Latest / CRYPTO 101 / Ep. 738 How 24/7 Markets Are Coming for Wall Street

Transcript

Ep. 738 How 24/7 Markets Are Coming for Wall Street · CRYPTO 101

• 0:07
  [SPEAKER_00]: We are joined here by Hein to Bosch.
• 0:09
  [SPEAKER_00]: He is the head of product digital assets over at flow traders.
• 0:12
  [SPEAKER_00]: Hein, welcome, and it's good to have you, man.
• 0:15
  [SPEAKER_01]: Yes, I'm afraid of it to be here, thanks.
• 0:17
  [SPEAKER_00]: Yeah, this is gonna be a fun conversation.
• 0:19
  [SPEAKER_00]: I mean, you guys are a leading global liquidity provider for both the traditional and the digital markets as well here in crypto.
• 0:28
  [SPEAKER_00]: You guys have been around for a long time, excited to get your insights.
• 0:32
  [SPEAKER_00]: And really, what you're making of the markets here,
• 0:36
  [SPEAKER_00]: I know you especially are dealing with the 24-7 markets that's kind of your specialty, but also was happening with tokenization, which I know turns a lot of heads here, and the listeners are already probably getting excited as, you know, tokenization has been one of those big talking points for the better part of the last year or two now, but before we even get into that, introduce the audience to what you're doing at flow traders.
• 1:00
  [SPEAKER_01]: Yes, well, I started at Flo like almost 16 years ago, so I've been around for quite some time.
• 1:07
  [SPEAKER_01]: I was a trader most of my career at the F's.
• 1:11
  [SPEAKER_01]: At the beginning, I spent over decade in New York trading and the US markets.
• 1:16
  [SPEAKER_01]: I traded everything from fixing income to commodities, fix domestic USA global ETFs.
• 1:24
  [SPEAKER_01]: And I transitioned to digital assets for four years ago in the US, first from the trading sites, and then it was time for me to move to Amsterdam.
• 1:33
  [SPEAKER_01]: And I was heading out of product offering currently, and my main focus is like how the two girls are converging.
• 1:42
  [SPEAKER_01]: So you have the traditional world, you have to clip the digital assets space.
• 1:47
  [SPEAKER_01]: like what's happening there.
• 1:49
  [SPEAKER_01]: You see, that's say, called a 10 years ago, crypto was very futuristic, speculative, I think it was a bit shady at times, but over the past 10 years, it really evolved into like a full-fledged industry where you see very significant players moving into the digital, to the traditional space, all at the same time.
• 2:08
  [SPEAKER_01]: You see traditional players also moving into the crypto space, and then currently I would say tokenization,
• 2:17
  [SPEAKER_01]: comes with it.
• 2:17
  [SPEAKER_01]: This is video our core focus for me, but also for the firm.
• 2:22
  [SPEAKER_00]: One of the interesting things is I've seen people try to put a total addressable market on this stuff.
• 2:28
  [SPEAKER_00]: And you've seen the ranges be pretty vast because I think different people are different views about how it could be used or how it is being used.
• 2:36
  [SPEAKER_00]: What do you think about that?
• 2:38
  [SPEAKER_00]: Like where do you think the true value is?
• 2:41
  [SPEAKER_00]: Because it's easy for us, right?
• 2:43
  [SPEAKER_00]: to maybe be a little bit biased, at least I'm speaking for myself here and probably some of the listeners, it's easy for us to be biased and say we'll see the value here and there and there and there and we probably end up over valuing how much the total addressable market could be, but I think you have a much more grounded idea of what is practically useful for some of these, you know, more traditional players, some of these bigger players, what do you think are some of the more valuable parts and what do you think they'll actually end up using?
• 3:14
  [SPEAKER_01]: Well, that's a big question.
• 3:16
  [SPEAKER_01]: If I could see, I could see the whole market, just the whole financial industry, moving into tokenized forms.
