Welcome to What Goes Up, a weekly markets podcast. UM Veldona Hi across Acid reporter with Bloomberg, and I'm Mike Reagan, a senior editor at Bloomberg, and this week on the show, cryptocurrencies have had an awful year. The major coins have all had in value or worse as the Federal Reserve hikes interest rates and froth leaves the most speculative corners of the market. At the same time, retail investors have bailed and there are no signs that they're making a comeback. We'll get into it with a pro who trades crypto on a daily basis. But first, Mike, I wanted to ask you a question. I'm wondering if you have ever been in a book club? As Pavis used to say, data, if I wanted to read, I'd go to school. No, no book clubs for me. Now. I I have never been in a book club. I feel like it's a lot of high pressure to actually read the book. You know. If there was like a cliffs Cliff Notes club, I would join maybe, But um, how about you? Have you ever been in a book club? Of course, I'm in multiple book clubs right now, multiple book clubs how many book clubs can one woman join? I'm in like two or three. I want to say they're small sometimes like sometimes it's just me and one other person. Part of my reason for never joining is a book club is I've never been invited to join a book club. So I'm not even gonna ask you if you'll invite me to one of your multiple book clubs considering Yeah, I'm not inviting and there's no way, there's absolutely no way. There's no room for me in any of your multiple book clubs. Consider it. I can't even get into your professional network on LinkedIn. I assume I'll never get into a La book Yeah no, no Lincoln invitation for your notebook club for you. And actually I have a story for you. I met with some students the other day at the journalism school I went to, and I was talking to them about Bloomberg and what it's like working there. And afterwards, a bunch of them adam me on LinkedIn, and last night I logged in and I accepted all of them. So students get in mere students, not actual and maybe they'll join my book club too. Yeah that's not even that's like LinkedIn fraud. They're not even part of your professional network. They are just students. Anyway. Well, I've I've got news for you and that next week, returning the podcast into our own little book club, So you better make some room for your multiple book clubs to read. Uh. The Paul Volker Memoirs A great time to talk about Paul Vulcar Uh with the inflation flight going on, the former Federal Reserve chair. Our own colleague Christine Harper, one of my buddies at Bloomberg, actually helped him write the memoirs, so we're gonna have her on to discuss his fight against inflation in the eighties and how it relates to today. So like it or not, we're in our own little book club here, Bildono. That's actually a very very good tease and a good segue for the guests that we have on this week. We have Michael Safi. He's the managing partner at Dexterity Capital, which is a crypto proprietary trading firm. He's joining us this week. Michael, thanks so much for coming on the show. Thanks for having me. Great to see you both. So, Michael, maybe you can just start with telling us about Dexterity and what it means to be running a proprietary trading firm. Sure, Well, the short version of Dexterity Capital is where a proprietary trading firm. We specialize in high frequency trading of market neutral algorithmic strategies for cryptocurrency assets. So there's about a team of seventeen of us and together we trade a few billion dollars worth of crypto per day. Ue we treated over one point two trillion, which made us one of the biggest traders of cryptocurrency in the world. So that's the very brief version of what we're doing out there. Market neutral. An interesting time to be market neutral. Michael considered, I feel like we've been so range bound in crypto at least the last I don't know, six months or so. How do you explain this, uh, this tight range around twenty thousand in bitcoin and sort of every other coin major coin at least kind of falling in place and being ranged bound? What what what explains that in your opinion? Well, I mean there's a few factors, as we all know, with the FED raising rates, money is tightened up, and with the kind of big controversies we've had in crypto around the terror crash and around the Celsius collapse, retail has kind of fled the market. So what's happened in recent months is we're seeing a lot more institutional flow than we did over the course of the past five years. Now, institutional players are smart, So when we might have been playing checkers two years ago, we're playing chess now. And when you're playing chess, things tighten up, and these guys are keeping kind of things in the same range while we kind of do price discovery but still try to make a good profit. Maybe you can just talk a little bit more about the crypto winter, and you just mentioned the FED et cetera and some of the other factors that have been behind the draw down that we've seen this year. And another thing that's been happening in crypto is that the major cryptocurrencies at least have been trading in the same way that US stocks have, in particular tech stocks. So can you talk about that and what some of the factors are behind the draw down? Yeah, and I think you know, with institutions coming in, they're playing by the rules they've always played by. So you know, we're crypto native Dexterity never traded equities is always traded crypto, and that's kind of what we were raised on, so to speak, over the course of our five year history. But as institutions have come in, they're bringing in the strategies they adopt in mainstream markets and equities markets in f X, so I