4-Year Bitcoin Cycles: Is It Still Time to Buy?

Published on
January 21st, 2021
Duration
58 minutes

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32

4-Year Bitcoin Cycles: Is It Still Time to Buy?

The Interview - Crypto ·
Featuring Anatoly Crachilov and Moritz Seibert

Published on: January 21st, 2021 • Duration: 58 minutes

Anatoly Crachilov, founding partner and CEO of Nickel Digital Asset Management, joins Moritz Seibert, CEO/CIO of Munich Re Investment Partners and co-founder at Twoquants.com, to explore trading crypto markets, custody, and where the crypto space is headed. Crachilov discusses Nickel Digital Asset Management and its sharded key management solution they use for clients. He explains their use of more efficient perpetual swaps that settle every 8 hours as opposed to traditional futures that settle monthly. Crachilov says that 2020 is the year that Bitcoin went institutional and that, even though we are near all-time highs, his indicators show that there appears to be much more growth to come. Filmed on January 15, 2021. Key Learnings: Institutions need the highest level of custody security, requiring no single point of failure, and Nickel Digital Asset Management has created a sharded key management solution for this. Perpetual swaps are a more efficient type of futures contract than traditional futures—as a result, perpetual swaps are becoming widely used in crypto. Even after Bitcoin has reached new all time highs recently, the indicators Crachilov uses based on the Bitcoin halving show that institutions are allocating for long-term growth, and not on short term speculation, which provides investors more opportunity for upside in the near term.

