Inside Crypto's Liquidity Chess Game | Evgeny, Nick, & Omar

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All right, everyone.

Welcome back to Empire. We've got a fun episode. We've got 3 guests today. We've got Omar and Nick, co-founders of Second Lane, uh, and then we've got Evgeny, uh, from Wintermute. So Omar, Nick, Evgeny, welcome to the show, guys.

Thanks a lot.

Yeah, Evgeny, I brought out the socks for this one. We're doing a little sock reveal.

So look at, by the way, look at that flexibility though. Yeah, no, that's a For people that don't appreciate, Jano's like 6'4", and, uh, yeah, it is.

Yeah, I got, uh, some special socks. I got loaded up with the Winter Meet swag. And when did we do that event? You've got in December or something?

Um, yeah, December. Yeah, we had like, uh, end of year predictions kind of event.

Some good predictions in there. Maybe we can— yeah, maybe we can revisit some of those. So anyways, guys, I wanted to, um, to do, to do this podcast. Santi and I've been talking And, you know, everyone on Twitter is talking about like low float, high FDV. And Santi and I had the— we recorded the roundup yesterday and we were talking about who's responsible. Is the founder responsible? Is the VC responsible? Conclusion we kind of came to is maybe no one's responsible. Maybe all parties are responsible. The SEC is responsible a little bit. So, Yevgeny, there's this— I'm going to pick on you for this kind of broad opening question, which is there's this underbelly of how tokens trade. Right? There's the retail and there's like how you trade maybe just on Coinbase and Binance. But there's this kind of like underbelly where things are trading on Telegram and things are trading OTC and prices get set with market makers. Like, can you walk us through just like what I will call the, the broad underbelly of how tokens trade?

Right. I think it would be, it's kind of like 3 stages in general tokens go through. Like there are primary rounds where Well, it's like seed rounds, Series A and beyond where venture funds invest basically. And yeah, we are present in those rounds, for example, with our venture side. Then like the very last stage is when the token lists and that's usually on some exchanges, sometimes decentralized, but quite often these days on, I don't know, big exchanges like Binance, OKX, Bybit, Coinbase. But then there is a second stage in between where token is not listed yet, but there are some deals happening behind the stage, basically trying to, well, trade tokens before they are listed, trying to trade softs, trying to trade basically any kind of like exposure to those tokens. Like recently, like this whole meta about points being traded as well is really interesting because we have some platforms which basically trade points, which ultimately convert to those tokens at some point. So it's really a lot of ways to get exposure behind the scenes these days. And I think, yeah, my, well, basically the guys from SecondLayer probably have a lot more to say about this.

What do you think is the most misunderstood thing about how tokens trade, like before or pre- tokens going actually onto an exchange? Like, what is the most misunderstood or just like the least well-known thing that people don't know?

Probably about how the tokenomics are decided. Basically, how is it decided who controls what, who controls, well, basically how much of the float is released on day one, how much of the float has been invested within the first year. A lot of those things are pretty esoteric to most people. We actually incubated a few protocols over the last 2 years. So we've been very much like in the weeds of trying to understand like which model makes the most sense. But ultimately, it's a pretty tough thing to figure out because you need to, on one hand, please a lot of investors that invested into you in early stage. On the other hand, you need to make enough supply available on day 1. Finally, you need to make sure that, yes, there is some kind of like balance between the people who get access to token day one and investors. So there should be like some upside for people who invested into those early rounds. And often those interests are very much conflicting.

Yeah. So I want to draw attention before we go to the secondary markets, because I think that is a really good signal into how things will trade, just interest in the market. What is the role of the market maker? Because I don't think people really appreciate Typically, when you look at the pie charts, I guess we're no longer using pie charts because of a team that really messed it up. But nonetheless, within the pie chart, there's a certain allocation that goes to market-making activities. Like, it is essential for people that don't appreciate this. Like, IPOs, for instance, in traditional markets, like, you have roles of bookrunners, JP Morgan, Goldmans of the world that are there to kind of really just create markets. And sometimes they get it terribly wrong. Look at the— there have been IPOs where they totally botched it. They mispriced it like they— you know, stuff went wrong. Typically, investors, as in traditional markets and in crypto, are locked up for a year. Depends on the project. But I'd like people to— if you could comment on just what is the role of the market maker, how do you typically— the standard by which the best teams kind of work with you guys and what is your role in those kind of early moments where it's so critical to kind of create liquidity in the market?

Yeah, generally there is definitely a lot of misconceptions of what market makers do, which, yeah, we can totally go into today. I wouldn't mind touching upon some of those. But ultimately, the role is we— basically, like, if you think about day one, there is usually only two— well, two basically ways for people— two kind of actors, people who buy tokens from. It's either people who got them on day one, usually as airdrops or points or stuff like that, or it would be market makers. And the airdrop people, they usually, well, sell. So it's usually the offer side of the equation. But in order to see the book, in order to see a liquid book, you need to see bids and offers. And basically market makers are providing those bids and offers on the, basically when the token just gets listed on exchange and they keep providing those bids and offers throughout the first day and beyond, basically to make sure that people can trade in and out in a most efficient way. Very often those tokens are getting listed on multiple exchanges. And so very big role of market makers is actually making sure that the prices across those venues are similar, like not necessarily exactly the same, but very much similar up to like, I don't know, 0.1, 0.2%, for example. So it's ultimately making markets efficient, I would say. And I think on this very first tick, on like the very first, like basically once the stock, when the token just gets listed, it's pretty important that the price makes sense as well. Like, I don't know, if a token launches and it's priced at like its fully diluted valuation is priced at price of Bitcoin, for example, at fully diluted valuation of Bitcoin, doesn't really make sense to anyone. And it doesn't really, it's not really good for market for it to be listed there as well, because people who will buy into it, they'll just lose money. Like it's really nice for token airdrop people, but anyone who buys will be completely screwed. And there were, yeah, there were times in the past when it happened.

Yeah, let's double-click on that. And I'd like to bring in the Second Lane guys, because I heard it from Omar that you said, look, the best projects that have performed really well same launch a token are the ones that have really robust secondary market activity, meaning there's just investors that have been early on the cap table that you'd rather clear them out before, uh, to create just like less sell pressure. But, um, I'm curious, like, maybe start with you, um, like, we have all seen the Burj Khalifa candles, right? Filecoin at one point, like, there's a— the vast majority of projects, like, you know, have this dynamic where it's just down only. How do you solve that? Like, what, um, they're all clearly having market makers like try to fix this, but maybe a good example would be like, what has been the best project in your opinion that has gotten like the best kind of performance out of the gate? And I know it's very complicated answer because it also depends on what the market's doing, you know, but in your opinion, like, why is it that that the the vast majority of projects have that, like, just down only for a while dynamic.