think part of what we're seeing is that as equities Bitcoin drops and they kind of stick together. And it's because the same strategies are being enacted by a big players in the institutional world across both asset classes. I'm kind of fascinated with the idea of high frequency trading in crypto, Michael, because you know, you know, I'm an older gentleman, so shall we say, you know, I remember the old flash boys days in the backlash and sort of a lot of the focus of HFT in equities and traditional futures markets, uh, was on that idea of latency. You know, if you could co locate your machine right next to the matching engine at the exchange, you could be the first in and first out of every trade. I don't get the impression that that's at all factor and crypto at all. Correct me if I'm wrong. Maybe it is, but you know, I'm curious what sort of the traditional HFT strategies. What the kind of compare and contrast is between crypto h f T and that old school low latency you know, venue arbitrage type of h f T that was so famous in the flashboy days. Yeah, it was still kind of funny talking about crypto n h f T because the real flashboys HFT you're talking nanoseconds to microseconds latency, and in crypto you don't really get there, you know, the differences co location is the exception. Most of the major exchanges in the world are all in a WS so it's not like I can go buy a machine and put it right next to theirs and try to minimize the length of my cable down to one meter instead of two to be faster. So it's fundamentally different. And there's two types of latency to think about. There's internal and external. So external is that a w S layer I want to submit in order, I've got to send it through a bunch of machines across the world and try to hit the receiving exchanges exchange as fast as I can. Um that's something these days that's on the order of milliseconds, And that's true whether you're Citadel or whether you're Dexterity. And it's an interesting problem still as solved when you talk about all these institutions entering into the market, is how much of their strategies are are sort of HFT based as well? Is it is it? You know, are we really in a speed battle at this point among the big traders of the crypto industry? Not yet, but we're getting there and we can see it now, and part of it is exchanges themselves maturing. So we talked about latency, but it's also once I sent a trade to an exchange, how are they going to process it? And it's getting there first actually gonna matter now in traditional markets definitely, but with crypto exchanges there's this thing called jitter or is that this kind of moment as orders arrive, how fast do they process them? Do they queue them up properly? Do they do them first come, first serve? And in the past they really didn't, so whether I was a hundred milliseconds or a hundred and ten million sseconds to get my message out didn't matter much. They're improving, though, and this is going to enable guys like the Citadels and the Jumps to the world to get better. And it also means internal latency matters. Because you talk about being in the traditional close to the machine, that's not all that matters. It also matters how fast you process information you receive from an exchange and how fast you make a decision to send a message back out. And while we didn't think about that too much in the past because it just didn't matter with the big guys in, we have to think about that now we have to think about arctic to trade or internal latency. So we're at the beginnings of this kind of arms race to be faster, to be smarter, to really win. Yeah, And is there a risk that as more and more sophisticated players like this uh sort of dominate the volume in crypto? Is there any worry, any concerned that you might scare scare away the retail investors and traders And you know, do you really need them in the market to sort of optimize your your strategies, you know what I mean, Like, do you need that unsophisticated mom and pop trader to to kind of give you the best opportunities? Yeah? I think you know, the key about retail treaders is they're not price sensitive the way institutions are. So institutions will care about a single bit a hundred of a hundred will care about that, right, but an institution, but a retail treader, they're not bothered if they pay one penny or two pennies on top of ten dollars to get a trade done. Um, So when retail goes, it ends up being just a most institutional players scrapping over a tiny little sliver. So having retail of the market it's not great right now. But because crypto is so unique, because there's new products that people don't fully understand, because there's models that haven't been developed for decades, like indratify, there's lots of opportunity to kind of find alpha. Michael, can you talk a little bit more about the involvement of the retail investor because obviously we had them involved in when prices were going up and everything was great, and so this year really we've had the retail investor retreating. I'm wondering if you think the retail investor will be staging a comeback or if we need the retail investor to really be coming back for prices to start to recover. I think we do need retail to come back. And the truth is crypto is not just supposed to be another speculative asset. It's supposed to have cases, it's supposed to change the way finance works, and that ultimately relies on retail. Now, cryptos had this long journey of trying to find products fit. Really what does it matter to the everyday person to be using or smart contract or any of these things, and were still not there yet. So you know what really excited sparked the last bull run? I mean there were a