Comments

Transcript

  • GV
    Guillaume V.
    3 February 2021 @ 08:13
    3 0
    Thanks. One of the best interviews I've seen and explaining some stuff behind the scenes. Much appreciated!
    • AC
      Anatoly C.
      3 February 2021 @ 21:46
      0 0
      Guillaume, that's very kind of you to say so, and glad the interview offered some greater transparency to hedge fund operations.
  • sc
    sung c.
    1 February 2021 @ 19:52
    2 0
    Loved this video. It gave me such an increased understanding and appreciation of the specific going-on by major players in the market.
    • AC
      Anatoly C.
      3 February 2021 @ 21:26
      0 0
      Thanks Sung, glad to hear the explanation was helpful.
  • jM
    john M.
    27 January 2021 @ 03:25
    1 0
    FASCINATING I LOVE IT GREAT STUFF !!
    • AC
      Anatoly C.
      3 February 2021 @ 21:25
      1 0
      Thank you John, much appreciated.
  • JC
    Joshua C.
    26 January 2021 @ 11:08
    1 0
    I'm surprised that the triangular arbs work with cryptocurrencies. I was expecting speed-expert HFT houses to already be grabbing all the arb opportunities; straightforward triangular arbs are hard to get right in US futures and equity (you have to be preeminently fast to make money) so I was expecting cryptocurrency markets to be the same. With triangular arbs, if you miss one or two of the 3 legs of the trade, you can lose a lot more than you were going to make.
    • AC
      Anatoly C.
      27 January 2021 @ 15:11
      0 0
      Tri arb would hardly work in the FX space these days (where it originated from in the first place), however in the crypto space it is still feasible, especially if triangulation is done using spot, derivative, and/or fiat legs within a single triangular structure. It is a tough strategy to execute though, as it requires significant commitments on the infrastructure side, including API connectors and payment rails to the exchanges involved, low latency information feeds, server co-location, and sophisticated inventory management systems, among others. Given the vast number of possible currency pairs and a large number of trading venues available, the ultimate number of possible triangular permutations can go into millions. The selection process comes down to the analysis of available trading volumes, depth of individual order books, slippage, etc, which narrows down the list of trades worth pursuing. The systems must be fully automated to take advantage of these dislocations, many of which may last only for milliseconds. As to the risk of being lagged out whilst running these trades, - it is indeed the key risks one should factor in. This is mitigated through appropriate sizing of individual trades, i.e. instead of trading one large size ticket, the system would execute multiple small sequential trades, thus minimising market exposure at any given moment of time. Hope this help Best Anatoly
  • LS
    Lemony S.
    26 January 2021 @ 02:29
    1 0
    Great interview. Anatoly nails it at the end, confirming the correct and healthy (as he states) way to look at this asset class; that we should expect volatility but realize this is always the case for a nascent technology. He also reminds us also to keep in mind that as it is a store of value, we will look at it and react to it appropriately, if we keep our eyes on it as the prize that we can see it becoming.
  • Dv
    Daniel v.
    21 January 2021 @ 14:15
    13 0
    IMHO; It looks like these crypto video's are more and more becoming an video advertisement for companies. Some video's have interesting parts though.
    • GR
      Gregg R.
      25 January 2021 @ 10:51
      1 0
      This is a free platform, so there has to be some incentive for the contributors to share their knowledge. I appreciate that it can be frustrating but personally I don't have a problem with it as the products themselves are solutions to problems I'm unaware of, or can br new opportunities the we can benefit from. That aside, there's plenty I've learnt by listening to these two and it also highlighted so much more I need to learn (I'm not the smartest guy so feeling intellectually inadequate after this! :) ).
  • JS
    John S.
    25 January 2021 @ 04:44
    2 0
    A transformational experience to hear Anatoly Crachilov explain clearly what a neutral hedge operation does. Excellent interview by Moritz Seibert of an exceptionally brilliant market participant who provided some great tips on how to think about crypto investing.
  • ND
    Nish D.
    24 January 2021 @ 15:00
    3 0
    This interview is absolutely terrific. Anatoly should teach a course. It is bananas that they've got a well running arbitrage thing going on.
    • AC
      Anatoly C.
      25 January 2021 @ 00:38
      5 0
      That is an interesting remark Nish. My father was a teaching university professor of Higher Maths for over 30 years. He had a rare ability to explain complex concepts in such a manner so that for many of his students it was a transformational experience when suddenly maths (something many subconsciously were petrified for years) was becoming their favourite subject. I certainly lack my father's gift of eloquence, but genes might have started to carefully manifest themselves after all!
  • SU
    Sadik U.
    24 January 2021 @ 18:39
    1 0
    How do you even work your way out from future market to spot market? If I buy 31March2021 future contract now, I will have physical bitcoin at the end of the march. What is the role of the spot market in this equation? Can someone clarify that part?
    • MS
      Moritz S.
      24 January 2021 @ 22:18
      3 0
      CME futures are cash settled, so no delivery of BTC. The idea of “working out of the futures market into spot” is to first establish a long position in futures as they are more liquid (—> get more size done right away). You would then gradually reduce your long futures position and buy spot BTC at the same moment.
  • LA
    Lars A.
    24 January 2021 @ 13:59
    3 0
    Excellent educationally!!
  • NC
    N C.
    21 January 2021 @ 21:52
    1 14
    Anyone and everyone in the crypto markets needs to read this: The Bit Short: Inside Crypto’s Doomsday Machine https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3
    • MB
      Mungo B.
      22 January 2021 @ 00:08
      12 0
      lol tether fud is old news bro
    • YG
      Yianni G.
      22 January 2021 @ 04:14
      3 1
      Maybe old news, but would be awesome if RV and Raoul looked to set up a video delving into this and presenting the facts and risks
    • NC
      N C.
      22 January 2021 @ 04:18
      1 4
