Alex Mascioli, co-founder of Trade the Chain, joined host Paul Gordon to discuss the role of startup Trade the Chain in the crypto retail investor landscape. Alex hails from traditional hedge funds, where he worked for the last decade or so. In 2017, the Trade the Chain co-founder received an inquiry from a large bitcoin holder who was launching a BTC algo fund asking if Alex could be the hedge fund administrator for it. Alex agreed, and the rest is history.
(2:45) “[At the] end of 2017, we launched a firm, an institutional hedge fund administrator firm, solely for cryptocurrencies. And it was off to the races,” said Alex, who for the past year and a half has served as head of institutional services for Bequant, overseeing the trading, execution, margin financing and lending for institutional players in crypto.
Trade the Chain Origins
(4:00) In mid-2020, Alex and a friend discussed offering institutional data to the average retail investor, considering that hedge funds have a leg up from a pocketbook standpoint as well as the data available for them in an order to trade on.
They formed the idea and built the platform using a multitude of data analysis and APIs, the result of which was Trade the Chain, which launched in October 2020. It’s geared toward the retail investor, who is able to gain access to the same sentiment data signals that hedge funds are using to trade.
(6:30) There’s a great void of fundamental data when it comes to cryptocurrencies as compared to the traditional markets. Crypto just doesn’t have those types of metrics, such as intrinsic value if a company is facing liquidation, acquisition flow, revenue, etc.
Unlike the traditional markets where fundamental analysis is key, sentiment analysis has become the new trading functionality and alert system for many crypto traders. Sentiment analysis is how the market feels, whether it’s bullish or bearish, and that’s where Trade the Chain’s data comes into play, using AI and scraping. This gives people the opportunity to trade on momentum, whether bullish or bearish, based on the sentiment rather than having to figure out very opaque individual projects. Twitter has been the main source of signals that Trade the Chain provides. They are expanding across the spectrum to other channels.
(8:37) “What we’re doing is we’re actually data mining as we scrape through that. So we’re contextually translating and reading each of these social posts that are being presented. If it’s in a foreign language, we translate to English…And we’re also able on Twitter…to identify bot accounts, spam accounts, pump and dump tweets because of our contextualizing and able to eliminate those to produce accurate scoring and sentiment,” explained Alex.
Risk & Back-Testing
(10:45) Accuracy is extremely important to Trade the Chain. A couple of different metrics they have are on a rolling one-hour projection of price up and down along with a weighted mean. They are accurate over 90% of the time on those one-hour projections.
(11:46) The functionality is three years old, so they have back-tested and have data going back through that time period. They won’t go back and provide the history of certain pieces of data. If somebody goes back and changes the social data they’ve posted or edited, that would trigger a systemic change all the way through — that’s not 100% accurate. Only the end game is accurate, what’s happening in real-time, said Alex.
(1:09) Trade the Chain is currently working on a large integration with a major counterparty in the space into their dashboards. It will give users who decide to trade a coin they are analyzing on the platform to click through seamlessly into the account that they have with the counterparty. Users will be able to execute the trade pretty efficiently, Alex noted.
Community & Governance
(14:05) The community, which is 2,000 members strong, is a huge part of the Trade the Chain product. The members span 23 time zones and the discord server is active 24 hours a day. People are helping each other out, talking through trade ideas and there is a winner’s circle, where users share positive trades through the signals.
The member experience is diverse, from people who are new to those who are very experienced. It is almost self-governing in that way, Alex explained, but they also have community ambassadors who are elected by the community as well as someone on the team who is a chief community officer and oversees the community.
(15:40) Trade the Chain has a progressive roadmap. Their day-to-day focus is on collecting data. They require 200 days per coin of historics to produce scores and they list about 30 new coins on the platform each month. They are planning to marry up the data analytics page with the sentiment.
Many users like to use technical analysis (TA). So Trade the Chain married the analytics where people can do TA to get affirmation on their sentiment analysis choices. People don’t have to leave the confines of the platform to trade, Alex said.
(18:20) When security tokens started making a push years ago, Alex predicted that they would become the majority of trading in the future. All things equity will be digitized, he said, adding that he believes they will take the form of security tokens. So traditional hedge funds that are trading stocks will be trading security tokens in the future. Now we’re starting to see regulatory approval with some of the big counterparties come to fruition.
(19:16) “Listen, this is an opportunity. Hedge funds are about arbitrage. And if there’s arbitrage to be had, they’re going to go after it. And I think you see that apparent whether it’s in principle trading of crypto with traditional hedge funds that have come in or whether that’s big-name hedge funds coming in backing counterparties. You have some of the biggest names in hedge fund managers and asset managers writing checks, particularly this year, to different entities in furthering their involvement or their evolution process in this. I think it’s too hard to ignore,” said Alex, pointing to Anthony Scaramucci, Michal Saylor, Elon Musk and Jon Najarian as big names propelling the market to the forefront.
The companies that have already been involved in the space are laying the foundation for regulation, learning what policymakers like and don’t like. Once the regulation is more concrete, the existing industry players are the ones who have paved the way after years of going through the mishmash with the regulators.