Primer: Roshun Patel started his trading journey in the trading pits, before moving to crypto. At Genesis, he is the VP at their lending desk. Learn more about Genesis, his thoughts on trading, and NFTs in this episode on the Zima Red podcast.
Background
Involved in the crypto space for a number of years
Currently, working at Genesis. Specifically on the lending desk, some trading functions, and venture
Before that, he was working at a trading firm in Chicago. Had just graduated from college in 2017
Started dabbling in crypto in 2017. Went deep into it and eventually left his job at the trading firm
A lot of his trades dried up in March 2018. Had to look for another path. Came across Genesis and the rest is history
Why Trading Appealed To Him?
In high school, he was a good student who got really good grades
Was interested in the stock market and participated in stock trading competitions in middle school and high school
For stock splits, there will be a delay before they are credited to your account. This could be manipulated to boost one's profit & loss. Made him interested to look into event-driven trading strategies
Went to Northwestern University where he majored in Computer Science. Did an internship between the floor of the Chicago Board of Options Exchange as well as a market making firm
Experienced people shouting orders on the trading pit and found it very exciting
During the summer, he came across Nick Szabo's blog post about Bitcoin as a way for Greece to get out of debt. Thought it was interesting
"These global financial markets are so talked about but like, this is what's happening behind the scenes there's just a bunch of people yelling options prices." - Roshun Patel
Stuck with trading because he liked the idea of eating what you kill
In 2016, the DAO hack happened. Someone at work was talking about it and he got really into Ethereum
This was how he got into trading and, subsequently, crypto
What He Traded
While he was interning, he was trading forex and equity futures
When he had a full-time job, he was doing algorithmic trading
Initial Attraction To Crypto
He first learned about Ethereum from his friend in college. His friend explained Ethereum in terms of applications on the internet
The idea clicked with him and he went down the rabbit hole
First thing he thought of was that people can make exchanges and options on Ethereum
Joining Genesis
Interview process was straightforward
Back then, they had less than 15 people and everyone was working in a really small office in New York City
Went through 3 rounds of interviews, but it all happened very quickly within 1 month
Genesis
Genesis is a wholly-owned subsidiary of Digital Currency Group (DCG)
DCG uses a Berkshire-style setup where they have a bunch of venture investments across the board
Has over 200 companies and a handful of companies that it wholly owns and operates
Initially, DCG has 100% ownership of Genesis Trading and Grayscale Investments
Eventually, they picked up CoinDesk, DCG Foundry (a mining company), and Luno (an exchange), interfacing them all to various degrees
DCG has its roots from a Broker-Dealer called SecondMarket — a place where private investors can trade their pre-IPO illiquid stock
One of the desks at SecondMarket started trading Bitcoin
In 2014, SecondMarket was sold to NASDAQ. DCG, Genesis, and Grayscale Investments were all formed at the same time
At that time, there was the Silk Road Marshals Auction. Genesis and Grayscale won the 2nd bid and that gave them a warchest for market making
In 2018, they started the lending desk
In 2019, they started a derivatives trading desk
Currently, Genesis is the closest thing to a digital currency prime broker. They are a little bit different from an exchange as they don't operate fully onscreen. There is still chat/talking and they cater to clients with a certain amount of assets and sophistication
The closest analogy is a sell-side trading desk. They do not tell clients what they should do nor give advice. They just help clients to get things done
Genesis Lending
An example would be in 2018, people would want to get short exposure on altcoins. They could post BTC/USD/EUR as collateral and then sell the altcoins
Another use case is to long an asset and borrow another asset. This enables traders to borrow the spot and use it for trading on exchanges while not being exposed to the long
A third use case is to hedge your future receivables
Genesis Market Insights
The reports have evolved since its inception
Three main insights that jumped out at him:
Proliferation of stablecoins over the years has made the market very efficient in terms of settlement
On-chain permissioned pools are becoming much more popular
More places where people can take on leverage and handle those sort of positions
Crypto markets are maturing and we are receiving affirmation from the mainstream as well
How Will Genesis Evolve In The Future?
Will be entering the NFT markets
Looking more into permissioned pools
Structured products are another way for them to evolve. Will be bringing more esoteric products on-chain once first-level derivatives like futures and options become more liquid
Why Are Lending Markets Important In Crypto?
In order for an asset to have proper price action and price discovery, there needs to be a two-sided market. Assets with limited float exhibit strange behaviours
People who long assets have those assets sit idle. In the lending/supply side of things, people can lend out these assets to earn a yield on them, making them productive. Very common in stocks where people lend out their stocks for shortists to short
Lenders get a good yield while borrowers get to express their views on the market to make it more efficient
The Bitcoin Cycle
Bitcoin has a 4-year cycle, where there's a halvening and then price goes up for a while before a huge drawdown
Andrew: Will the Bitcoin cycle continue going forward or has the market matured enough such that it will be less volatile?