I think one of those minor misconceptions is that actually market makers decide the price. But in reality, nowadays, the price is, like, much more often decided between the exchange and the protocol. And also sometimes it's decided by the pre-launch markets, like on AVO and Hyperliquid, for example. So— Basically either exchange or this like pre-launch market, they pretty much decide where the token will open. And if this price doesn't really make sense, if there are more sellers than buyers, for example, yeah, it will inevitably just go down. Like what keeps bugging me a lot is, yeah, you do see like Burj Khalifa kind of candles pretty much in every launch still. I really don't get who those people are who are buying into like the very first tick every single time. It's, it's very confusing to me. Like, you just see it, it's 100% a bad trade to buy at the very first tick, but still people do it and they just pay through.

I always tell people, like, just, just sit it out. Like, you're— there is another more sophisticated player that's maybe doing some hedging, some weird stuff. Like, just wait for a bit.

But anyways, uh, you wait for 10 minutes. Yeah, yeah.

Omar, Nick, uh, how do you see like this problem and what are you seeing on the projects, like with secondary market before they list the token and how important has that been for performance like after they have the token live?

I think, Nick, if we just go to the most recent movement was Celestia for us at least, because we did the pre-TG and post-TG SAFRE assignments with, that's what we call it in our side of the market. And reassignment means that a buyer comes in and a seller comes in. The seller is usually the investors, and they buy it from the seller, the buyer. And then the team gives a consent or an agreement in which the soft, the original agreement between the investor and the team gets reassigned to the new buyer. And then they get the tokens in their wallets once it gets distributed. So what happened on Celestia was just to go back from the first stage, they had a round at $10 million valuation. And then the second round was at $1 billion valuation. And that jump is pretty high from that $10 million to $1 billion. So these seed investors who bought like a couple of millions of tokens, they were like, you know what, once it's at $1 billion, we might think of de-risking a portion. And then at that point, our work basically started because we got in a lot of hype around that time. Whom buyers reach out to us. And but buyers, I mean, large institutional funds, literally till I would say probably we did literally to the end of TGE, at the beginning of TGE, we were closing deals on that one. Literally the day before TGE, we were closing deals. We did millions in transactions on that one because these guys knew something, Santi, at that time. They were like, you know what, if we buy these tokens at that moment, it will go from $1 billion to $3 billion and beyond. And it did. So I think, Nick, correct me if I'm wrong, I think we did pre-TG around $30 to $40 million USD. And then after TG, we're still closing deals on the secondary market. And I think we still have it like $30, $40 million on the secondary market for Celestia. And we all know how the price evolved from $1 to $3 within a week or two, and then it jumped to $10 and jumped to $15, and at some point it was at $20 as well, which is $20 billion valuation.

So, and like, do you see this dynamic for other projects where if you have a really good— because, because we've all seen like the AVOs of the world where for the most part you have a, an implied price on the, on the points or the, the token pre-TGE but a lot of times it doesn't have really good volume behind it. So it's not really, I would say, accurate unless like you're talking about Celestia, you have like, like very good volume and the ability to do reassignment. Um, like the question that I have in this case is these reassignments of SAFs, like the investors are locked up for a year or 6 months at least. Uh, the price activity is usually happening on the airdrop amount and then whatever is carved out for market makers. Uh, but what you're saying is these institutions like that are buying— it sounds like it's mostly institutional or large individuals—

they're also probably vegans as well.

Yeah, they're also probably buying the token. They want the list, right? It's sort of a multi-combination where they'll, they'll buy the locked tokens at a discount, and then once the token launches, they'll continue to get more exposure of it. Yeah.

Just to give you an idea there on the discount, what we see on our end, if it is vesting over a year or two, then you hit like discounts from spot, 40%, 50% discount. The reason why we have seen that movement is the most impact on the market when it dips, it has been around 40%. So people tend to cover that. On the basis that if they cover that option, then they're good to go. And then you see the other side in which, again, you probably know this as well, in which market makers buy those positions as well and hedge on those. That's a different type of bet as well. And just to back up on your point on, on the points thing, Santi, I mean, we have all seen the most movement on Eigenlayer, for instance. Everybody is bullish and still is bullish. And then we saw the movement on the points. We saw the trades on the point hitting at $0.50. So due to the low liquidity on that point and then the conversion wasn't 1:1, so it was a bit off on that point. And then we saw that the points and the actual market of OTC at this moment, there's a difference between 5 to 10x on that measure. And it's all due to the low liquidity, which Nick also mentioned in the notes, like that's a tricky thing to do because it brings us on a scale, on a different level and different level of speculation at the same time. And the thing that I have seen, and you probably know that, Santi, is the JITO thing. JITO has been one of the better performing and stable pricing in the last couple of months. The way that they have done it, the way that they have actually launched the project, given the airdrops and also splitting it up into multiple years, like gradually building the price up. I mean, I'm amazed by the resilience on the chart level as well. I've been following it. I was like, holy shit, they're still doing solid on the pricing side.

I want to talk about like further unlocks, like for instance Arbitrum and other projects that are constantly unlocking. And of course, we've seen the price action on that recently. Nick, I want to turn it over to you maybe to comment just on this point around TGE and the dynamics that pre-TGE, secondary activity, and the performance of tokens. Like, what do you think projects really get right, and what do you think projects really don't get right as it relates to, like, you know, the token launch?

Well, going back to your original point in terms of this dynamic that you see in secondary markets, we're using Celestia as an example, and you kind of saw the price get locked up over time, right, as the project got more exposure. This happens all the time. You kind of like, you're able, you know, there's a lot of capital allocators who are using secondary markets as their primary vehicle to deploy capital because to Omar's point, you're able to get this stuff at a discount. Teams may be cleaning up cap tables, there may be investors who invested in previous early rounds, they've now seen these large markups and they're able to capture liquidity ahead of getting to the token launches, right? A lot of the time it's just management of portfolio risk, right? They want to get liquidity for the next investments. I think what teams get right is engaging in the secondary markets, understanding that if you have a lot of liquidity that's been locked up for a while, whether it be employees, foundations, the investors, there's other offshoots to alleviate that liquidity demand that wants to get out there. So, you know, to your point with Arbitrum, and, you know, there's been a lot of foundations that are using secondary markets to raise bridge rounds and stuff, right? You know, SEI has some large unlocks. There's going to be a lot of unlocks coming out here in May, right? SEI has a large one here, I think, actually today. Employee tender offers aren't something new, right, in the traditional space. Tesla— or sorry, SpaceX does this on a yearly basis, and it allows those private companies to supply liquidity to their employees their investors, as well as in most cases for, for at least SpaceX, they've had a markup for every single round. So it looks good for being able to raise additional liquidity in the future. So I think teams get it right when they engage early and they understand how they can use secondary markets to access liquidity across these various profiles.

