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Wall Street Traders Find A New Retreat In The $2.4T Crypto Craze

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  • The commodity markets are no longer as fun as they were 30 years ago; the new “fun” is crypto, said Trey Griggs.
  • Mark Treinkman rediscovered his passion for quant trading with cryptocurrency.
  • In the past years, crypto has proved to be the easiest and most profitable way into the boom.

With the crypto market reaching $2.4 trillion, the Wall Street traders like Trey Griggs have found a new retreat.   

Trey Griggs Found New Retreat

The U.S. chief executive officer at GSR Markets in Houston, Trey Griggs, coaxed by a former Goldman Sachs Group Inc. colleague, first stepped into the crypto-verse in February this year. Just three months in, and he’s already “fighting spirits, unleashing old-school finance tricks to exploit the industry’s rampant inefficiencies, volatility, and downright weirdness,” reported Bloomberg on Monday.

Griggs feels the commodity markets are no longer as fun as they were 30 years ago; the new “fun” is crypto. Putting their in-depth knowledge on systematic strategies, tried and tested in conventional asset classes, to use Griggs is among the crypto newcomers revolutionizing the digital currency jungle. With more mainstream investors like Mike Novogratz, followed by boutique firms joining the trend, the crypto rally keeps breaking records. 

GSR Market Strategies

GSR, pioneering financial services for cryptocurrency markets, deals with market-making, where traders gain the spread between buying and selling orders. Unlike hundreds of crypto-dealing exchanges offering access at a slower pace, GSR capitalizes on big volumes without squandering millions on high-frequency infrastructure.

Richard Rosenblum, the co-founder of GSR and a former Goldman trader, shared, part of their tech just confirms if they traded and whether the trade’s good or bad. While the firm doesn’t wish to lag behind its competitors, Rosenblum said, “it’s just not quite as much of the driver.” 

Mark Treinkman’s Passion For Quant Trading 

Global crypto-fans have been profiting off of it for years, and now the recent relentless rallies across the token-sphere are bringing in volumes of Wall Street converts seeking riches and new thrills. For instance, Mark Treinkman, after most of his career as an equity trader at a proprietary stock-trading store, Chimera Securities, has rediscovered his passion for quant trading with cryptocurrency. He discovered that some of his old strategies, which now don’t have much impact on the equities, still “have an edge in crypto.”

Classic, Market-Neutral Strategies

Last year, Treinkman’s $60 million firm BKCoin Capital made 71% profit attributing to a market-neutral strategy involving investing styles, including arbitraging prices across exchanges and the spot and futures market gaps.

Cross-exchange arbitraging, like when this Wednesday, Ethereum Classic (ETC) price spiked beyond $100 on the Coinbase exchange but was $80 on the rest, is one of the best-known discrepancies exploited by investors and crypto-trading firms, including Alameda Research. One famous example is ‘Kimchi Premium,’ Bitcoin, due to strong demand, is traded higher in South Korea than in foreign exchanges; this gap, so-formed, is where the traders profit. Although the process isn’t simple, with no one-stop prime broker to centralize trading books and offer cross-venue leverage, traders like Treinkman still go through all that trouble as they believe the reward is worth the struggle. 

Retail Investors’ Domination

Crypto trade is a unique addition to the world of finance, with doors to several opportunities. According to Nikita Fadeev, fund manager of the $60 million crypto unit at Fasanara Capital, “retail investors who use excessive leverage and bid the premiums for futures” dominate the crypto market. Additionally, the most common crypto industry trades include short-term momentum and a kind of statistical arbitrage betting on the closing of various tokens, “like when Ethereum is surging, but Bitcoin isn’t.” With its recent asset growth, the fund appointed the former co-head of derivatives at Citadel Securities, Laurent Marquis, and co-founder of Oxford Asset Management, Steve Mobbs as chief risk officer and senior adviser, respectively.

Next in line is the Zug, Switzerland-situated St. Gotthard Fund Management, which upgraded its old-school Swiss shares operations and became a digital evangelist with an income strategy to yield 8% annually. Similar to stocks, the strategy is to sell derivatives and leverage the big demand to hedge price swings. But it also heightens the firm’s risk of having to actually payout, like an insurer during calamity. At the end of the day, what matters is “how much premium retail investors are willing to pay,” said Daniel Egger, chief investment officer at St. Gotthard. 

Crypto: Growing Industry With Growing Competition

In the past years, crypto has proved to be the easiest and most profitable way into the boom. But with this rate of development, competition is also sky-rocketing. For example, BKCoin recently co-located to Asia, installing servers at the crypto exchanges there. This in itself is a sign of how fast the industry is growing. And of course, as George Zarya, founder of Bequant, said, “There are more professional players that come in.”

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