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By Dan Matuszewski Partner/Co-Founder CMS Holdings LLC.

Prior to CMS I ran Circle Trade the OTC trading desk for Circle and before that worked for Kraken.

Have been trading crypto in a full time capacity since early 2013.


So it’s fair to say that you’ve been in crypto for a while, love to hear how gnarly your first impressions were?

So in the beginning there were a lot of structural problems with just acquiring BTC let alone trading it. Banks were entirely hostile and especially hostile in the US mostly because the industry was really intertwined in public persona with Silk Road and darknet markets. A lot of the edge up until Silvergate started onboarding multiple corporations and supporting the industry was just around being able to structurally move money through the pipes. To give an idea of how weird it was back in the day a lot of my initial capitalizations of accounts were cash transactions which clearly was a hurdle for a lot of people. So my first impressions were this industry is wild and like theres a ton of upside cause of how just banged up basic operations are that people were still figuring out to get in, clearly demand was much higher behind that.

It’s an interesting point about functionality/operations holding back crypto prices. I’d argue that even now there are still a lot of blockers holding traditional investors back. Do you have a view on the retail/institutional breakdown and how this might evolve?

I think markets are still dominated by retail on the coin trading side of things. This is why all the venture equity valuations are so jacked since that’s how the institutional segment gets in. But we’re seeing big inflows to funds that can take tradfi money and deploy it into coins and then eventually they just go straight to buying coins but we probably need a generation of compliance people to retire first.

How did you get into crypto professionally? Was it entirely thesis driven?

I got into crypto professionally for a couple of themes that synced up. The biggest really was my current career, trading some vol strategies at a hedge fund, was largely not going anywhere, it wasn’t bad but the fund was flattish and sort of dying on the vine. The second was as part of trading tradfi I had gotten really into market microstructure and some of the strats we used for jockeying the ordebrook and generally placing orders so when I found Bitfloor which paid a true maker taker model I was like I bet i can earn a little here and sort of plowed in. It was always a trade in the beginning though I didn’t become more intertwined with the ethos of crypto till after I really figured out how it worked in the beginning it was just another asset that moved around a ton and was massively inefficient at being priced, for a lot of structural reasons primarily around banking

Well it certainly doesn’t seem like CMS is dying on the vine! What’s the accomplishment or trade, or set of trades you’re most proud of?

By far the most proud period and set of trades I ever did was the first half of 2017 when crypto just went apeshit and ETH exploded and ICOs boomed. So Circle trade went from doing idk 5mm a week of business in 2015-2016 to 100-150MM of business a day at the beginning of 2017 with basically no tech changes. We didn’t have a real risk system, we had been keeping stuff on google sheets by hand and pricing got super banged up because all the exchanges dislocated because so much money was stressing the system. So really what I was doing was just hand quoting everything that came to me and the size was gargantuan. We were often doing trades far larger than the entirety of our balance sheet and i’d have a clock of where can I move this and how can I settle this if at all. Im most proud of it because it was the only time i’ve ever really felt where the price discovery of an asset sat somewhat squarely where I was sitting, It was like 4 desks dicating pricing and i was just firing it off on skype while walking around and often just pricing stuff on a phone call and a glance of Coinbase punching and moving on. It was by far the fastest and most risk I ever moved over my fingertips and we made a fortune.

I can remember you building quite a name for yourself, and for Circle, in that period. Do you feel like taking a stab at how much \$ of crypto you think those fingertips have moved?

At the peak we were basically trading about the same as Bitstamps volume. I remember lining them up and being like this is a pretty good proxy. I think the biggest week was 4bn and we weren’t very algo at all so it was mostly high touch trading. And this is with 2017 prices so % of btc and eth float much higher than today

How would you describe your process?

I think we largely would consider our liquid trading a function of relative value and historical pattern recognition. The rel val stuff is just we look for what’s moving in a sector and then we buy the sympathy names around it. I talk about this concept of a hot ball of money a lot and I stand by it its constantly in flux and you just need to get close-ish to where its going. We probably get the most quanty when we look at leverage usage in aggregate via OI and funding and what curvature looks like to determine how many outright deltas we should be keeping.

How has your trading had to evolve as your trading notional at risk has increased?

Everything has just shifted to further dated investments. We take larger positions for much longer time horizons since we have excess balance sheet that can be riskier for longer, our illiquid book was probably a 20% target when we started. It is now about 60%.

What is/are your edge(s)?

Probably just time and a really high tolerance to stomach the vol of the market because of that time, this goes with a general belief that over larger time horizons the aggregate crypto market is heading hire and has led me to be almost fully deployed over the lifetime of the market. Also some basic pattern recognition that comes with those cycles of where the action is and where it is going.

Was the first big shock you experienced Mt Gox? How did that compare to the 2018 bear market?

Gox was worse because it was just such a large piece of the market but really everyone knew something bad was afoot for a year before, they had gated cash withdrawals in USD for a fairly long time before shuttering. The issue was BTC was in a super nebulous regulatory regime in that time frame and it was really unclear if regulators would take the GOX episode and just shut the door on the whole experiment. It was a much more unknown than 2018 where you kinda knew it would just suck for awhile but it would be fine.

How do you think crypto markets differ from the traditional markets you’ve traded?

The inefficiency is colossal. Traditional markets just don’t offer this level of edge to capture and are much harder to make above average returns and or money at all. They also differ in that everyone has a lot more passion about the things they are trading in general. Most people trading tradfi are pretty disconnected from the asset base they are dealing with, its much more cold a relationship, crypto has general passion with the participants and the asset class.

How do you monitor market news & sentiment?

A lot of time on Telegram. I generally keep the binance and bitmex liquidation feeds up on the top of telegram pinned, I use that to sort of just see if anything is happening that warrants attention immediately. I spend a lot of time talking throughout the day to all kinda of market participants, teams we have invested in, different traders, etc.

Do you have weaknesses or biases you are aware of?

Yea i dont sell losers I will spite hold them to 0. Though I will chuck them the first chance they come to life for no reason.

What are your pet hates about the market?

The lack of dedicated hours, it will never go the other way and become like traditional markets, if anything we will bring traditional markets into our 24/7 mania. It is however a big problem when juggling a family and having constant need to react to markets, you can solve this with staffing but there’s drawbacks and risks there.

What are your strongest market convictions now?

I think we’ll continue to see adoption and a horizontal growth of the industry, meaning more money into more assets, clearly the trend is in my favor here. Additionally I think we’ll see a real push for deriv venues on chain to grow in size and scale and compete with the CEXs much like we have seen the growth in DEXs for spot over the past year.

Last but not least, what advice would you give to those newish to these markets?

Take enough risk to make it matter