number of factors, but a key factor was there was lots of cool new projects with unique applications that people wanted to try, many of them financial and many of them gaming, some things, other things. But without that excitement, it's just speculation. So without retail that's excited about product fit, it's not gonna be much fun. And what is it that would sort of help bring them back in? What would it be that we need to see maybe some development or something that you can imagine that would help them come back into the market. Right, FOMO is very important. I think I think I'll point to two major categories. You know, One is n f T S, which I'm a skeptic of everything. I was a skeptic a bit point from day one. UM, and so n f T is always kind of seemed fine to me. But there is some attraction there. Maybe it's because I'm from the last generation, but I don't like collecting things I can touch. It turns out a lot of younger people do, UM, so they might be value and n f T s there, especially if they're tied to access. You can get into this club, you have these rights. That's an interesting thing. UM. And the same with gaming. You know, we've seen loot boxes in traditional gaming, you know, buying player cards for FIFA or you know v bucks for Fortnite. Bringing that onto the blockchain has interesting applications, but it has to be done right, and it has to be away consumers can use. This is the key problem with crypto. It's a pain to use, and no one's really cracked that UI problem yet. I think once that's solved it gets much easier to be excited about it and retail come back. Well, let's talk about that UI issue, because I'm interested. You know, how you approach um this fragmented all over the world crypto industry. I mean, I don't even know what the latest count is. What is it like ten fifteen thousand different coins going around? You know? So does a firm like your yours you just focus on the the majors or are you dabbling out into the defy world? You know? How do you decide what the trade? Yeah, you know, our bread and butter as a high frequency trading firm is high volume. So obviously the highest volumes are immediately going to be BTCNA. Now what's the flavor of the week is a question were always asking because coin x, y Z might be having all kinds of volume for reasons that we don't really care about. Were in hf T shop, But it's very much data and data out. I've seen volume spike over there, I see numbers of my back tests that are promising. I'm going to go trade that. I don't really care what it is. So that's really what we succeed at. We look for high volume spikes and activity and go trade there as fast as we can. Um That being said, sometimes their opportunities and defy. Sometimes it's interesting signals coming from that part of the world, but it's not dexterities kind of center of excellence. Can you talk a little bit more about what specifically you guys do, because you and I have talked in the past about market neutral strategies, which we mentioned earlier in the show. So layout for us, what is that, what you guys are doing, what you're utilizing, what what a market neutral strategy really is, And then also tell us how you guys are holding up this year and how market neutral strategies are holding up this year. Yeah, and you have a high like kind of finance. One on one level of market neutral strategy is one where you're indifferent to the price direction of the assets you're trading. So Dexterity doesn't care put Point goes up or down in terms of its piano. What we care about is volatility and activity and pricing inefficiencies. That's what we really look for, and that's what makes us market neutral. And it's kind of a few flavored strategies that work like this. You've heard of the basis trade, maybe maybe you've heard of statistical arbitrage strategies or market making strategies. These are all strategies that generate alpha, but at the same time, the price of the underlying doesn't really matter to you whether it goes up or down, And the good thing about market neutral is that whether it's rain or shine, you're doing okay. You're printing money and things are going the right way. You have a very high sharp strategy. Um. The downside is when there's a bull run like there wasn't up till at the beginning of this year, Um, you're not getting those outsize asymmetric gains of somebody who just goes leopard long. The good news is when Celsius falls down and so does bitcoins price, you don't get hurt either. So that's our goal is to kind of be be ready for any market. Can you maybe give us an example of a strategy or a trade you have utilized recently and talk a little bit more specifically about what returns actually look like. If somebody is running a good market neutral strategy this year, what do those returns look like? Because obviously within crypto everything else has been just suffering so much. I think you know. The example I used for a typical stat our strategy is one inequities. Let's say you buy some uh Coca Cola stock, and you see your Coca Cola stock pops ten percent, but PEPSI doesn't. Now they're not the same thing coke and pepsi. But whatever is good for coke is probably good for pepsi. So maybe you sell all your coke, you spend that the proceeds it's to buy some pepsi, and you wait and if things go right, it also goes up ten. And now you've kind of made this stat art strategy where you've traded two things that aren't fungible, but it was a good signal that you're going to make money. It's a bit more sophisticated in that simple example. In the real world, and in crypto, you have a lot of different products that are margin in different assets. So the price of bitcoin in us D tether is going to be different than