Nick, how, how important are the, or how impactful are these unlocks? So yeah, like May is a big month for the unlocks, right? Like Pith, I think AVAX, I think Arbitrum has a pretty big unlock. I think Aptos has a pretty big unlock this month. Like how actually impactful are these?

Depends on how much is getting unlocked. It depends how much liquidity is in the market. It depends on the sentiment at the time in the market. Obviously, if you're coming out with, you know, 50% of your total supply in one go into a bear market, your spread, your spread on the order books is dismal, you're going to have a bad time. Right. And that's why teams need to recognize that there are other liquidity, you know, there are other solutions out there to alleviate that pressure. And in fact, it protects retail investors as well because that liquidity isn't reaching the spot markets, which of course is going to have a detrimental effect on the price. So when you're at— I mean, there's a lot of funds that are spun up on a weekly basis that hit billions of dollars. In AUM that deploy into secondaries. It's a market that hasn't seen a lot of growth in the crypto space because there hasn't been a lot of coordination around this. Everybody wants access to high-quality deals. Everybody wants to feel that they're getting the best deal, right? It's kind of like a bragging thing among asset allocators, right? They want to feel privileged. They want to have the access, etc. So again, teams just understanding that there are options can alleviate a lot of these issues. Because again, if you have, you know, 10%, 15% of the supply coming online in one go, of course, people are going to sell, especially the employees. You know, they all have families, they have their own needs, what they want to do in life. You've been working on something for years. Most of these projects don't get to a liquidity event, right? Most startups fail. Crypto is very unique in that it can kind of accelerate the path to a liquidity event versus traditional equities where your options are limited through M&A, or if you're lucky enough to get to an IPO or something, right? Tokens are essentially that IPO moment for a lot of this stuff. I think what you see a lot of the time is that the rewards are put ahead of the actual work, right? Yes, hopefully that answers a little bit about the question.

I think two recent events were actually on Arbitrum. Which had the first unlock around March. Around that time, it was trading around $2. Right now it's trading— there you go. And right now it's trading on $1. So that's the first thing. The second one is SUI. When I was in Paris, it was trading at $1.50 and above. That was the most recent event that they had. They announced some partnerships and et cetera. And right now, because the unlock just happened like 3 days ago or something like that, and it's trading at 1-ish. So there is definitely an impact there. And what we did before this unlock, we had a huge buyer volume for that, Jano, because people were looking around 10, 20, 30 million buying the first unlock at that moment. So what usually happens for the first unlock is people want to buy it like between 5 to 10% discount from spot. So imagine if you had closed it like a month ago, you would have a solid deal if you had done it and move on to potential. And the thing there is, is not that you're actually selling your position and moving on and de-risking on a proper manner, but also stabilizing the price at that moment because it creates a cascading effect. If one sells, the price drops like 5 to 10%, then the second one goes on and then the price goes literally on the downside. And we still have on our end people whom we know whom are thinking of selling but not selling because the liquidity isn't that good enough to sell that kind of position on the market. And that makes it tricky to do such movements.

Let's talk about like just a bit of a pivot, because I think it's relevant in terms of how, how particularly funds and sophisticated investors think about like the liquid book versus buying stuff at a discount. For instance, SOL is a good example of this. You know, there are auctions right now happening every so often. People kind of— it's very telegraphed and they're trading at some discount. The first one was, you know, 50% discount-ish to spot. And then that discount has sort of compressed a lot of strategies. I've talked to just institutions that are bidding. They're like, well, we have a huge liquid sold position. Why would— like, I'm gonna sell that and buy it if I can get it at this discount. And so there's a lot of that, I think, that happens in— it's not just one or the other. It's not that for Celestia, it's like, I have a liquid position, but if I can get it at a discount, and then depending on how it trades, then it also impacts and can have further cascading effect in the, in the order book. Um, but I want to get your thoughts on the SOL kind of auction tying it into this kind of why things perform the way they do and trying to kind of understand that. But Evgeny, I don't know if you have thoughts around SOL and what you're seeing in the order book, and, uh, is it fairly obvious what like certain market participants are doing there?

Definitely. Like, you will still sell— you'll still see some selling pressure from those SOL auctions ultimately because like they would have to be executed in a way where, well, in order to basically provide dollar proceeds to the, well, the party who is selling those locked, selling this locked Solana, well, you need to sell some Solana yourself. And then, but then ultimately, yeah, just like I mentioned, those basically people who are sitting on liquid Solana positions, they sort of like leverage their positions further. So they get a lot more locked SOL than they had unlocked SOL, but it still generates a bit of selling pressure. And we definitely see it, and we definitely see it in this Solana price action last couple of weeks. But yeah, also really interestingly, yeah, it's a very competitive auction from what we've seen, primarily because of those people who sit on the liquid Solana.

I think there's another thing to that as well, because we have seen a lot of funds selling those liquid position due to tax, um, uh, optionality in which they need to do it so that they can avoid and buy cheaper SOL instead and then avoid the taxes over last year. That's the other component to that as well. They need to do it and you're talking in millions.

So you're saying it's concretely a fund because SOL ran up to $200. So if you would have bought like SOL at $200 in December, it's now sitting at $150. You're going to sell that $150, clock that loss, and then buy it in the auction and, and push it.

Or the other way around, Santi, if you have bought it early on like at $20 or $30 and it had jumped to $200 and you would be paying taxes over that 10x, um, which is booked in loss. You're— yeah, that's the thing.

So you could theoretically hold that, but I guess if you're a year in to that position, long-term capital gains. You clock that, you collect the carry on it, and then you buy SOL at $90 or whatever the clearing price is now in the auction.

Yeah, yeah, that's the other, that's the other aspect to that. At the same time, what we are seeing on the auction side, which is the FTX auction, just to be, um, clear on that option, because, um, I don't know, roughly probably more than 50% has been sold by this time, but Okay. Okay. And what we are actually doing there on our end, because we have clients who are actually interested in buying those position, we have bidding on those auctions. But yeah, at the same time, the price has gradually moved up from the 50% discount, which it initially was roughly.

Yeah.

It moved to around 40, maybe 30% range by now because everybody's interested in SOL, to be honest. And on a weekly basis, I think the auction is around $200 million each week, basically in the last 3 weeks, which is a pretty high amount, to be honest. And so that's very good for the SOL, obviously, on the OTC side.

