Cryptos are tied to macro factors now more than ever, and this is because institutions are involved in the industry.
Now institutions have flooded the crypto space through ETFs, as well as digital asset treasuries or debts.
At the same time, retail is now exposed to leverage trading and can be forced out on breaking economic news.
We could see Bitcoin reacting.
Vide's earnings report next week and we saw the worst liquidation event in crypto history last month and this did come on the heels of Trump announcing 100% tariffs on China.
Well joining me on this Tuesday morning is Paul Howard, senior director at Winston.
Paul, welcome and thank you so much for joining me.
Thank you for having me.
We're here at the New York Stock Exchange, the center of.
Additional finance and here we have something known as DMM.
So tell us about Wincent and the role of market makers in crypto.
Yeah, like you said, we've obviously witnessed a massive swing of institutions moving into the cryptocurrency market.
That's culminated in cryptocurrency prices being driven a lot more by macroeconomic events than before.
We've obviously seen a huge impact on retail trading in this space over the last 4 or 5 years, and now we've got an opportunity, I think, for institutional players to realize institutional liquidity through market making activity and counterparties like Winston who can provide liquidity for them.
Yeah, and I do want to get your take on a liquidity event that we saw earlier in October, that's October 10th if you're here in the US on the East Coast and if you were in Asia or Australia, that would have been the 11th, but walk us through what actually happened.
And now that a little over a month has passed, what is your autopsy analysis?
Yes, so we saw an event with the announcement of the rare earth tariffs coming in overnight in Asia, which is around 5 o'clock here in New York time.
I happened to be in New York that day, and what we saw is just like a traditional risk off asset. crypto prices dropping quite suddenly, and the reason for that was obviously the traditional markets were mostly closed.
The stock exchanges were closed, and so crypto really bore the brunt of that change.
And what we witnessed was massive drawdowns in crypto.
We saw some prices dropping up to 90% in some cases, and there was a stepping away from the industry, market makers, people who have been in the space for many years, not being able to provide liquidity to people when they most need it.
And this is something that really I think plays into people like Winston's Hand and other institutions in the space who are stepping in and providing that institutional liquidity regardless of the volatility that we see.
I mean, the event was a $20 billion liquidation, but to put that into perspective, that's the biggest event that we've ever seen in the crypto market.
Yes, I think perspective is key here as we look back and analyze what actually happened.
So what would you say are the key takeaways and the lessons that should be learned from that?
We moved into a massive risk off environment in that event and people were withdrawing from the market.
Spreads widened out and a lot of market makers stepped away from providing quotes and.
Liquidity.
Now it's critical when we see markets moving like this, whether it's in the traditional world or whether it's in the cryptocurrency market, that liquidity providers like Winston are there to provide liquidity for people wanting to hit bids, people wanting to exit their positions, and just providing a go to institutional grade liquidity source during times of these where we see.
Movements overnight, and here we are at the beginning of November, actually November 11th, and we are looking at Bitcoin prices that haven't quite yet recovered and this considering the record highs we saw earlier this year above 126,000.
So give us your analysis of what's happening in the crypto market right now.
Yeah, well, we've seen a lot of institutional money flowing in, whether it's through ETFs and later digital asset treasuries as you mentioned earlier.
This has led to an institutionalization of the asset class that we've not seen in the past 15 or so years.
Now we've got a stage where we have big institutions, some of the Just hedge funds and pension funds in the world investing in the asset class, and they need that institutional liquidity partner.
They need that liquidity whether it's happening on a Friday night, a Saturday or a Sunday.
And for us the maturation of that and what I describe as the Institutionalization of the asset class has been encroaching into the industry for the last 12 months, and now here we are in November, 12 months into what is a very positive cycle for the crypto industry here in the US and as much as there is institutional demand here, we need that institutional supply of liquidity to help fulfill that.
So we're now oscillating around prices between arguably $105 to 110 $115 US dollars on the Bitcoin.
And we think that that's probably a decent level for us to be working in for the next, who knows, a few or 4 weeks.
Traditionally around the end of the year we tend to see a selloff in the asset class, but again this has been really a year that's surpassed all expectations so far.
And with us working much more like a macroeconomic asset these days, we're starting to see that correlate a lot closer to a traditional risk on asset in this world.
Yeah, and speaking of institutions, we know that a lot of ETFs, as well as ETPs have come on the market.
So for retail investors out there who are trying to make sense of what has happened and what is yet to come, what would you say to them, especially if they're both in tokens as well as funds?
Yeah, the funds certainly are very interesting for the institutional side.
A lot of people who can't put or institutions that can't put spot onto their balance sheet can leverage some of these DAP vehicles that can leverage the ETF to do that, and that's really been what's driven the market the last 6 or 7 months.
Looking ahead to next year, we're going to see the proliferation of stablecoins.
The Genius Act is obviously going to have a massive impact on how the US dominance is still very important for stablecoin circulation in US dollar funded coins, so we would expect the stablecoins to still be a very vibrant area.
And secondly, I think for the token market that you talk about as well, very much a bellwether of the retail interest in the market.
We're still seeing interest in DATs.
We're still seeing interest in ETSs, and let's hope that we've got another good 12 months ahead of us in this sector with the regulations now in favor finally and you touched upon something that we're all paying attention to, and that is the regulatory landscape here at state.
So although the government shutdown is hopefully expected to end soon, we'll see if there's progress before your end.
But as we head into the new year and beyond, what are your expectations as well as timelines for regulation as well as legislation here in the US?
Well, great question.
I've got a sense that we're going to see some more positive outcomes shortly.
My vision has always been that the opportunity for digital assets to really Fundamentally change what we do in the banking world over the last 20 years is still ahead of us.
We're going to see, I think, a lot more institutions adopting stable coins, offering these products to both institutions and retail so that we can benefit from all of the positive things that a cryptocurrency asset class can bring to finance, whether that is in lowering cost, efficiency of moving capital around.
All of these things are very valuable to. economy like we have less than 60 seconds here, but what is your take on DAs and where do we go from here?
I think we're going to see DAs becoming increasingly prolific towards the lower end of the curve.
Originally we had seen strategy and other companies with their bigAs in some of the big major coins.
We're going to see that, I think, go through to some of the lower, let's say lower tail coins, and my expectation would be that we're going to reach. saturation point in that market where the DAs are really going to try and find yield and that's where some person or group like ourselves can come in and help with yield on some of these plays.
So again we're keeping an eye on what's happening in the DAT space but a great vehicle for people to be adding into their arsenal if they're not able to find the spot.
Well Paul, we'll see how all of this shakes out.
So thank you so much for joining me here at the New York Stock Exchange.
Thank you so much for sharing all of your perspectives.