the price of bitcoin in us D. They're not fungible, they're not the same product, but they're highly correlated, so there might be opportunities there. Um. So that's a very simple example of stat art strategy that makes sense um in terms of returns. One of the problems of being a prop shop is a very defensive of what our returns are. UM. But I can tell you that if you're doing north, you're probably doing it right. But you can get better than that. Wow, North I'll take that in this market for sure. That's yeah, Mike. I'm curious how you see uh, the market structure in crypto evolving. You know, it strikes me as it's probably a tough time to be in exchange. You're tougher than it was. Volumes are low, prices are low. As you said, you're you're losing that retail uh interest. Um are we do for sort of a replay of what we saw in the equities market where there was a lot of consolidation of exchanges and a lot of sort of efforts to uh figure out ways to bring in more revenue for exchanges, either by selling data or you know, selling co location services that sort of thing. Obviously, as you said, you can't really co locate in the cloud. But you know, walk us through how you see the sort of the market structure and the big players evolving from here. Given this this sort of lackluster year we've had had in crypto um or the boom times over, you know, is it is it's sort of a time for belt tightening among the major players, and we could see you know, a different crypto market structure at the other end of this. You know, I think there's two major camps amongst the crypto exchanges right now. And keep in mind crypto emerged from a type of rebellion. There was a lack of trust and institutions people want to have. Didn't trust banks. They want to control their own assets, and so a lot of the guys who founded the big exchanges have that kind of mavericky kind of ideology. Um And you know, for Dexterity, the reason we started in crypto was because the barriers to entry much lower. I didn't have to pay a million dollars a month in data from twelve exchanges to get it going. I didn't have to pay for co location. I didn't have to buy a microwave tower, right And I think some founders of cryptic changes love that. That's what they want to see as a level playing field. But you can't buy your way in. You have to be smarter. And there's other exchanges that are saying the TRAFFI market descry five model makes sense, and that's exactly where we should go. So I think some exchanges dogmatically will say, no, we don't want to sell data, No we don't want to sell cola. That's not the world. We want the future to be and there are others that will say, yeah, this makes perfect sense, and I want to kind of limit all the small guys and have five major counterparties. Who are you know, the brand name h F T s and institutional traders in the world. Um, and that's what life should look like. It's hard to say who's gonna win. The pessimist Simmy says attracted by guys, But as someone who came as an outsider into crypto and into finance, I really hope it's the guys who are more altruistic and want to see a different financial world going forward. Can you talk a bit more about the state of play for exchanges right now, because if we have people trading less, if if volumes are much lower, what does that mean, what does it mean for exchanges and can they still continue to make money in this environment a fewer people are trading? You know? I think what the interesting thing about criptual exchanges is you know exactly how much money they're making because their fees are public and their volumes are public, and it's not a black box. Um. They are the exchange and broker combined. So at a minimum, you know what their basic exchange fees are and then they have lots of other things going on the side, O, t C, d C, what have you. Um, the kind of big leading exchanges, they're still doing great. I'm not really worried about them. It's as you go into those two two and tier three exchanges you have to wonder what's going to happen. UM. Now, for them, exit kind of can make sense, but only if it's the right kind of exit. Now for a big exchange, you know, flow comes organically. It's very easy for me to trade from Exchange A. Could drop Exchange A and start trading on Exchange B. So there's no point in buying exchange being necessarily unless they have a unique geographical positioning where they've got a user base that the big exchanges don't have. So I do expect big exchange just to purchase small exchanges that have geographic strength. And also exchanges have licenses, and you see an ft X and coin base both do this. Coin Base for example buying fair x, so they could get that Future's license in the US. UM. That's where I see consolidation making sense. UM. And in terms of revenue, yeah, they're gonna have to get creative, and doesn't mean buying data maybe, um, but today, looking at their exchange fees, I think the big guys are fine. You know, Michael, It's funny when Viltata booked you for this podcast a few weeks ago, I think the last thing I ever imagined we'd discuss would be Kim Kardashian. But uh, here we are, you know, uh SEC dropping a bombshell this week, finding uh Kim Kardashian for her uh being a crypto influencer on social media without disclosing she was being paid. But I look at that action and I really have to scratch my head because here, you know, Gary Geintsler of the SEC is coming out and basically saying there's these tens of thousands of tokens we consider securities. Um. And if you read between the lines, the unspoken part is, well, we're gonna let all these on you know, unregistered securities be, but we're gonna go after the Kim Kardashians of the world for shilling