And the other big component of that, why you're seeing that discount close, and I think there's been a lot of narratives put out there on crypto Twitter, it's bullish. They're super excited for Solana. It's actually a mechanism of the auction itself and the way it was held, right? Before you have an open price that everybody knows, right? Now it's a closed bid. So it's going back to kind of how the Silk Road auctions with the US Marshals are held. And I participated in those, you know, years ago as well. So I'm very familiar with the process. But the closed bid style gets a better execution price. So when you have everything televised and it's broadcast out there, it creates more demand and more interest and more participation. For this stuff. So the estate and Galaxy have done a fantastic job of getting that best execution price by kind of tweaking the way that these auctions were run. I think initially they thought demand wouldn't be there, or they had to do an exploratory first tranche, right, to see what, what it looks like, and then they can better tinker it from there. So that's kind of why you've seen the discounts close. It's not necessarily a mechanism of, oh, people are super bullish, which, yeah, of course some people are, but it's more so just the mechanism of how the auction was actually run.

That's, that's very true. Jenny, I want to go back to you, just as a matter of interest, like post-FTX, the market maker landscape has changed pretty dramatically. Um, you, uh, I want to maybe just get your general thoughts on like how you see the, the state of the market. Um, you know, what are some of the things that, you know, have changed and maybe kind of how do you see it today and going forward? Because I think it's, for a while there, it felt like there was no liquidity and there was no market makers other than a few folks like you guys. But how do you, how has that kind of changed in the last year?

Yeah, I think the lack of liquidity was primarily not because there were not enough market makers, but simply because there was no enough retail interest. So as a market maker, you typically want to provide more liquidity when, yeah, retail is trading, not necessarily when, yeah, basically informed participants are trading. So big part of the liquidity gap was simply because of that. It was just like not interesting to provide liquidity from that perspective. But also a significant part of it was just because bunch of market makers just exited, primarily on the US side of the equation. Like if you, Well, if you think about like all these big US firms who couldn't trade on Binance anymore, for example, because of all the regulatory issues that Binance had or they had because they were on Binance. So that did create quite a bit of a gap as well. But then we had quite a few new entrants. For example, like there are a bunch of TradFi European market makers entering the space. Even on the token market making side, which is very interesting. Like, yeah, we definitely did not expect that on our side. But also equally, like on token market making side, basically it's a very crowded space at the moment. So pretty much every second prop trading firm is thinking, oh, should we go there? Because it's like, I don't know, those options look so lucrative, those deals look so lucrative. And they started to think, should we hire like a few business development people? Should we go into this space? So it's a becomes to be pretty crowded in general. And it definitely does help for the protocols to pick the best ones because there's definitely an oversupply of people who provide this. But it's, yeah, it's definitely became, I would say, even more competitive than it was in 2021 to a degree.

Omar, do you have something to add there too?

Yeah, I wanted to understand, how do you pick a market maker. I mean, believe me, I have done investments myself personally. I mean, over 100, 200 stuffs. But each and every time the founder reaches out, it's like, what do you think about this market maker? And what do you think about this market maker? And I think about you guys, obviously. But it depends on the type of the project as well. I mean, if you are someone like EigenLayer, for instance, they would probably definitely reach out to you. And if you are a bit of a lower hype project, then there might be other options. But what do you think are the best things, criteria to choose a market maker and depending of whatever you do? Let's put it like that.

Yeah, I would say it really depends what you want to achieve ultimately. If you just want to like, okay, starting with maybe obvious, like there are a lot of protocols like on the lower side of the grades who want to achieve not necessarily like the best things, like, I don't know, they just want the token to go up, for example, or they want to see the volumes explode. And yeah, I cannot really advise there, like, that's not the stuff that we do. Like, yes, there are a bunch of market makers who do this kind of stuff. Yeah, that's all I can say about this.

For those not watching on YouTube, there's nice quotes around market makers there.

But ultimately, yeah, you need to diversify yourself, right? It's, if the protocol is just looking for any liquidity whatsoever, yeah, they can go with basically like 2, 3, 4 market makers and call it a day. That's fine. But if you want to see something more like bespoke, that's basically where we are trying to insert ourselves a lot more, basically. I know, for example, if you're a DEX and you have a token and you want to provide liquidity, not just for a token, but also on your DEX, for example, that's where we step in quite often. If you generally like want to see more DeFi exposure, that's also where we step in as well, like providing liquidity on 1inch, for example. So those kind of like extra services, I would say. OTC is a pretty big example. OTC venture, like basically everything about like secondary market, like off-screen liquidity, also very important. So if further down the line you're looking to sell some tokens from the treasury or maybe your employees want to sell, yeah, definitely. Like that to me actually would be one of the main reasons why you want to engage with the market maker in the first place, because they would help you to get the best execution for those kind of, well, for those transactions.

True.

Got it.

You've got a solid tweet from Alexander Osopovich, the Wall Street Journal guy that reminded me of the predictions conversation we had back in December. And so his tweet said Robinhood is now routing the largest share of its customer crypto orders to Wintermute. So if you pull up there, I'm not sure where this is from, but it's a market maker. It says Citadel 12%, Wintermute now 10%, all other individually less than 10%, 30%. So it's, yeah, it's Wintermute and Citadel. I'd just be curious to hear more about like the Wintermute strategy of pushing more into the traditional capital markets world.

Yeah, Wintermute is pretty unique in that we are very generalist, yeah, prop trading firm. Like a lot of, most of our competitors, they just focus on one niche. They're either doing, I don't know, market making for protocols, or they're only doing OTC, or they're only trading like most liquid perps. Or they do DeFi, for example. We're basically doing it all. And yeah, I cannot necessarily comment a lot about the nature of our relationship with Robinhood, but ultimately it's, yeah, it very much fits into our general strategy of being everywhere pretty much, whether it's DeFi, whether it's trading on Binance or Coinbase, whether it's trading on Robinhood, whether it's OTC or providing liquidity for protocol tokens. It's all part of the general vision for Wintermute going forward. With that particular form, yeah, I guess just for listeners to understand like where is this 10% and 12% is coming from, that's basically called 10-Q. You can find it on Robinhood website, you can find it on SEC website. And basically what this 10% means is that this, it means that, yeah, Wintermute generated 10% of revenues for Robinhood for that particular quarter. But that's, that basically doesn't necessarily mean that we are, I don't know, trading same volume as Citadel. It just means that we generated almost as much volume, as much profit for, well, as much revenue for Robinhood as Citadel. Yeah.

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We were discussing on the Roundup yesterday the latest Coinbase earnings as well, and the ratio of retail to institutional volume, at least particularly for Coinbase, it's very much institutional. So going back to your point around how active you are, you really want retail to step in for you guys to get excited about these markets. What have you kind of seen on both of your sides like your assessment into kind of where we are in the market cycle. And also, what are the most kind of, from your vantage point, the most interesting projects that are catching a bid that are really, you know, people are excited to, you know, get exposure to?