• 3:23
  [SPEAKER_01]: So if you talk about what's the total dressable market, it could be everything, like quite bluntly.
• 3:30
  [SPEAKER_01]: More practically speaking, currently, I think we're still in a bit of, I think, experimentation phase we're getting out of it.
• 3:39
  [SPEAKER_01]: We will be seeing,
• 3:40
  [SPEAKER_01]: use cases, especially with the large US players stepping up like a DTCC, that will be tokenizing the first ETFs on the 15th of July.
• 3:50
  [SPEAKER_01]: The first like tokenized trades will be happening through DTCC.
• 3:54
  [SPEAKER_01]: At the end of the year, it will be possible for anyone to choose, but you want to have buy a stock or an ETF in tokenized form or in traditional form.
• 4:05
  [SPEAKER_01]: I could see that only scale up because
• 4:08
  [SPEAKER_01]: the efficiencies are clearly there, it's, well, it's, yeah, I don't need to explain to you how, like, what kind of fish you can attain, this intermediation is one of them, so it's just efficiencies in terms of cost, also in terms of liability, trust that you can get when everything is on chain, rather than somewhere like with the deepest two, deepest one, deepest one settlement,
• 4:37
  [SPEAKER_01]: So I could see, plan the everything move into a tokenized form, what it really brings to the people, because I think that's always a big question.
• 4:48
  [SPEAKER_01]: You have tokenized to Oxford trading, and obviously for retail, if you're in a place that's less banked, or there's no true traditional banks.
• 5:06
  [SPEAKER_01]: gets like to also invest a little bit in a fractional form, but people can really, people can start become active on markets, they're previously good and which is obviously a gain, but of course that that address will market is relatively small if you compare it to Wall Street.
• 5:24
  [SPEAKER_01]: But at the same time, and this is again, I would say, more beetle-focused, products can be accessible to people, that would be not accessible, whether it's private credit, maybe private equity, all of these instruments, you cannot easily get it, but now in the tokenized form you can also spend a thousand or five thousand or ten thousand dollar to get their exposure and to
• 5:52
  [SPEAKER_00]: So it sounds like, and let me know if I'm right on this, but it sounds like there's kind of four key takeaways about how it can be useful and why it will be impactful.
• 6:01
  [SPEAKER_00]: And the four that I'm seeing is that it saves money, right?
• 6:07
  [SPEAKER_00]: Or maybe it's three, but it really saves money for everyone involved, right?
• 6:10
  [SPEAKER_00]: If you can get cheaper, especially for the institutions, the bigger players, if they can save money by doing this stuff,
• 6:16
  [SPEAKER_00]: better for them, right?
• 6:17
  [SPEAKER_00]: That's kind of what they're all about.
• 6:19
  [SPEAKER_00]: The other parts would be that this is would be twenty four seven.
• 6:24
  [SPEAKER_00]: I think people yearn for that, right?
• 6:25
  [SPEAKER_00]: The more time that the market's trading, you could theoretically say that, you know, there's more money to be involved.
• 6:31
  [SPEAKER_00]: Obviously again, company kind of like that, us as retail, we really like that, right?
• 6:35
  [SPEAKER_00]: We're able to trade more frequently because what people don't understand is that the market is moving even while it's closed, right?
• 6:40
  [SPEAKER_00]: And the traditional sense, just because the market is closed doesn't mean that things aren't being priced in and the market isn't technically moving.
• 6:47
  [SPEAKER_00]: That's why you see gaps so often, right?
• 6:49
  [SPEAKER_00]: You come back and it's like, oh, well, something was happening in some other market and that was being priced in and there's algorithms to kind of calculate how that would impact
• 6:58
  [SPEAKER_00]: You know, different assets while they're maybe not trading actively in the traditional sense.
• 7:02
  [SPEAKER_00]: So I think that's really useful as well.
• 7:04
  [SPEAKER_00]: And then the other big one here is liquidity, right?
• 7:07
  [SPEAKER_00]: If you can have stuff that is cheaper, if it can be 24-7, and you can essentially kind of increase liquidity.
