This week’s episode dove into all of the crypto market news surrounding institutional investors, decentralized finance (DeFi) and of course BTC markets. Emmanuel Goh, co-founder and CEO of Skew, spoke with Teana Baker-Taylor about institutional investors being in the “homework” stage of the crypto market and waiting for the bitcoin price to jump.
Mona El Isa, founder & CEO of Melonport, and Daniel Yanev, COO at DiversiFi, spoke with Alex Batlin about making DeFi accessible to asset managers as well as the eye-popping returns in the space and what’s driving the hype. Finally, James Bennett, CEO of ByteTree, broke down all of the latest on-chain data in the BTC market as it relates to miners.
In Conversation With: Skew
Skew, which provides data analytics and trade execution services for cryptocurrency markets, came on the scene in 2018. The London-based company is a team of 16 led by co-founder and CEO Emmanuel Goh, a former JPMorgan trader who joined Teana Baker-Taylor for a discussion about the company and institutional investor appetite for crypto.
(14:05) “We are late movers to crypto. I really looked at it in 2017 when we had the big boom…I think a lot of the talks, especially at the end of 2017 were about institutions entering the space, which was primarily dominated by retail initially. And I think we are part of the trend. So I worked all of my career really on the institutional side, servicing very large institutional clients when I was at JP. My co-founder was doing the same at Citigroup…I think we really have that in our DNA and I think it shows in our product in terms of we are really kind of targeting those clients that we used to serve on the banking side.”
A recent Fidelity survey revealed strong growth among institutions wanting to gain exposure to bitcoin by CME futures, many of whom have clearing relationships in place to enable access. Emmanuel explained how Skew is trying to position itself as a leader for the products that matter for institutions — futures, options and the spot market, saying:
(17:10) “We have more than 1,000 firms with us signed up on the platform that are using us to crack the crypto markets on a daily basis. So what we think from there is that most of them actually are really I think in what I call the homework phase. So they are not ready just yet to consume and enter the markets but they feel that there is a need really to get a better understanding of how this asset class is going. So what we think is that from there, some of them, maybe a lot of them, will want to start consuming those products so what we want to give them is a way to do it from our platform.”
Emmanuel also discussed how far away the crypto market is for firms with high regulatory requirements to seamlessly trade CME bitcoin futures with crossover in the unregulated derivative and spot markets, saying:
(21:58) “It takes time. I think we are definitely in this homework phase. And so there are probably a number of firms that have already put in place the right infrastructure so that if they want to move, they can move quickly. But my view is that there are a lot of people that have done their homework for a little while and what you need really I think is a push on the client side. And I think this push on the client side is really driven by price….(22:50) You need price basically to force them a little bit to revisit the asset class on a regular basis. And I think there is really this level of bitcoin, the previous all time high, which was at $20,000. And I really think that if we get there again and break out, then the clients will ask a lot of questions all of a sudden at the same time and that probably can give enough of a business case for some of the banks to say okay, I think now we can do it.”
DeFi Convention — Making DeFi Accessible for Professionals
Mona El Isa, founder & CEO of Melonport, has been in the crypto space for five or six years after spending much of her career in traditional finance, including as a trader for Goldman Sachs. Melonport is behind a decentralized protocol for establishing a fund and letting the manager focus on investing. She explained that not all DeFi is the same, saying —
(33:57) “First of all, I want to just make something very clear. There is a spectrum of decentralization, right? It’s not that you are either decentralized or centralized. And there is also on that spectrum a tradeoff. The more decentralized you are, sometimes the less efficient you are. Decision making is slower. Results can be slower…The more decentralized you get on the other side, the more secure a system becomes and the less subject to attack or malicious attack or failure a system is as well. So you need to think very carefully. When you’re looking at the space, it’s not just oh, we’re kind of at this one extreme. But I want to make it very clear there is a spectrum. And it doesn’t always make sense for everyone to decentralize everything.”
Melonport’s El Isa also addressed the astounding returns that the DeFi space has been delivering.
(36:22) “What about the returns in DeFi? A lot of them are irrational, I’m not going to lie. And some of them are rational. There are some very exciting things happening. You can earn yields…for example, you can earn up to 6% interest on a digital dollar, lending a digital dollar today…a decentralized digital dollar, which you can’t do in traditional finance.”
Daniel Yanev, COO at DiversiFi, started the firm with a team of alum from Ethfinex, a subsidiary of Bitfinex. Their solution allows professional traders in the DeFi market to trade quickly without having to be slowed down by congestion on the network. Yanev spoke about the hype in the DeFi markets, saying it’s not all bad:
(37:29) “There is a level of hype there that is there now. However, I think there are also a few positive things about DeFi compared to hype cycles in the past; the first one being that there is a lot of hype around things right now but it is generally all around existing products. So things are hyped but that is because they are real things that work and they create some value. Now do people speculate that the value is higher than it is? Maybe, but you know it’s not just the white paper. In terms of security…I think over the last year DeFi has kind of matured quite a bit in terms of auditing practices but also in terms of disclosing vulnerabilities. I think there’s now an expectation in the industry of how these things are disclosed rather than people keeping it quiet and trying to hide the fact that there is a vulnerability.”
James Bennett, CEO of ByteTree, provided the latest onchain insights and observations from the past week in the BTC markets. This week, Bennett focused on onchain data from the mining industry.
(41:19) Miner revenues are above April levels, and fees remain high.
(41:21) “Miners over the last month or so have been earning around $11 million-$12 million per day in revenues. This is really good news for the network after the Bitcoin…the last halving in May saw the block reward drop from $100,000 per block to $50,000 per block.”
(41:59) Fees as a percentage of revenue currently sit at around 10%.
(42:02) “Now while this is positive for the long run, in terms of creating an incentive for miners to be active on the network, it’s slightly concerning from a usability point of view. In my view, it’s good to see fees at around 2-5% of total revenues. But when we get to around 10%, it can act as a disincentive to users who might seek other payment networks like Litecoin or Dash in order to send their transitions,” said Bennett.
(43:18) “Around every 10 minutes, this is how much a miner receives in revenue. We can see that that’s been trending up since the May ‘20 halving and currently sits around $80,000 per block.”
(44:27) Bitcoin block times were consistently below the 10 minute target in Q3 2020.