Nothing, Santi. There are no exciting things.

Nothing.

Nothing. That summarizes this very well.

That was it. Shit.

No, no. I think we are definitely like not there yet. I think, well, from my perspective, like the most interest this cycle is basically in Bitcoin ETF. And so most of the retail interest actually will go there in a coming. But basically like my, my general theory is we had a Bitcoin ETF listing. People basically on the TradFi side bought into that. Uh, crypto-native people exited via that, and then they started playing all those games with all the tokens that we've seen last 6 months or so, or 9 months or so. Um, and that's basically it. So I don't think there was a lot of— like, all the new money in crypto ecosystem basically comes from this Bitcoin ETF flows. That's basically my current work in Syria.

Yeah, I think people severely underestimate mainstream media's war on crypto and the effects that the narratives have had. I'm sure you all saw that commencement speech the other day and the crowd reaction to just Bitcoin, right? Um, we live in a bubble on crypto Twitter, right? Um, we amplify the very best of what we're doing within the industry, and we try and mute a lot of the negatives that are put out from like the current administration We've endured 4 years of hostility from regulators, right? This was always going to happen as soon as institutionalization was put on the table back from those original preliminary conversations with the SEC, right? We had Barry lined up, we had the Winklevosses in the rooms, etc. This was always the strategy to bring liquidity to this industry, was to the institutional rails. And this is kind of the net result of that over 5 years. The head of the CBOE said when they first started launching products, we will tame Bitcoin, right? It's not— the playbook is well known with how they create more claims against the underlying assets. Gold market is the perfect example of this. You see a lot of debate and speculation around paper Bitcoin and the impacts of these future products, right? They can just— they have unlimited cash that they can always just print and deploy into these products, right? And slam prices through futures. Obviously, this is a very expensive strategy to suppress price, and it can only happen for so long because the bid on spot is so large at this point, right? So your cost to suppress price through futures and paper increases exponentially. So it's a symptom of the environment. I don't think retail is going to be coming back in the US until we see some changes around policy that enables retail participation participation to be easier. Otherwise, we live in a post-chokepoint 2.0 environment where you've seen a lot of access cut off. Myself, I've had bank accounts continuously, you know, I've been debanked many times from banks and just having crypto, right? And now you've had these data surveillance initiatives for years. And now you have all these subpoenas coming to the exchanges. All of a majority of transactions are mapped to identity. At this point as well, right? So this idea of the crackdown on compliance and regulation, it seems daunting and they try and paint crypto to be a villain. In reality, on-chain compliance is coming, right? Like if you follow what the guys over at BIS, Bank of International Settlements, are doing, it's like Project Mandara, for example. The biggest thing slowing them down right now is the localized regulations. There's so much in cross-border settlement and payments, right? There's a lot of changes that are happening in settlements moving from T3, T2 down to T1. This, you know, the changes, the rules that were put in or brought forward by the SEC last year, they go into effect in 17 days here in the United States. So there's some big infrastructure changes happening at the DTCC level, which is the Depository Trust Corporation. So all the private equities, essentially sit there. It's the foundation of the financial markets in the United States. So there's a lot of changes happening there. And until we see policy changes from the Biden administration, it's not just Democrats who are against crypto, right? It's individuals who have interests to see the status quo remain as it is. So I don't think you're going to see a big resurgence of US-based retail or Canadian. you know, as well, which I'm a Canadian.

Can't buy more than like $1,000 of crypto, right?

It's brutal, man. And they've pushed out all the good companies offshore at this point. And yeah, I mean, the volume in institutional, speaking to Evgeny's point, is that it just comes from these products. And the institutional capital isn't necessarily going to slow down because a lot of the time these, you know, the broker-dealer networks in the United States, they have long compliance periods and creating the products and the structures, getting the sign-offs, that takes 6 to 8 months. The ETFs came out in what, January? So, you know, you're coming into this like summer slowdown, you know, sell in May and walk away, wake me up in September ends. I think we're going to see a continuous ramp of new products and new counterparties coming into this market, but it is primarily going to be institutional driven. And that's more than enough, right? If we have a Saylor-style buy coming in every single day, I don't have any concern about short-term volatility. But I do think there's going to be a huge concentration of that value that's coming in towards Bitcoin. Because it just has the most clarity versus a lot of these other assets that are still up in the air. And there's some big court cases going through the legal system in the United States. Around secondary markets. You know, watch the Ripple case, watch the Coinbase around secondary trading. What is a security? What isn't? When does it not become a security? These are all questions that are going to be getting resolutions in the next year or two. And once those definitions are set, then you'll see standardization start to happen. And once you have standardization, that's when you get broad. The two worlds can really come together. This concept of like permissionlessness it doesn't bode well to integrate into the TradFi, which is heavily permissioned. It's heavily walled, right? So I think you're going to see a huge split in liquidity over the years between this permissionless ecosystem and permissioned ecosystem. And the permissioned ecosystem will have more liquidity because the majority of wealth is concentrated in the hands of the few institutions and private equity.

But at the same time, Nick, the same thing is happening on the European side as well. I mean, Santi knows this. As well. By the end of this year, you can actually ask your MiCAR license, which would cover basically all Europe. That's what we are doing on the second lane side as well, because we have our US side covered. Next phase, we are focusing on the European side to take the license on the MiCAR and cover basically all Europe to do these OTC trades and soft trades, etc., as well. So what gives us that is it becomes more like a not a localized setup, but more a centralized setup in which you know what kind of rules there are for each and every party. And then it's pretty clear. So everybody who has a different license from Spain or Portugal or whatever, they just bridge towards that new license and get it done. And it covers all Europe at once. And then things become a lot clearer for everybody to know, oh, this is what we are getting and we should be doing this and this and that. So those are the things that, would be very helpful down the line to get in the next phase, which is retail on all fronts.

Yeah.

Yeah, I would suspect retail comes more into play once the institutions are able to offer products to their client base. But why would you—

I'll push back on that because crypto has always been a retail market first.

Yeah, I know, but I'm talking like where things are going.