• 7:14
  [SPEAKER_00]: then I think that that matters in the way that it increases liquidity and this is something that we've talked about before, but I don't think a lot of people understand is just because an asset or a stock, right?
• 7:24
  [SPEAKER_00]: Let's just be blunt, just because like a stock or something trades in the US doesn't mean that everyone in the world can just open up a brokerage account and trade that.
• 7:31
  [SPEAKER_00]: What's very frequently looked over is that there's all these tradable assets.
• 7:36
  [SPEAKER_00]: You know, especially inside the United States and in a lot of other countries, but there's also a lot of countries that just cannot get access to those in the same way that we might.
• 7:45
  [SPEAKER_00]: And so you'd be opening up the market to a lot more people.
• 7:48
  [SPEAKER_00]: Is that all accurate or did I miss anything?
• 7:50
  [SPEAKER_00]: Yes.
• 7:51
  [SPEAKER_01]: Well, I think it's all accurate.
• 7:54
  [SPEAKER_01]: I think the access to more advanced ways to invest.
• 8:00
  [SPEAKER_01]: I think in a lot of different shapes and forms, I will come back to that.
• 8:05
  [SPEAKER_01]: As I think that's a very important consideration, I think it's well, it's already taking off.
• 8:12
  [SPEAKER_01]: What I heard before is that like the stable coins basically are banking the unbanked and tokenization is sort of brokering the unbroken I think that's sort of the narrative moving towards.
• 8:24
  [SPEAKER_01]: And to give an example what I just said about like how can you be more savvy which or which you might have been going to bring new investment opportunities.
• 8:34
  [SPEAKER_01]: And if you think about your dollars, they're just sitting in the bank account.
• 8:38
  [SPEAKER_01]: Do you always might have some still dollars when you broke with your town?
• 8:41
  [SPEAKER_01]: It's not always invested.
• 8:47
  [SPEAKER_01]: which, and it's just sitting there, and it's just not gaining you any yield, it's gaining yield for your brokerage firm or for your bank.
• 8:55
  [SPEAKER_01]: Like one of the, I think the most, the best examples right now of a tokenized product that's taking off a tokenized money market funds, where if you, if banks, if parties are open to accept these, and I think right now the appetite might be a bit low because it's sort of a competitive threat that's a product offer
• 9:17
  [SPEAKER_01]: a yield that you cannot get on your on your dollars.
• 9:19
  [SPEAKER_01]: If you put your money in a telegrams money market fund, which is basically you could compare it as you'll almost the one-one versus you as dollars, that way you can get some yield also on the money that's still in your account, and I think the more people will realize these possibilities, and the more players, like especially the more advanced players that will offer this to their clients, they will get market share, and they will also force traditional players to move
• 9:47
  [SPEAKER_01]: into offering these kinds of products because they were simply losing market share.
• 9:52
  [SPEAKER_01]: The same comparison is by now a lot of banks are getting active in crypto.
• 9:57
  [SPEAKER_01]: I think if you talk about it in the US, just offering Bitcoin to your customers a few years back, it was impossible, basically, right?
• 10:07
  [SPEAKER_01]: Now, it is possible, you see, I would say, every major financial institution is already offers it to clients or is in a process of offering this to clients.
• 10:17
  [SPEAKER_01]: One of the reasons is simply because, then, over the last 10 years, they've seen money flow out at a pretty consistent pace outside of their traditional firms to the core basis of this world that they're able to access this and I would say, for example,
• 10:37
  [SPEAKER_01]: I could see the same flow happened basically where it moved from additional player to more advanced players that are offering this to their customers and then if you take it one notch further
• 10:49
  [SPEAKER_01]: And this might sound futuristic, but if it's possible if you do everything on chain, also tokenize stocks, everything will just sit in the digital wallet.
• 10:58
  [SPEAKER_01]: So you don't need a, like the custody will be done at the same place as where you hold the token as money market funds where you hold to stable coins if you if you have a need for this or everything is sitting in.