them on social media, which, you know, it makes me wonder about, you know, is there a message from the regulation standpoint of something like that that, look, these things are here to stay, whether or not they are registered securities. Were not um that the sort of horses out of the barn and and the regulators are trying now to just uh deal with the market as it is rather than blow it up or you know, make it start from scratch. But for a guy like you, I wonder how much does it matter regulation? I mean, is it is it a major risk to you? Or is it the type of thing like you know, you'll you'll keep dancing while the music is playing and if they you know, if the crackdown comes, you'll you'll you'll figure out a second career choice. You know, how how are you thinking about it all? You know what I mean? Yeah? And I think you know I'm an explawyer, actually believe it or not. But don't worry. I'm much better now. And the way, you know, the way regulators have to work with crypto, it's so hard. I do not envy them, because you've got this borderless asset that's taken off while the world was on fire, there were so many things happening in the world, and you've had COVID and wars and how do you actually worry about regulating crypto of all things? And it's stuck up on and it gut big. So now they've got this borderless thing and how they control it. So you're right. The opinions and the actual letners we've seen and they're kind of they're kind of hard to read because they don't dictate general rules. They indicate them. But I do feel this kind of a a difficulty, and how do you make rules for something that's so borderless and that's just going to jurisdiction hop as need be. Um? Now, do I worry about that? A lot? Of course I do, because we need to trade these things. The good news is the big exchanges out there are also very worried about this, and they're getting proactive. Um. Even if you're ask me three years ago, it was wild West and I won't mention any names by name, but you know them. They were definitely taking some chances with the regulators and now they're trying to rectify their ways and get into a position where they're offering is compliant with the relevant jurisdictions they participate in. And so you know, my hope is that we're going to get there in time and the regulators won't really knock anybody out, and I think that's what they're doing. People are cooperative with regulators now, and they're trying to find a framework that works because everyone knows this isn't going away anymore. Cryptos here to stay. Whether it's a chillion dollar asset clus or not, it's pretty darn sticky. Um. So that's my expectation is they're going to have to kind of struggle to give kind of really clear opinions, but they'll get there eventually working with the relevant parties. But what does regulation actually look like? Because I've been covering crypto for the last four and a half years, I feel like at least once a week somebody tells me that regulation is coming, regulators are going to crack down, and that actually it's going to be good for the crypto space. But I feel like a very squashy subject. So what does regulating the crypto markets actually look like? Yeah? And I think I think the problem is that in regulation, you have existing frameworks for trap FI and the traditional thing you want to do is just apply that to crypto, and it's clear it doesn't work. And we saw this in the early Internet days when you talked about regulating media and you just couldn't do it the same way because Internet was borderless, So it's not clear to me what the end state is and I don't know if it means luciening of certain restrictions in the traditional world or tightening in crypto. I think it really could go either way. Um, but it's really hard to say. It was a problem I count solve. I would go do it and hopefully make a lot of money doing it, but it's a hard one. How did uh? Was the the ethery emerge a good trading opportunity for you guys? You know, being high fregnacy trader is what we worry about is edge cases, and the merge is an edge case in that what's going to happen is trading activity going to go through the roo roof or exchange is going to explode, you know what could go wrong? And we didn't know, and we're conservatives, so we played it safe. Now we lost our machines like hawks, um, and we just kind of navigated it in a very safe way. That being said, there were definitely others who were making use of this moment to kind of find ways to generate alpha, and I think that the big trade everyone was doing, and it appeared in the funding rates on perpetual softs of either was simply buying spot either going short on the perpetual and then acting that fork because when the merge went through, if you were holding any eat, you also got e W a proof of workings. So now you have two coins, the second one kind of free, and then you go dump that as soon as you can. And there was a race among exchanges to see you could list at first and open up deposits and withdraws because they wanted to get the fees off of all that dumping. And that's exactly what we saw. We didn't partake, but it was you know, it's a fund trade to run if that's your kind of thing. Yeah, So I get the impression you are mainly trying to profit off of price appreciation or depreciation going longer short, not getting involved in the yield farming. Uh, you know the terra dollar and and Celsius is of the world. Is that is that a safe assumption? And and how do you you know, how do how does yield farming and that whole end of the industry fit into your your strategies if it does at all? Yeah, you know, it's not something we do much of. Um, and there's there's kind of a reason. Now now they can be