I'm not expecting— I'm not expecting in my underwriting process, I'm not expecting like the sovereign of XYZ to come in and, and max bid. I just think this is a retail phenomenon and it will continue to be a retail phenomenon first, and then the institutions rally behind that. Like, uh, am I worried about regulation? There's nothing I can do other than engage and other than, you know, as an industry, like self-police and try to do within the best of our ability. There's certain things that we know we need to get very right. And the most important thing we can do is like Uber. If we create really solid consumer products, then it's game over. Like, we can't control the stablecoin bill. We can't control how quickly or not these things go. But if Uber faced incredible amount pressure from lobbies that had a really strong interest not to allow them to go into all the different jurisdictions. They wanted every single one of them because why? Because people love their product. So, you know, I look at something like Stripe and it's like, okay, we've actually come a long way. You know, payments, embedding stablecoins in payments makes a lot of sense. And businesses from time— like, so the more we can build that, you know, because and not just pure speculative, you know, like trading, which is, which is fine, then I think we'll have it stand a better chance of moving this further along, not just in the US, but like in Europe and other places too. But, you know, we're also in Dubai. I mean, there's like some pretty— there's a very big divide between how countries are trying to regulate and, you know, embrace this technology. So I don't know. But I'm not sitting and looking at the order books. There's still interest, right? I mean, for your guys' perspective, like the question is, and I asked this on the panels, like who would have predicted prices would be at all-time highs and rates at 5.5%? And no one— if you believed it, you didn't do it with conviction. So it doesn't matter. No one did it. But like the question is where are flows coming from? Because most— the largest fund of funds in the US says there's no LP interest to invest in crypto funds. And so where are the flows kind of coming from, from your perspective? Is it from kind of Middle East, Europe, Asia? Like, who's bidding on this stuff?

That's a good question. I think what we have seen, if we go to Q4, Q3, Q4 last year, what we saw on movements is each and every month had a different— because we have this top 5 that we put on, like top 5 of order book that we have on let's say in December it was dYdX and in February it was something else and then it was StarkWare and then it was Celestia. So each and every time we get constant new buyers and new sellers and the sellers are usually the typical VCs whom have been in this space the more, let's say, who have been like 10, 20 years or now maybe 10 years in the last 10 years in the cycle and they know what they're doing. And then, um, you still have a lot of these guys. I think he hopes to. Well, the only thing that I, that I'm still amazed, Santi, is because I've had this chat with many VCs as well in the last year or two. And the one thing that I wanted to know from all of them is like, do you have a proper risk management? That's the thing that I've asked them. And believe me, I have seen only one.

And yeah, as you know the answer to that question, Omar.

No one.

It's only one. Yeah.

No, I mean, You're going to be a venture capitalist and you have no idea how to de-risk. Good luck. You learn that.

That's the issue. Yeah, it is. It is. I mean, just to go back in 2017, 2018, I mean, Nick and me both were trading at that time soft for Solana, for instance, at $0.20, at $0.50, whatever. And I just— guys, chat right here.

Go ahead.

Sure.

I think you guys were the guys that did some of the largest transfers of SOL sub a dollar.

We did. We did.

Or some of the well-known funds out there, they're our largest holders. Yeah, these are the guys— you're listening to the guys that did it behind the scenes.

True.

Yeah, I mean, the OTC market was highly fractured at the time, right? Like, there's no coordination, there's no central platform to organize and consolidate all of the counterparties and the assets and the service providers. That's essentially what we provide now, right? Taking a fractured market, the main participants who have the majority of the flow, and consolidating that. The underlying business always wants to take place, just lacks a platform to discover it. In fact, there was a European group called Euroclear that tried to build a program called the Global Liquidity Highway, right? That was 10 years ago. They lacked the technology to do it at the time. I think you could argue now that the end experience here in crypto is going to be like Robinhood, you know, SEC-like front ends and a lot of DeFi liquidity routing on the back end. The idea that you can build globally consolidated order books is where this stuff is going. At least that's where we see it, right? That's kind of the future that we're building towards. And to answer your question of, you know, where is the demand coming from? Obviously, it's the crypto native funds who have been here for multiple cycles. They're sitting on billions of AUM, etc. On the institutional, on the traditional, you know, trad fi side, it's a lot of just ultra-high net worths who don't have the restrictions, right, to be able to deploy capital. You know, it's family offices. They often sit at the top of the, you know, their LPs in a lot of these funds themselves. Right. But I think especially in the US, they've taken pause to deploy. And I think the returns from venture have been pretty depressed. Right. If you look at that data from PitchBook, for example, And everybody's just kind of wondering where macro is going to go as well. But there's always discretionary capital out there that's deploying into this stuff. And if we see, you know, capital markets outside of the US, like Hong Kong's opening up, etc., Singapore is more active. There's always a flow of private capital into here. It doesn't have to come from, you know, traditional VCs in San Francisco or anything like that.

One dynamic in— go ahead, Santi, go ahead.

Well, I'd want to put finer numbers here. Like, on any given month, like, let's compare it against like the blockbuster month that you guys had in the last 2 years. It was, say, 100. Today you're at— and I know that last couple of months have been soft-ish, but like, where are we in terms of volume? Is it, uh, Is that your primary KPI? I assume it would be, but how do you, or like, where are we like at 20 versus 100 at the all-time high? Uh, do you focus more on the type of buyer, recurring buyer? Like, maybe you guys have different business models, but I'd be curious to get your thoughts on around like the state of the, the market right now.

Yeah, I think it's very asset specific, right? In terms of, you always have the same cycle, Right. You know, you had Monad, for example, it's walked itself up from $100 million all the way into the billions in a relatively short period of time. You saw Fuel do the same thing, right? Sitting down at $50 million. Now it's upwards to a billion. It's the same appreciation path in the secondary markets all the time. In terms of like the volume, you know, we're probably sitting around $20 million a month at the moment. Towards your question around KPIs, there's transacted volume. And then there's aggregated volume in an order book, right? We actually publish monthly reports. We've been doing this for almost a year now.

Literally the best report. There's a couple of reports I look at. This is top, top of my list.

Yeah, I appreciate that. I mean, the idea here is to give visibility into a market that's typically opaque and not very well known or understood. Right. But there's tremendous value for issuers and investors to engage in these markets. And it just comes down to increasing the discoverability and knowledge and education. It's a huge education lift, right? The biggest thing here to getting secondary transactions done and increasing the transaction volume is education at the issuer level. Because a lot of the time when you look into these contracts, there's transfer restrictions, right? There's disclosure requirements to the issuer if you have an intention to trade or transfer, etc. And if you don't make those disclosures and do it the right way, there's a lot of risks that you're taking. Right.

A lot of counterparty risk.

100%. I mean, a lot of people will try and structure deals through forward agreements. Luckily, I've never gone through a negative experience with those, but they happen, right? Sometimes—

not only that, but I've talked to like large funds that have an appetite to do secondary. They have not done so because of this. They're like, I know they usually go through, I know the counterparty, I know it's like someone in the team or another fund, but we just, we can't take that issue.

The issue on all fronts on that side is something— it's even if you do these contracts, you're only on all fronts, you're in breach of contract. That's what it is. So as a seller, if you do it, the team can actually say we're going to void your contract because he sold it while we didn't want to. I mean, I think last month we were working on this deal for a Belmond project out there. I had like 6 different calls with their internal, external lawyers. And Foundation to convince them to let go on secondary front. And at the end they did, they did choose to do it. But it takes time to educate these guys because they don't know about the secondary and how to do it. And then they're like, oh, we can do it like this and this and this and that. And then that saves time. I mean, the FTX 3AC takes time.