• 11:10
  [SPEAKER_01]: In an anti-environment, rather than a traditional environment where you have a clearing house where you have a brokerage, like all of that.
• 11:18
  [SPEAKER_01]: So I think that's a direction where for sure the crypto native players, they would want the market to move into these.
• 11:25
  [SPEAKER_01]: That's why I think like super apps.
• 11:28
  [SPEAKER_01]: is it's a common, it's often mentioned by some of the like more crypto native players that that's what they want to become a tokenization enables this and then the traditional players will also adopt it because otherwise they could see more assets flow into these players.
• 11:45
  [SPEAKER_00]: Yeah, I think you're right about that.
• 11:47
  [SPEAKER_00]: And one of the things I've seen you be be vocal on is about how infrastructure and some of these operating models either need to improve or change to kind of fit the mold moving forward.
• 12:00
  [SPEAKER_00]: Can you walk us through a little bit more on that and what the impact maybe would be.
• 12:06
  [SPEAKER_01]: Yeah, I think one of the challenges is of a tokenized asset, also as a market maker, in the traditional space used to settle at the end of the day.
• 12:18
  [SPEAKER_01]: Meaning you can trade all day in and out with with a prime brokerage where you get leverage, meaning that you don't need to put all the money upfront in order to trade it.
• 12:35
  [SPEAKER_01]: either to organize the asset or you need to hold the stable coins to trade in these, and so we need some kind of prime brokerage firm, like prime brokerage function, not firm, but
• 12:53
  [SPEAKER_01]: in efficiencies, capital wise, because if you would have to quote like a thousand stocks in the weekend at five different venues, it means like as a market maker for me, we need to put up a lot of capital.
• 13:05
  [SPEAKER_01]: So this is a challenge, which I know is also actually worked on by quite some parties to play a role and to be in an other different space, because the unlike the on-chain business, like the on-chain model is great, but this is
• 13:19
  [SPEAKER_01]: Yeah, this is a chance it needs to be fixed, but I'm pretty confident on the conversation.
• 13:23
  [SPEAKER_01]: I've heard of the last six months that models will be introduced to solve for this.
• 13:30
  [SPEAKER_00]: Yeah.
• 13:30
  [SPEAKER_00]: Yeah.
• 13:31
  [SPEAKER_00]: It has.
• 13:32
  [SPEAKER_00]: I know one of the big things that shocked me is I really like the idea of being able to tokenize different parts of the gaming space and video games and creating like these other economies.
• 13:43
  [SPEAKER_00]: And I was like, man, you know, even if we don't build the games on blockchain, I think having the economies run through block changes makes so much sense.
• 13:50
  [SPEAKER_00]: And I'm an advocate, you know, steam user for the gaming community.
• 13:53
  [SPEAKER_00]: And I've seen, you know, different games kind of utilize this stuff like counterspeck and I said, man,
• 13:57
  [SPEAKER_00]: That just seems like it would kind of be the direction that we would move, you know, here we are a couple of years later, turns out the traditional financial world and banking and the whole finance space.
• 14:08
  [SPEAKER_00]: There's a lot more money in that than probably in gaming and so that was the direction that we move.
• 14:14
  [SPEAKER_00]: But I think it has been shocking to see how.
• 14:19
  [SPEAKER_00]: open they have become to this and I think you made a good point there because now it's like well there's all these different tokenized funds from different you know asset managers out there you know right black rock and and temple tin and some of these other ones are just so so open to it um and adding more and then the other part of that
• 14:37
  [SPEAKER_00]: is I think the overall direction that they're just moving with this.
• 14:43
  [SPEAKER_00]: Again, they're just they're so open to the idea now and we talked to a lot of these asset managers and these banks and I think what has happened is that.
