried.

>> Okay. The short answer to that question is if you went short after Clarity Act fail, you have lost money. >> It's actually a very good point. Now, we've we've talked about the risks >> inside the crypto [laughter] risks. Yeah. Love it. We've talked about the risks, a number of different risks, and we've talked about your sentiment and your views. I want to know what clients are actually doing on your desk. How are they positioning, and what does that tell you about where the market is going to the end of the year? >> So, I think adittedly, I think we've got the widest sort of token range that that that is traded. So what do you see? Um one a bit of a crowded trade that everyone has been seeing in crypto for many many years is the covered call trade which is probably how you you can

most easily explain why the vault is still so cheap. Yeah, >> it creates some opportunities and we do have a few counterparties as such that you know have bought cheap calls and whatever Zcash and you know all the stuff that's popped up recently and that's uh that's uh that's actually quite worked very well for them. Um what do we see? We've seen a few so on the smart money side we've seen some people buying a bit of upside in the Bitcoin especially. >> Mhm.

>> But conservatively so it's like a 1995 sort of mid mid price. Um Solana like the really really top side is still being bought and I think it's still achieved. I'm long PA NFA and so on but then I think it's it's got a lot of interesting potential. uh you're thinking of like you know uh good trades good opportunities earlier and I think it's it's trying to find both an underlying so token that has good visibility both from the retail and an institutional perspective but also adding you know asmmetric bets on top of it so people can buy calls they can buy call spares and whatnot and uh yeah this this happening we do see people buying randomly you know co

spares on dodge and so on dodge dodge used to be the the big star and then big the bigger barometer for for memecoin and for the the general retail interest and I don't know if it's still the case. Uh I think if you looked at you know use less and a few others actually you have a better idea of the meme coin interest even um even the Robin Hood chain had something like 440 million of of memes on their chain quite quite recently. So I think it's a bit of um yeah it's just a bit of a sensing the barbell of institutional interest and meme interest and and how you want to try. So if you want to try uh if your if your brain is filtered for macro then just don't touch

the memes and if your you know if your brain is filters for you know socials and just uh you know being on Tik Tok then of course you should be trading the memes. Can I just give a shout out to Darius because I've heard you Darius was talking about covered call strategies on stages back in 2018 [laughter] and I do think that you know like look if you're a believer in the four year cycle you know I'm sort of agnostic to it but you know in the past draw downs have been you know in the neighborhood of 80 to 95%.

>> And this year if you believe in the cycle you know the draw down is now in the neighborhood of 50%. And the covered call strategies like you know Black Rockck has covered call ETFs now. the amount of gamma supply that is coming from the sales of these covered calls does dampen volatility a bit but it actually also shows that you know a lot of the a lot of Bitcoin is being held in like ETFs and retirement accounts and >> weirdly those tend to be more diamond hands than a lot of the like the native crypto traders >> because you know if you're if you have IBIT in your retirement account you're not like checking the marktomarket like every day on your position and so I do think that you know we are seeing the effect of the institutional space on on

on flows already but [snorts] I did want to just shout you've been talking about >> I think we we have seen uh demand for simplification of of of uh these strategies actually to more very simple lower yield principal protected kind of maybe it's a Asian flavor to it right uh Japan or the rest of Asian countries where they just prefer you know hold along assets or dollars uh and local currency and get yield anything you own. But I actually think that that results in a potentially more binary situation because you have balls compressing, you have bases compressing.

>> So the whole market is positioned for that kind of compression. Uh and that's why when when you have sudden moves like the one we you mentioned, you know, uh it's outsized and then you get a V breakout and then you get a compress again. So you have that kind of that pattern. >> We have time for just one more question and it's my most important question given all the insights that you guys have. If you could make one bet over the next 12 months, what is your highest conviction view? And you can't hedge it. Yawan, >> I'm a long Sena guy. >> Long Salana.

>> Okay, [laughter] pretty quick. >> Thank you. >> A lot of Salana out there. >> Yeah. >> Oh god, this is a terrible question for me because you know >> you got to sort of trading >> simple answer. >> Okay, this is not a price action uh [laughter] prediction. Uh this is going to be harder to check, but I think that uh crypto is going to end up just being another asset class that's going to sit in everybody's portfolio in some, you know, in some allocation. >> The most consistently performing trade in the last 10 years, I mean, not not the most outperforming, most consistently performing has actually been uh shorting vaults whenever they spike.

>> So short short-term vaults. Yeah. >> Yeah. Maybe my answer is biased especially given the panel but you know liquidity providers are going to still be relevant right in the future. I think it's been a tough 12 18 months for a lot of trading firms but you know we're in a very strong position. We see opportunities. We've been acquisitive. Some you know competitives have have struggled to a greater or lesser extent. But I think the way we trade is going to be different. The way we interact with markets AI is picking up. We're seeing that on centralized venues. We're seeing more DeFi dominance happen as a result of that, right? But uh you can't manage risk that effectively in a fully automated way. You still need professional liquidity providers. AMM sold for you know stable coin you know

trades when there's very little market risk but you know more exotic things I think are highly relevant for for players like us to to step in. Yeah. Uh we're working on a proper AMM you know for example to answer some of those questions. So yeah liquidity providers are still going to be relevant for definitely can't hedge that. I think we're all we're all like in it for a long haul, right? We're committing our time and efforts into that. So, no hedge there. >> But really quick to follow up like if you think about the function of market makers, especially in markets which are super fragmented and we're just getting more and more in that direction. The market makers serve the fun function of providing liquidity and bridging the risk that is available across the entire kind of global liquidity of an asset.

And so if you want to get access just delta 1 access to some product like Nvidia but you don't know if you have capital on Binance for Btox or Kraken for X stocks or what what have you [snorts] like the point of the market makers is to actually you go to them and say I want to abstract away a lot of the complexity a lot of the the the middle and back office uh nonsense and I just want a price and market makers are always going to serve that function and will only become more important as markets become more fragmented and that's just the direction of travel.

>> Those are some pretty insightful answers. >> And Josh, what's your what's your >> mine? Oh, okay. Um Oh, nice. >> I would say, you know, just from the Falcon X derivatives desk perspective, I do agree with your points around clients positioning for topside going into the end of the year. You mentioned the 9095 call spreads. I think we see some clients positioning for even higher than that in the low hundreds within Bitcoin. Um I also see some clients continuing to position for top side and hyperlquid. Um but I would say overall sentiment is still bullish. You know if you asked me this question three weeks ago I would have given you uh that answer I would have said that things are much more bullish. Now I am starting to see a good portion of the client base much more skeptical in this rally and that's

driven by as you said AI capex potentially topping out this V-shaped recovery that we're seeing in rates that we haven't seen in decades. Um all sort of weighing on the market. Uh, and so we're starting to see some clients starting to take some chips off the table. But I would say that over the long, let's say, you know, one to three months going into the end of the year, clients are definitely positioned for topside. And I think the vast majority of clients are still bullish going into 2027. So I would say go long. And with that, that's all the time we have. Let's give it up for our panelists, everybody.