Because teams at that point, teams typically just want to make sure that whoever's buying is someone that they approve of. There's like, you know, in the city.

Long-term focused guys, definitely. But at the same time, what they also look at is if there is a seed investor who has bought in very early on and they want to sell like 10-20% of that stake and they have done like 20x, 30x, then they're like, okay, you know what, go ahead with it. Just to go back for another example, like we all know Multicoin invested at, say, at $50 million round and they invested $5 million and that size is right now pretty large on the open market. So probably if you have such guys who have that kind of size, then I would probably say let them de-risk because why not? If they have that amount of size and you hit TGE, then there is a lot of volume hitting from one party at that date, which isn't a good— so that's what we tell all these guys and educate them to do.

It's not just tokens too, like in a Web2, like say if you're raising money for a Web2 company, there's going to be in the subscription agreement, it's going to say, can the investor sell normally? Or like, do they have to get first approval with the board?

Yeah.

Yeah.

Well, I want to ask you this point because it backfires in the sense if you can't, if you don't allow someone that has a huge position, I want to go back to this point of like, how sophisticated or not crypto funds are to de-risking, because sometimes they do it in an extremely unsophisticated manner where they literally just hit a big red button.

We're like, all right, we're out.

And it's— from your perspective, have you found that to be true? Do you think that crypto funds, venture funds have become more sophisticated in the way that they manage their positions and risk? Or is it fairly obvious that they have no idea what they're doing when it comes to managing liquidity or liquid positions?

It's an interesting question because, I mean, basically if they work with us, even if they don't necessarily have a lot of understanding how to do it, like by the time they are basically, by the time we get to the deal stage, but by the time we execute it for them, they should know enough because we generally try to educate them as, try to educate them as much as possible, try to outline, okay, what are the different options they can do, um, on the execution side. So it's like on our side, it's, it's always about education. It's always about making sure that they understand what they're getting into because it's, especially if you execute something, yeah, forward looking, it's, yeah, it is tricky. It is challenging.

Yeah.

How, um, what percentage of funds would you say are working with a market maker on an ongoing basis to, you know, trade in and out of positions and do it in a more sophisticated manner?

Good question. Um, my guess would be something like 40-50%, something like this. And ultimately, you know, like it all depends on ultimately like those venture funds. Yeah, it is true that they are not necessarily great at managing the risk, but it's all about timing, right? It's like if the fund is nearing the exit or if they're about to raise a new fund, they're much more likely to start realizing some profits because they need to either demonstrate to the LPs that they're actually profitable. Also need to demonstrate the new LPs that, yeah, yeah, the funds that you want to invest into. So it's usually all actually around those inflection points.

Yeah, I'm curious to get your thoughts on this, Omar. We've talked about it, but like, I'm like, there is this, um, great website that just shows the amount of unlocks and the inflation coming into the market, which is pretty substantial. You have a whole cohort of companies combined with the fact that there are a lot of funds that are underwater or just barely, just barely kind of meeting their high water mark from the prior cycle. You know, they were down 80% last year, was pretty huge. This year has been good, but they're just— so they didn't collect carry last year. And maybe if you're a hedge fund, but maybe you are just about at that cost. So the question was very concretely, like, it is something that I'm paying a lot of attention to, is for instance Arbitrum, the unlock a lot of funds invested in 3, 4, 5 years ago, they're well, well in the money. They're going to use that to recoup and collect, you know, the DPI to bring them to that above the high water mark. It's a dynamic that we're going to see, I think, in this cycle a lot.

And it—

I am curious how you guys— if that's something you're paying attention and how you guys are monitoring that.

We do. I mean, you know, we have had these chats with a lot of funds as well at the same time, like when when the unlock hits, because we see a lot of buyers as well on the other front who want to buy these positions. And then we reach out to them, we have a side chat and see where they stand. So some of them choose to hedge that position through a market maker. They just sell the position before that unlock, like 6% discount to spot and get it done and move on. So that's the first thing. The second thing, what they don't do is not sell the position because what they hit at that point is the short-term gain position. Because if they were to sell it, then they would need to reroute the funds to their LPs and then give them the option to just get that money, which is not that favorable. If they look at their portfolio and they're like, you know what, the bet that we put in here is that substantial that in 6 months to 9 months it could do another 5x or 10x from this position. So they choose not to sell it. And definitely some of them who are the less educated funds, they might just go for the option that you just mentioned. Like, you know what? Yeah.

If everyone is looking at this dynamic, then I think someone, one of you guys mentioned it, the interest, wouldn't it dictate to just long coins that don't have this overhang? And maybe this is why the market just likes memes and likes new coins because it doesn't have this problem like Arbitrum. And look, I'm full disclosure, I'm an investor. I think they're probably— they are the best L2. They have the best tech. We've had multiple fund managers come in here, say, hey, look, the L2 to L1 trade is really interesting, but you have this ongoing vesting sell pressure. OP has it too. And so the question is, and I've had this discussion with a lot of managers, is We love— a lot of them will say we love Arbitrum, we just think it's going to underperform for the next 6 months to a year. We'll buy it later. We're going to hold ETH now because of the ETF. And so that's— and so if you kind of play that forward thinking, then if everyone's thinking that, maybe the price is too depressed and you long it. But I think that like just you would rather not touch something that has a huge unlock and just go.

But there's, there's another thing to that, Santi, as well, because during our transaction on the secondary market, what happens at that point is the baseline price of the investors, but also on the buyer side, move up. So what happens when ARB was trading at one, let's say $1.50, $1.70, there were buyers around that time buying from the existing investors. So what happened, they bought on 50% discount, let's say, and that price is now at $0.90-ish. So those guys are on their cost line, on their cost basis. So they were like, why the hell would we sell at these points? And then they will just let it fly. And all these other sellers would look at that sell position, then like, you know what, these guys sold at $90. So actually, we could just wait it out and it would probably hit another 5x or 10x from this position as well. So that's the thing that happened on Celestia side. The cost-based price gradually moved up on all front, and then you had multiple levels of resistance. And also, that's what it created on that side. Nick, you want to add anything to that?