• 14:53
  [SPEAKER_00]: Some of these more, I don't want to call my DeFi protocols, but some of these more like digital asset based companies, like HyperLickwood, for example, I think are applying pressure because what they're seeing is that they're saying, hey, you can trade just about anything 24-7 through us.
• 15:09
  [SPEAKER_00]: You want to trade metals, you want to trade energy, you want to trade equities, you want to trade crypto, you can do it through us 24-7, and HyperLickwood, and among other players, you know, ex-docs has been another one.
• 15:19
  [SPEAKER_00]: They've been really successful,
• 15:22
  [SPEAKER_00]: is the traditional financial world looking at that and saying hey they're kind of taking market share and there's no real reason why they can't do that right if they truly wanted to they could and I think that they're looking at that and I think it's applying pressure which is oh I think a win for most of us.
• 15:39
  [SPEAKER_01]: Yeah, I think what you're bringing up, I think that's what excites me most.
• 15:42
  [SPEAKER_01]: And also, like flow traders as a company is, what you should know, like both crypto and our traditional eco-teas and ETFs, we're all trading it on the same roof.
• 15:53
  [SPEAKER_01]: So we are, for us, it's, well, I would say almost as easy to trade something on-chain as doing it over traditional whatever it is in Nestec or like the European or Asian exchange.
• 16:05
  [SPEAKER_01]: We can plug in everywhere, and we can just trade credits on chain or just traditional space.
• 16:11
  [SPEAKER_01]: And now, like how these worlds are coming together, I think hyperlique was a great example.
• 16:16
  [SPEAKER_01]: Also in terms of, like I think perpetual stay, they like the concept exists as way before, maybe for pit, Bitcoin came to life, but like the concept is really, it's,
• 16:31
  [SPEAKER_01]: like the proof of concept is done in the crypto space.
• 16:34
  [SPEAKER_01]: Now you see like on the 24-7 basis, like the weekend volumes on HyperLick with day, they get pretty significant.
• 16:42
  [SPEAKER_01]: And then it's still a different protocol, which is pretty hard if not impossible to access by any traditional player.
• 16:50
  [SPEAKER_01]: So or like whether it's a hedge fund or whether it's a macro fund.
• 16:55
  [SPEAKER_01]: And like I could see both, like players I could make would move more to see how they can kept more of this of the market shares, also doing mega hours and logical extensions to weekends.
• 17:06
  [SPEAKER_01]: But at the same time of course, Stike C. Meals, who just came out there also having more like 24-7 offerings and that is a very exciting development for us because it's sort of
• 17:22
  [SPEAKER_01]: It's happening now, and of course, the traditional bank, when you're in an acid manager, like your timing, when you do it on a Friday Saturday, a Sunday for your conviction trade, it doesn't matter that much, but if you're a pot shop, if you're a hedge fund, all of these players, they will want to access these 24-7 marbles, and that's what we're really gearing up for, to make sure we can serve all of these kind of counterparts.
• 17:48
  [SPEAKER_00]: Yeah, well, I'm right on board with you, man.
• 17:52
  [SPEAKER_00]: There's a lot of stuff happening.
• 17:53
  [SPEAKER_00]: We really appreciate what you're doing.
• 17:55
  [SPEAKER_00]: You're talking with these players.
• 17:57
  [SPEAKER_00]: You're working with them.
• 17:58
  [SPEAKER_00]: You guys are building it out.
• 18:00
  [SPEAKER_00]: If people want to get involved, they want to follow what you're doing.
• 18:03
  [SPEAKER_00]: Where can they find you at?
• 18:05
  [SPEAKER_01]: So flow traders.com is probably the easiest spots but otherwise they'd like LinkedIn, obviously.
• 18:11
  [SPEAKER_01]: And they've got this move to Telegram, if it's, if it's more
• 18:17
  [SPEAKER_00]: awesome.
• 18:17
  [SPEAKER_00]: We'll hide.
• 18:18
  [SPEAKER_00]: We appreciate your time and thank you so much for joining us.
• 18:21
  [SPEAKER_00]: Thank you.