AD Derivatives Podcast Featuring Yoann Turpin Co-Founder of Wintermute

Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini.

Featuring: Yoann Turpin, Founder & CEO of Wintermute!

Wintermute is a leading proprietary trading crypto market maker. They provide liquidity solutions across the digital asset ecosystem. They create liquidity on the world's best crypto exchanges and trading platforms. They use algorithmic and high-frequency trading methods to create markets; centralized crypto exchanges, DeFi, spot, derivatives, and ETPs. Wintermute offers some of the most competitive prices via OTC (automated RFQ and with direct trader support) to funds, institutional OTC desks, trading platforms, miners, and other institutions. They support listings and ongoing liquidity for high-potential crypto projects.

Introduction

Wintermute, a crypto trading firm co-founded by Yoann Turpin, has evolved from its inception in 2017 to become a significant player in the crypto market. Turpin's journey from early trading experiences to co-founding Wintermute is marked by a deep understanding of financial markets and a knack for fundraising. Wintermute's strategy initially focused on liquidity provision and market-making in the crypto space, negotiating substantial fees while navigating the absence of traditional prime brokers.

Wintermute Expansion

As the company grew, it expanded its business lines to include DeFi (decentralized finance) trading, becoming one of the earliest firms to trade on platforms like dydx. Wintermute's success in spot trading and its strategic embrace of DeFi allowed it to differentiate itself in the market. Turpin's experience in interest rate trading, where OTC (over-the-counter) markets dominate, informed Wintermute's approach to building relationships with institutions and covering their crypto exposure through derivatives like those offered on the CME (Chicago Mercantile Exchange).

Wintermute Growth

Wintermute's growth has been fueled by its ability to scale operations while maintaining a market-neutral stance. Despite the challenges of high crypto fees and market volatility, the firm has strategically positioned itself as a top player in the crypto trading space. With a focus on institutional adoption and a diversified business model spanning spot trading, DeFi, and derivatives, Wintermute is poised for continued success in the rapidly evolving crypto market.

OTC Trading Growth

The speaker reflects on the substantial growth of OTC trading compared to previous years, highlighting its increasing proportion within total trading volumes. They estimate that in 2021, OTC trading accounted for approximately 5% of total volumes, which has since risen to as much as 15-20%, and even 25% on some days. This growth indicates a shifting dynamic in the nature and quality of trading volume, potentially driven by factors such as increased education among market participants.

Institutional Involvement and Market Segregation

The conversation touches on the role of OTC trading as a proxy for institutional involvement in the cryptocurrency market. While acknowledging that some of the growth in OTC trading is indeed driven by institutional clients, the speaker emphasizes that not all of it can be attributed to institutional activity. They point out that market segmentation across different platforms has also contributed to the rise in OTC trading volumes. Additionally, they discuss the impact of regulatory changes, such as the implications of their firm obtaining an FC registration in early 2022.

Navigating Market Volatility

The dialogue shifts to discuss how trading firms navigate volatile market conditions, drawing on past experiences such as the COVID-19 flash crash and the FTX scenario. The speaker describes the importance of reliability and scalability in trading strategies, citing instances where their firm successfully weathered market downturns.

Insights on Potential Liquidity Crisis and Market Americanization

The conversation explores potential scenarios, including the idea of a sell-side liquidity crisis in Bitcoin due to ETF accumulation. The speaker dismisses concerns about an imminent shortage of BTC, instead highlighting the Americanization of Bitcoin as custody and trading increasingly concentrated in the hands of U.S.-based entities.

Personal Interests and Reading Habits

The discussion concludes with insights into the speaker's interests outside of work, which include spending time with family and indulging in language studies. They share a favorite book, "The Night on the Galactic Railroad" by Kenji Miyazawa, and discuss the value of reading for relaxation and gaining different perspectives.

Key Takeaways and Advice

The conversation wraps up with reflections on the importance of learning from diverse sources, managing ego in trading, and staying open to opportunities. The speaker emphasizes the value of critical thinking and morning walks as tools for personal growth and decision-making.

Overall, the dialogue provides valuable insights into the changing dynamics of cryptocurrency trading, the role of OTC markets, and the mindset required to navigate volatile markets successfully.