very profitable on a lot of people that are very successful doing it. But the thing about and this come almost almost comes down to dogma about dexterity, is that we're just a bunch of nerds and we really like hard problems, and so h f T is a super hard problem. You bang your head against the wall for three months until you have the Eureka moment and you're rushed with dopamine. And that's what I'm looking for, and that's what my team is looking for. Your farming school um, but it doesn't have the same kind of characteristics of that difficult problem solving, at least for us, So it's not something we do. I think one thing in defense that would be interesting to do that we don't do is MTV or minor extraction value, which has to do with optimizing your trades on chain, in particular on the ethereum chain, to kind of make alpha based on the fact you can see what's coming, because if someone summits an order on chain, you've got a good fifteen seconds to react to it before it actually gets action, and you can try to run kind of front run it in a very legal and compliant way because it's all public, it's not proprietary information. So MTV is cool. Lots of interesting problems there. It's like planning poker with your cards up and still trying to win um. But we don't do that now. Sadly, we just don't have the badly and Michael just to to go back to markets again. I'm wondering how you guys think about the crypto winter and how long that might actually last, because I read a lot of notes about what's going on in crypto markets. One of the themes that people have been focusing on recently is that long term holders really have just been sitting on their holdings and their coins really aren't moving all that much, and so the thought there is that maybe they're just waiting, waiting out and waiting for things to get a little bit worse before they actually start to get better. So how are you thinking about the crypto winter winter and how long it might potentially drag out? For Yeah, one of the benefits of being marketing trill is I don't have to worry about that a lot. Whether it's six months or two years or even longer, we're still going to be okay. But I do think about it because it's a lot more fun when there's a lot of activity, when people are excited about it and we're discovering what crypto is actually for in the world. Um. So, you know, it's something that I wish I could tell you how long it's going to beat last. I don't know, but I think a lot of holdlers have said, I've seen this before. This has been happening for ten years. We've been through cycles, and each dip is bigger than the prior, and each wave forward is bigger than the prior. And I know a lot of people who are betting on that. Um, there's some things this is the last one because we've got to a point where the maturity of the market is so great and the institutional participation has ramped up that after the next bull run there might not be another one as it kind of falls in line with traditional finance. But it remains to be seen, you know, Michael, It's it's fascinating. You know, we talked about sort of this range bound market in the major cryptos traditional effects markets, though I've been anything but range bound this year. You know, we've got this unre letting dollar strength, uh week pound. I'm sorry to bring that up. I know that's probably sore subject for a guy guy based in London, uh hero, I mean, does that influence this this false totally in the tradfi traditional uh FX market, you know, is there an opportunity there for you? You You know, are you trading stable coins against one one another that type of thing. Yeah, and it's it's an interesting thing because crypto can be margin in anything. So there's certainly pairs that our margin in GDP and the pairs margin in dollars and margin and stable coins. So they're definitely our opportunities there. It was moving so fast and so furious, and it's really an area that hasn't been explored in the past because FX was relatively stable for the major pairs for a long time. Um, So they're definitely were opportunities there. Um. But as you said, I'm a Londoner. I want things to get back to normal. So my hope is things stabilized and we'll just trade group and Michael, I think early in the show you mentioned the basis trade, which was a really popular trade with institutions a couple of years ago. So I'm just taking this opportunity while I have you here too, very selfishly ask you what are some of the quirky things that are happening in crypto markets right now? Maybe something that's going on a trade or something that we should all be paying attention to. If I could, if I could butt in, you know, the non nerds among us might not know exactly what the basis trade is. I of course know exactly what it is, but maybe some of our listeners maybe start off explaining what that is. Michael, Sure, when you've got a future product and the underlying spot product, so let's see, you've got a BTC spot and you've got a BTC future, they'll converge upon the delivery date of that future. So by going short on one and long on the other based on where the prices are, you know the price is going to converge. So you've locked in your profit the day you actually make the trade, but then you have to wait for the convert it to happen. Whenever that future contract is going to settle, you close all your positions and you've made your money and you're happy. So that's what the basis trade is. And if you look back in Q one, crypto basis trades were just all the rage because the numbers were well out of whack. Things were so frothy, and the futures price of crypto, I mean, it's it's difficult to make sense of it. You know, the fruitures price of a barrel