No, I, I think you nailed it on, on that point. Um, in terms of like the supply overhang, yeah, there's obviously that website that tracks everything. We're always very cognizant of that because because we want to address that problem, right? All the teams are aware of their supply unlocks. This is an opportunity for them to be educated on how to leverage secondary markets to remove some of that. So it's interesting because if teams start leveraging secondary markets more to kind of remove that, or at least a large portion of that overhang through secondary markets, people in the primary markets who are expecting these unlocks and these large overhangs, it never materializes. right? Um, and the other component, it's how long does it take it for the, um, the new supply to work its way through the system, right? Um, it has to be just— it has to be distributed. Again, Arbitrum, you know, it had a very large unlock about— was a month ago at a very good time, right? Prices were ripping, everybody was excited, liquidity was high. It was able to absorb better than what it would have, say, maybe in the midst of a summer where liquidity is low, etc., right? So I think these high-quality projects that actually have like application layer developing on top of them, it's a game of chicken, right? If you believe in something, everybody's looking for that best price. You see this with Solana too, right? Like some people don't want to pay 10% higher than where bid is going into, yet they have these long-dated thesis is, well, it's going to 10x and stuff, right? Everybody, it just always goes back, everybody just wants the best price. But a lot of time the market, um, yeah, they're just trying to play the market 100%. And a lot of time you're not going to, um, get that price.

Feels great to get, uh, stuff at a discount or perceived discount, but no, I totally agree with you. Time in the market will be timing the market, at least from my perspective. Um, yeah, no, this has been a A great discussion, guys.

Uh, I—

yeah, for the point on Arbitrum that I just want to make is you're absolutely right. When we talk about the price, it's also important, like, there's way more tokens in circulation. So it actually hit all-time high on a market cap basis, even though the price went from $2 pre-unlocked to $1.75 the day after the unlock, or like a couple days after. So like, when you actually look at it on a circulating basis, it actually absorbed it, to your point, actually fairly really well because it hit an all-time high on a market cap basis.

The best example of this was Solana when those first unlocks are happening, you know, just before the big run-up and stuff. Everybody thought, oh, it's doomed, huge unlocks. It was the bottom, created a springboard effect, if anything, right? And that's the thing with these projects, like you got to— and that's why secondary markets are so great. I always say secondary leads primary. You get a sense of how much demand is actually there. And then if you see a large unlocks coming to the spot market, you get a sense of, well, what's the absorption going to look like here? Is this going to be a cascading sell event like Omar was describing, or are people just waiting, chomping at the bit to bid that up? And now you have a huge short interest built up and now you get the opposite price.

This is when SOL was at $3, right?

Yeah, exactly.

The infamous Sam tweet, sell me all your SOL, sub, and then fuck off.

At $3 and fuck off. Yeah.

Yeah.

The same thing will happen on the SOL due to these auctions as well, Santi. Because while we are doing all these weekly auctions, the prices on the auctions are actually gradually moving up. So the first guys won't be selling at 2x. They're like, who cares? We are already at 2x. And then the last guy would be probably at current spot at some point. And then they're like, I'll just wait it out for another 2, 3x before I even, I think of selling those positions. So that's what you get constantly.

Yeah, no, I mean, when I say this, like, uh, your report on secondary market, just generally secondary market activity is, uh, your point, it's from my perspective one of the most important indicators of just demand in the market and who's interested in the type of projects and how it will behave post-launch. Um, thanks, man. Uh, but yeah, I know this has been a fascinating discussion. I'm glad we got all of you guys on because it's very good perspective on both sides, you know, secondary and primary, and like, you You guys are obviously very active. So thanks for coming on. I don't know if there's anything that you guys want to discuss before we drop, just parting thoughts or things that we haven't covered during this discussion.

I think what we would like to see is that projects have a chat with us and learn about the secondary market and the taboo that's on it for the founder side and the investor side, that there are so many options out there. That the organic growth of the price needs to be built from the primary to the secondary and then to the actual trading on the market itself, because then you get a sustainable ecosystem. That's what you get. And the same goes for, for funds as well. They need to have a chat with us so that they know what proper risk management is, because by far very few of them know that, to be honest, or they're probably degens and they want to just do the next thousand X, whatever. Yeah.

No, you have to, on that point alone, like the hardest thing to do as a venture investor is to sell. And it is an uncomfortable thing. You don't want to tarnish your reputation or your relationship with the team. But look, everyone has, it's a moment to, it's risk management. And so.

It is.

I mean, to your point, Santi, if you want to invest and reinvest into new projects, and if you sell like 10% of your original investment or get your whatever investment you did, sell that, move on and reinvest into new stuff.

What I've seen is funds that like neglect having an open discussion with either you guys or market makers end up doing the worst type of execution because they weren't thoughtful about it. They were like, they're just— the market starts tanking, they're like, oh shit, just sell it all.

It's like push the button.

You should have thought about this going into a position. During, while you're holding the position, and even maybe having dialogue with a team. Because a lot of times it is a coordination communication problem where I've seen folks dump it all. It's very obvious in the order book. You're like, did you ever care to reach out to the team? We're like, yeah, we didn't want to have that conversation. I'm like, you're an idiot, because they have 20 other people that would have bought your position without that ever hitting the order book. Like, you're like, that's the problem that we have. And the more, to your point, communication, transparency, we—

true.

No, it's not easy, but you're going to have that conversation. Like, you know, people know that there's a point by which early investors—

what I do on my front, Santi, is when I invest into these projects, I do talk to them about this secondary option as well, and to allow the investors, once you go to the next phase of investment and maybe Series A or Series B or whatever, let them de-risk on those positions if they want to, even if it is like 5 to 10% of the original investment, whatever they did. Let them do it. Why not? Because then you're actually doing it on a proper manner and you are structuring it on a proper manner. That's the most smartest thing to do.

But okay, I mean, I think like, yeah, building on that, it's—

yeah, we definitely see it on our side as well that, yeah, a lot of investors don't realize how appreciative protocols are when you tell them you're gonna sell. And it's just, it's a general common courtesy and They generally like, even if there is no buyer, even if they don't have like 20 secondary buyers lined up, they still appreciate it. And they appreciate it much more if they, yeah, if you just don't dump it yet.

Everybody just seems to understand it's a business. Everybody, nobody wants to tarnish their relationships. But at the end of the day, you are taking on investors to help your project get to a certain point. And eventually some investors, they're value and what they focus on, it expires. It, it does. They reach the goal, right? Like, what more do you need from them? Um, let them move on to the next one. We need this capital recycling. We need volatility— or sorry, velocity in these assets. Otherwise, if everybody's just holding everything, what— it's not productive anymore, right? It's the same argument with Bitcoin.

Yeah, gentlemen, uh, well, I hope— I'm sure listeners are going to love this discussion because you guys are at the forefront of this, looking at it and day-to-day basis. So we'll, uh, link to the resources of where they can find you, um, and, um, but otherwise really, really enjoyed this discussion and thank you for sharing all your insights. Um, you know, thanks a lot for having us, both of you.

Thanks, that was really great. Thank you.