What Will Crypto’s Market Structure Look Like?

Joe Weisenthal (0:09)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, did you like it the other day when you tweeted something, and then I just stole your idea and wrote about it in a newsletter?

Tracy Alloway (0:25)

I wasn't actually trying to insinuate that, Joe. I just thought it was funny. I thought it was a mind meld from like 3,000 miles away.

I'm not that arrogant that I would have assumed that you had actually read my tweet, given that I think I tweeted it at like midnight, your time in New York.

Joe Weisenthal (0:43)

I do miss a lot of your tweets because we're on such different time zones. But for those who are listening and don't know the context behind it, there was a very interesting story in the crypto world this week where a major exchange, a major crypto exchange called Binance, they delisted a coin causing the price of that coin to fall. And it raises all kinds of questions about who really holds power in the crypto world and questions about decentralization and centralized. Because how decentralized can anything be if one exchange can come along and say, no, we're not trading you anymore and then the price plummets. Anyway, Tracy tweeted about this conundrum.

I had written about it in a newsletter and I swear I hadn't seen Tracy's tweet, but she called me out for stealing her ideas.

Tracy Alloway (1:33)

No, I didn't call you out. I complimented you on having the exact same idea as me. No, look, I think the reason why I was actually thinking about it was because it reminded me of an old Odd Lots episode and I think it was actually the episode where you were talking about your experience inventing a cryptocurrency and what you learned from that whole saga, I guess.

One of the things that you pointed out then was, you thought one of the reasons that the cryptocurrency didn't actually take off was because it didn't get picked up by any major exchanges and without exchange participation, you couldn't have pricing transparency and no one could really get on board with it. So over and over and over again, I think we've really seen the importance of exchanges when it comes to crypto.

Joe Weisenthal (2:19)

For what it's worth, my cryptocurrency that I started with a friend several years ago failed for many more reasons than just that, many more, including the fact that we never really took the project that seriously to begin with, and it was kind of a joke. Nonetheless, that was one of numerous issues that we faced. Anyway, the power of exchanges is just one of obviously many interesting questions that arise in market structure. And we've been talking a lot about market structure on the show recently. We recently did one about bond market structure.

Obviously, crypto market structure, just like crypto itself in its very early days.

Nonetheless, people are trying to figure out what it's going to look like. So I think this should be an interesting conversation today because we are going to be talking to someone in that field who's trying to figure out. And maybe we'll learn something about where the structure, how market structure works today, and then ultimately where it's going in this space.

Tracy Alloway (3:18)

I'm intrigued. Who do we have?

Joe Weisenthal (3:20)

Today, we're going to be talking to Alex Gordon-Brander. He's the founder of Omega One. He's formerly of Bridgewater. He's building a dark pool for crypto. So, Alex, thank you very much for joining us.

Alex Gordon-Brander (3:32)

Good morning. Thanks for having me here today.

Joe Weisenthal (3:34)

What is Omega One and how did you decide to launch it? Or what did you see as the opportunity?

Alex Gordon-Brander (3:41)

So, Omega One, our first offering is OmegaDock, which is a regulated institutional dock pool for digital assets. So, let me just break that down. Digital assets meaning initially crypto and Bitcoin, but we also have our eye on the future, where we see stocks, bonds, real estate and currencies all moving over into this digital environment. Dock pool, we can talk a bit more about for you listeners that don't know, but is a particular kind of market microstructure or trading venue that allows large orders to be placed in volatile markets without moving the markets and bring stability to marketplaces. And then regulated, obviously, we'll talk about what that means. So, how did I come about doing this?

So, when I was at Bridgewater, I had the job of figuring out how to build a next generation trading platform that allowed very, very large volumes of FX to get traded in a way that didn't push the market around.