of oil makes sense because it costs money to keep oil in someplace for a quarter before you deliver it. There's a cost to carry Crypto there's no cost to carry. So the futures price is always kind of an interesting thing to look at. What does that yield curve look like? UM, So that trade was kind of big then, but really in mid kind of settled down. There's still people running it, but it's not the biggest yields out there these days. But to get to Veldana's point, is there anything sort of new and exciting that to replace that? You know, there's some opportunities I'll talk about that we're not doing. UM. But one of the side effects of the crypto kind of downturn is that there were lots of twos that were ing on treasuries that are kind of in distress UM. And it's almost like a distress asset market where if you can persuade enough voters in a dow. And just to back up, a dow as a decentralized autonomous organization, if you own sub cooin, you can vote on propositions that dictate how the data hates. So a lot of these dows are distressed, and the prices of these dolls are beneath the treasury value. And so the game then is, hey, can I convince the rest of the dow to liquidate the treasury and then pay it out? And if I do that, the liquidation value is going to be greater than the price I'm paying of the token. And that's because crypto prices are sometimes a ration, and sometimes they don't trust the people running the dough. So that's an interesting trade We've seen happen a few times over the course of the past few months. So one of the things that I've been writing about recently are the different narratives that are in the crypto space. So, for example, one of the narratives is that bitcoin is an inflation hedge. Another is that it's a store of value, ETCeteras. Who hear you hear about these narratives quite a bit, But really the narratives have quieted down this year as prices have been crashing, So what is what do you think is the narrative right now? If I go on Twitter, for example, I see a lot of tweets that say one bitcoin equals one bitcoin, which is which has just become this sort of crypto meme. So is that one of the narratives? What are what are the things that are people talking about are latching onto while we're having this very bad year for prices, you know, it's hard. I think a lot of us are waiting for a good narrative because narratives are what drive bull markets, and I can't say there's a great narrative right now. I think one thing to consider those that with institutions coming in in size, with h f T players coming in, UM, they're learning a lot about what this beast crypto is and how it's fundamentally different and how this technology, whether it's in crypto or in other kind of places even traify it's probably the future UM and so for them they are kind of learning how do we how do we like tackle this? And so if you're an hf T shop from trad fi, you have great latencies. You know how to work a fixed connection, which is the standard connection among exchanges can trad five. Crypto is weird. You have really unique connections to every exchange and everyone is different, and you win by finding nuances in the integrations the A p I s with each exchange. So that's something. Dexterity is really good at UM. You know, we're not going to have the same ticket ray to hit it up. They're going to beat us there. But in terms of connectivity, we spent five years building it and figuring it out. So I think, you know, I can't say a narrative is going to drive bitcoin. I think in amongst institutions, there is a narrative of how do they figure out this new asset class and how do they solve problems that they haven't solved before. Mike, typically we use crypto examples and the craziest things we saw in markets. So happy we were able to devote this entire episode to talking about some of the things that are going on on there. And Michael, I hope you came prepared with something. I'll let you go first with whatever it is that was the craziest thing that you saw in markets this week? Okay, brilliant. Uh, Well, as you know, I only read and only watch Bloomberg every mole and then something of course because I'm a good citizen. Um. But now and again something just cross my desk from the publication. And this one had to do with Chippotle, which was doing a proof of steak the meat position, and so they were running a promotion and they were saying, we'll give you off because that's how much you power, you say, by not using proof of work and instead using proof of steak, we'll give you that off a steak bowl. Um, if you use tool I think it's called flexa to pay with your ease. And so this journalists have gone to try to do that and guess to Chipotle and they've got no idea. And he says, well, here's the tweet. Look at my tweet and they're like, okay, well there's a QR cod when you're out, let's scan that. And then an error shows up in the terminal and they're like, you know what, man, just just take it and leave. You don't to pay, And so it was it was a dred percent off. So he did really well. But it highlights the really the problem with crypto. It's it's not there yet in terms of being super usable by the everyday person. And that's where we gotta get. That's pretty good proof of proof of steak. That Chinese place, Chinese takeout has to have proof of walk then, but it's called the sweat point. You can use that. Well, that's a good one, Michael, Yeah, you can't prepared. I like that. Okay. For my craziest thing, it's actually not at all markets related, but I'm giving myself a pass because I'm hosting the show. So there's a farmer in upstate New York near Buffalo, and he had set out to grow the heaviest pumpkin in all of New York State, and he