Evgeny Gaevoy began his career in traditional finances, which specializes in the market and trading of Prop. But through 2016, seeing the efficiency of the financial systems of legacy and the potential for disintermediation, Gaevoy realizes that there is an opportunity to create something new and better.
Through the experience of developing foreign exchange firm European ETF business – one of the biggest in the EU – he decided to launch an algorithmic trading firm designed for the period of digital asset. Since 2017, Wintermute has since grown in one of the largest algorithmic trading and liquidity provider in crypto, processing more than $ 5 billion in the day -to -day trading volume and giving deep liquidity in 50+ areas of trading throughout centralized and decentralized exchanges.
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Here, Gaevoy, who speaks to Consensus Hong Kong, discusses how the Asian crypto markets are different from the West, how he predicts AI will be used in trade and market making and how the response of the Wintermute to growing liquidity of liquidity in many many blockchains.
This interview is reserved and lightly edited for clarity.
What led you to start the wintermute?
I started looking at the blockchain around 2016, which is a bit late compared to some early adopters. At this time, I was in traditional finances and what was really interested in me was the disintermediation – the cutting of the efficiency of the carers and chief brokers, which was painful slow in how they opened. Blockchain seems to be a great way to interrupt that.
But after that, it all felt very theoretical. It wasn’t until 2017 that I actually got into crypto. I stopped at work, started looking around, and bought a small amount of Bitcoin on Coinbase – just to try it. Then it doubled the price for a week or two, and I barely paid attention because the volatility was so discouraged compared to what I was accustomed to in tradfi.
In making the Trade market, there may be 10 days a year when things are really exciting-when markets move 3-4%, and that is considered a big deal. But in crypto, this type of movement occurs all the time. So I thought, I knew prop trading, I knew making the market and I wanted to build things from the beginning-so why not build a market-making business in crypto? That is how it became a wintermute.
You are actively engaged in both the western and Asian markets – what are the biggest differences you have noticed between the two?
The regulation is smart, everyone is primarily driven by the US even in Asia, most companies watch what the US is doing rather than setting their own independent course.
When it comes to OTC and institutional trading, China is the largest missing piece. Chinese and corporate institutions are still not allowed to handle the crypto, and until the Communist Party of China has changed, we will not see proper institutional flows from there.
What basic opportunities do you see coming out of Asia today?
The most friendly -friendly development today is how some countries open up to crypto in significant ways. Japan is becoming more attractive -because of improved tax policies for crypto. By reducing tax burdens on crypto handling, it makes the country easier for both businesses and individuals to participate in the market without much financial penalties. This is a significant step that can drive liquidity and institutional involvement.
South Korea is another Kapana -exciting case, mainly because of the massive retail market. However, one major limit is that foreign market manufacturers are still prevented from integration with local exchanges. If regulators allow external liquidity providers to participate, it can unlock a massive amount of liquidity. So far, Korea exchanges remain relatively separated, which is why we still see phenomena like Kimchi Premium – A direct result of barriers that prevents global liquidity from free flowing through the market.
Hong Kong, on the other hand, plays a unique role as a pilot program for China. While China officially prohibits the crypto, Hong Kong is establishing regulated markets and institutional frameworks that can serve as a test place where China can engage in crypto in the future. This makes Hong Kong an important region to watch, especially in terms of institutional adoption.
The main thing to watch is how these markets are emerging, as each offers different points of entry into the Asian crypto adoption cycle-Japan is attracting Institution with tax incentives, Korea is a heavy market with potential unlocking of liquidity, and Hong Kong is a regulation experiment that can have greater implications for China.
What are some of the lesser known or unexpected catalysts that drive crypto adoption and liquidity in Asia?
The biggest surprise for me was the many narratives we see on Crypto Twitter and from the VCs don’t reflect on what’s really going on on the ground.
A great example is Tron and Tether. In Asia and Latin America, the USDT on Tron is the most widely used crypto assets for payments, especially for the unchanged and those looking to escape the lowering of money. But in the West, no one talked about it. There are also many projects and defi protocols that have been ignored in the Western Echo Chamber but are well done in Asia. That’s why I think it’s important to keep a pulse on what’s going on in Asia, rather than just relying on Western narratives.
Do you think AI will autonomously run a full market operation operation?
AI is widely used in trading, and it has been quite long. Machine study is nothing new – companies have been using it in prop trading for many years. What is different now is how big the advanced AI models are, and how much raw computing power is thrown into the problem.
Get XTX For example, (another algorithmic trading firm) – they have a crazy amount of GPUs dedicated to machine learning. They even build large data centers in Finland to just run their AI models. This is not a new trading, but the size of which it is that it is rising rapidly.
Will AI replace human entrepreneurs? I don’t think-at least not in the next 5-10 years. The biggest limitation factor is how much you can really automatically.
Today, you have different styles of market-making companies-some are highly dependent on AI, while others still have a lot of human input. Wintermute falls somewhere in the middle. We use AI where it makes sense, but there is still a lot of human decision making involved, especially when it comes to dynamic markets that AI does not yet understand.
The real challenge is the AI’s adaptation to a market such as Crypto, which is still unpredictable and lacking in -structured data sets that traditional financial companies have access to. AI is good at recognizing the pattern, but it is still struggling with black events in the Swan and completely changing markets. Until AI reaches a level where it can fully adapt to unexpected market changes, people will still play an important role.
How does the wintermute approach the challenge of liquidity that becomes a break in different blockchains?
In the wintermute, our main approach is to facilitate and promote as much difference -as possible when it comes to blockchains, centralized exchanges and decentralized exchanges. We don’t see fragmentation as a bad thing – it really creates many opportunities for us.
Today, we are connected to all major centralized exchanges, a large range of OTC counterparts and twelve defi ecosystems. The difference is that this is our competitive advantage. Instead of waiting for the market to convert, let’s embrace fragmentation and position ourselves to be wherever liquidity exists.
Can things be more centralized over time? Maybe, but not in my opinion, at least the way tradfi works. In traditional finances, you have CME for derivatives, some dominant stock exchanges and relatively small number of major players.
Crypto is different. It is naturally decentralized, and I think it will stay that way. There are always new blockchains, new trading places and new pools of liquidity. Instead of all integration with some big players, I think we’ll see an ongoing expansion of ecosystems – and companies like Wintermute have to be agile enough to run for them all.
What are you excited about to discuss on stage in Consensus Hong Kong?
One of the things I want to talk about is the structure of the market and the role of the crypto market makers. There are many misunderstandings about what we do. For example, if you go to Crypto Twitter, you will see people who blame market makers for the cause of price crashing, which is not just how it works. There is a huge misunderstanding about what market makers really do, how we operate, and how we provide liquidity. I would like to dispel some of those myths, explain how the market really works and perhaps challenge some of the false narratives out there.