Will discuss it from 2 angles:
Things will never change because human greed will always exist. As a result, you will always see moves that extend and fall off/mean reversion
Entrance of more sophisticated players in the market. They no longer have to buy spot; they can have exposure through options and futures
The derivatives market is zero-sum. For every winner, there is a loser. The winners in this market tend to be more sophisticated investors
Whereas for the spot market, everyone benefits when the price grows
Profits generated from the derivatives market will roll into the spot market, making the price stickier
Hard to predict what will happen moving forward
Thoughts On NFTs
NFTs are here to stay and it's important to take them seriously
First foray into NFTs was CryptoKitties
Foresees that NFT borrowing and lending will exist in the future
"95% of people you talk to think they're [NFTs] dumb, but I'm like, 100% sure that those people are gonna have to capitulate their opinion eventually." - Roshun Patel
Which Sector Of NFTs Does He Find Interesting
From a fun standpoint, he likes the intersection of gaming and NFTs
For avatar NFT projects, he thinks that they are a long-term play. The community could start doing cool and interesting things, which builds value over time. Difficult to know this upfront
Will NFTs Turn Into Purely Financial Assets?
Thinks it depends on the type of NFT
If the NFT is used in the context of a game, it could be treated as a financial asset
For an avatar NFT project, they will always have that art and creative component around it. Hence, there won't be perfect pricing on it and its price could change due to perceived value
What Surprised Him The Most About NFTs?
He looked at both CryptoPunks and CryptoKitties in 2017
Found CryptoKitties to be more interesting as there's playing and breeding involved
In hindsight, being able to breed an arbitrary number of CryptoKitties made the value proposition of the project less attractive compared to another project that has a fixed supply
Andrew brought up Axie Infinity, where there is no fixed supply of Axies. Roshun replied that the relevance of the game matters a lot
If the game loses its relevance, the multiplication process would become a huge deterrent to the NFT's value
Thoughts On Play-To-Earn
Play-to-earn makes gaming more professional in terms of what you can get out of it
EVE Online is a good example of a play-to-earn game. The values in the space battles are massive and it increases the stake. This makes it addictive and engaging for players
Should Money Be The Sole Objective When People Play Games?
It may be boring, but it's a net positive for everyone
Thinking of the concept of play-to-risk
In Runescape, there's this area called the Wilderness where there is a risk of death from PvP. If players die, they lose their money/loot, which is in fact, their time spent gaming
Which Sector Of Crypto Is He Most Excited On?
The modularity of on-chain products. People are able to plug in these modules to various interfaces and view data in different ways
Example: the format for credit/debit card history data is very difficult to utilize. If that data is on-chain and protected by a privacy layer, it would be easy to create a UI for one's spending history
Usability and smoothness in interacting with various protocols
Thinks that a lot of centralized finance products will occur on on-chain modular interfaces
Excited about the financialization of NFTs for borrowing and lending
Thoughts On The Metaverse
Doesn't think it will be like Ready Player One
People will be spending more time in the Metaverse. Especially for jobs that require an internet connection
The real world and the metaverse will intertwine more (e.g. DAOs will host events in the real world)
The Global Macro View
Does not think it's fair to fit historical analyses and context into a post-information age era. It's a magnitude of order different than what existed previously for society and civilization
The proliferation and trends that are spawned from the information age are going to power through the macro environment
Grand 5-10 Year Vision
Want to make an impact on the space
"I think, you know, just having an impact on the little blip of history that I'm a part of is a huge thing for me." - Roshun Patel
Compared to the past, he doesn't put pressure on himself like what he should be in 5-10 years time. People don't even know what will happen 2 minutes into the future
Prefer keeping a pretty open sort of vision
Favourite Video Game
Halo 3
Enjoyed the experience of playing cooperatively with his friends on voice chat
Single Favourite NFT
His Audio Glyph
It's a high quality generative audio file that goes on forever
Got an Audio Glyph with a soothing tone
The audio file can be downloaded as well
Most Controversial Thought On NFTs
Wish that there is a standard for NFTs
Some NFTs have randomized attributes. However, there is no transparent way to verify this
If You Could Change Something In The Space
The network to handle load better
Who Is Someone You Look Up To And Why?
Dan from CMS Holdings
He is a really good risk taker and a good person
View him as a mentor and a thought partner
NFT Ecosystem In 3 Years
The space will get larger in terms of users
People will be onboarded on different blockchains. Hence, the space will become more fragmented
As a result, interoperability will become a much bigger thing
NFTs will be more widely held by celebrities, athletes, etc.
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