actually ended up with a national championship winning pumpkin. His giant pumpkin clocked in at two thousand, five hundred fifty four pounds, which is above the previous record of two thousand five eight pounds. And what the farmers had to do to keep it growing, which is so interesting to me, is they gave it fertilizer and help and warm castings whatever that was, and chicken refuse, which sounds disgusting, in tons of water. And there was a really great quote in the article for about this pumpkin. I think it was maybe in the Guardian or something, but it said the farmers said all the animals and cutters seemed to love this pumpkin more than anything in the world. They all want to eat on it. And I have some cats and try to come and try to scratch it. They think it's a big couch. So this was my favorite story that I saw this week, and I just wanted to use the opportunity to talk about it. That's hilarious. Two thousand, two thousand plus pounds of a well, it makes me think of I went to UH College in in the state of Delaware. I went to the finest university in the state of Delaware. I will I will tell you and UH in Delaware what they do after Halloween every year, as they have something called pumpkin chunkin, which is where you build a catapult and you load on your pumpkins and the goal is to see who can chuck their pumpkin the furthest from the catapult. So I feel like if you could do that with this pump you could like take out the Russian Army with this thing, if if you had a alright, pretty good stiff competition this week, I think I don't know I might have to. I might have to give it to proof ofstake. I think that's my favorite of the week. I'll concede defeat well, rare rare time when I'm actually defeated, Rarey rare, Michael, I'll concede defeat. But I'll give you mine. Uh. Mine is themed appropriately for you too. They're both British related, both have a little London connection, and one includes a very nerdy book for you old on us. So two things going up for auction. One is uh, David Bowie's Space Shoot Space Suit Um from the nineteen video for Ashes to Ashes is up for auction from prop Store Auctions later in the year. This is a story courtesy of the Daily Mail, so that's one item going up for auction. The other item is a Jane Austin book, uh unique first edition of Emma. Now that and the story's courtesy of the Telegraph. So one item is yet to go up for auctions. So we only have the estimated price for that. But we do know that the Jane Austen book did sell, by the way, but by an American who insisted that at stay in England, so it's going to a museum. Uh. Very nice gesture there from some rich American, But Michael, I regret to inform you you're now contestant on a game show. We call the prices precise, and so I need you to guess, not the prices right. We're playing the price is precise, not the prices right. Yes, yes, any lawyers out there for Bob Barker who are listening, this is completely different. So I need you to guess which one is a higher value and and give me give me a pound figure for that value. Will Donna as tradition, you start, is it David Bowie's space suit from the video for Ashes to Ashes in Night? Or is it that first unique first edition of Emma by Jane Austen, I will say includes a handwritten from the author message inside it's it's definitely the space suit. I'm going with seventy five thousand pounds seventy British pounds. Michael. Uh, Let's see how your valuation skills are. What do you think which ones higher? And what's your your dollar, your pound figure on on it? Now you can find out why remarking neutral, it's like can never gisces of things. But we'll give it a shot and Honestly, they'll donna. You just betrayed your book clubs. So I'm really ashamed of you. Anyway, I invite you from from my book clubs. You're you're not invited. You're no longer invited from to my book clubs. Well, you're not invited to my Bowie David Bowie club. No, I'm kidding, you're invited. You're invited. I'll clock at at a hundred and thirty three thousand pounds because that's what I would pay for it. Okay, it's a tough one to referee because the Jane Austen book wins three seventy five thousand pounds. For the Jane Austin book. Bowie Space suit has not yet gone off for auction, so it could go higher, but they only expected to fetch eighty one thousand pounds. I think the bottom line is you both lose and I win. I don't know that's the only that's all your fair resolution I can come up with. I'm sorry, I thought you were letting Michael win this week. Well he he wins the craziest thing, Uh word, I win. I win the prices prices per sype because as we know, I have to win something. I have to stroke my eagle egoes somehow, somehow in this I'll let you do the introduction, and he did very well. They'll down a congratulations. I think that's about all the time we have thought. Join us for our book club next week. Uh, Michael suff I greate to catch up with you and hear all about h f T trading and crypto. Fascinating stuff. Michael, thanks so much for joining us. We were so happy to have you on the show. All right, thanks a lot, great to speak of you both. That's it for the show this week. Don't forget to tune into Bloomberg Crypto, a daily Bloomberg I Heeart podcast. You can find it on the terminal or wherever you download your podcasts. What Goes Up. We'll be back next week. We love it if you took the time to rate and review the show on Apple podcast so more listeners can find us. And you can find us on Twitter, follow Mike Reagan at at reag Anonymous, I'm at at Bildonna Hirach and you can also follow Bloomberg podcast at at Podcasts. What Goes Up is produced by Stacy Wong. Thanks so much for listening and we'll see you next week. An