      It's not that this is a revelation which I know it is not. I read about this long ago. Yet, even with the investigation, the situation has exacerbated. Why is that?
    • QG
      Quentin G.
      24 January 2021 @ 05:20
      1 0
      This is short term noise and if Tether collapses rather than pay fines (like most major banks who have been found guilty of fraud) then yes it will create a temporary big drop in prices... which will be a great buying opp to lower averages 😀 Also investors have already started and will continue migrating to USDC which is properly audited. Tether is simply another way to buy crypto and doesn’t impact the fundamentals of good crypto assets. So whilst it may affect short term prices the strong cryptos will recover and BTC certainly will. As a long term holder I can’t see how this will impact BTC / ETH & Blockchain’s value and significance going forwards. How and why would it? Can’t blame the author of this article for selling as he made such a huge gain in 9 months and he may have been looking for an excuse to justify his gut instinct to sell, so he doesn’t look silly to his community when the price reaches $50,000 and beyond later this year 🤣 My hunch is he’ll be back if BTC prices drops significantly since the use case as a store of monetary value is only going to get more relevant to the global economy.
  • JW
    James W.
    23 January 2021 @ 01:10
    1 2
    Watched for 36 mins for the question in the title to be answered before giving up.....
    • LO
      Leonard O.
      23 January 2021 @ 04:08
      4 0
      Skip to the last segment - 44 minutes for a pretty good response to the million dollar question haha
    • MA
      Mateo A.
      23 January 2021 @ 14:30
      0 0
      Same here
    • HB
      Hariod B.
      23 January 2021 @ 17:40
      0 0
      James, I somehow suspect the answer was never going to be 'No'. I don't think it's a tradeable asset — only in the sense that one's house is.
    • AC
      Anatoly C.
      23 January 2021 @ 21:46
      6 0
      To be perfectly honest, this discussion was never meant to be about bitcoin price action per se. Instead, the focus was on trading techniques allowing alpha generation in a market-neutral fashion, without taking directionality bets. The 4-year bitcoin price cyclicality came up towards the end of the conversation and ultimately made into the interview title (!). Hopefully, the logarithmic scale of BTC price discussed at the timestamp 00:46:07 was helpful in highlighting the emerging BTC cyclicality pattern and the 4th year of the cycle we are about to enter. Given the limited number of past observation cycles, It will be fascinating to behold whether history indeed will rhyme with itself.
  • KM
    Kelly M.
    23 January 2021 @ 18:50
    6 0
    This is one of the best interviews I have seen. Please have Anatoly back in a few months!!!!
    • AC
      Anatoly C.
      23 January 2021 @ 21:20
      2 0
      That's extremely kind of you Kelly. There are many far stronger speakers than I am, but I will be happy to come back on RealVision in the future to share my views. One thing certain - digital assets space will never be short of developments worth reviewing in details! Anatoly
  • LH
    Luke H.
    23 January 2021 @ 20:38
    2 0
    Great conversation to be able to listen to. Very interesting to hear all of the things that hedge funds are doing in the space. After 6yrs of of investing and learning about BTC it dawned on me that Anatoly is ex JPM and ex GS.....very intelligent and market savvy guy who now sees the value in the protocol and network. Much different market participants now than 6yrs ago. Very exciting and best part is all this increased demand but supply stays the same (actually decreases every 4yrs) that’s a wonderful thing and a perfect store of value technology. As Saylor says, volatility is vitality, it’s means it’s alive and full of energy which is a good thing and should be embraced with a longer time horizon.
  • HB
    Hariod B.
    23 January 2021 @ 17:36
    1 0
    High-level discourse, at times too high for me, and yet one still intuits a sense of things and the credibility of the interlocutors. I have no objection to either party promoting the supposed benefits of the services their respective companies offer. If, as so frequently is claimed, last year was when Bitcoin 'went institutional', then it seems reasonable to assert that this year will prove or disprove the validity of that claim. It could be that only a fairly small cohort remain in play. Or not. Uncertainty seems the most rational position to take. * Flip *
    • AC
      Anatoly C.
      23 January 2021 @ 20:27
      1 0
      Thanks Haroid. Last year was the perfect storm for crypto space, with bitcoin coming to prominence on the back of aggressive monetary expansion by the central banks. Its store of value function saw increasing acceptance among institutional investors looking to shield their capital against the growing risk of currency debasement. In October 2020, JPMorgan's research expressed a view that BTC started to complete efficiently with gold. This notion led JPM to reverse its long-term naysayer stance towards crypto, with a constructive view on BTC and positive price forecast. The year 2020 culminated on a high note, with FT publishing an article named "2020: the year bitcoin went institutional" on Dec 18, 2020. With these developments in mind, year 2021 is well positioned to register further inflow of institutional capital. As you said, this year will prove or disprove the validity of that claim, but so far we are seeing a very constructive communication with large institutional players, performing deep dive into the crypto concept and evaluating access points to the market.
  • MC
    Michael C.
    22 January 2021 @ 18:23
    1 0
    That was just fantastic. I'm just getting going in algorithmic trading and that had my ears prick up on numerous occasions.
  • DO
    David O.
    21 January 2021 @ 08:10
    10 0
    Fascinating and SUPER-informative... two great minds :)
    • AC
      Anatoly C.
      22 January 2021 @ 16:57
      3 0
      Thanks David, very kind of you to say that. Credit goes entirely to the interview host!
  • HJ
    Hendrik J.
    22 January 2021 @ 06:16
    1 0
    Excellent, this triangle ARB is literally what I was doing back in 2017~2018. Spreads are way tighter nowadays and you'd have to park significant capital in anticipation for market vol.
    • AC
      Anatoly C.
      22 January 2021 @ 16:54
      2 0
      You're right, parking on certain venues in anticipation of market vol might be an expensive tactic from the capital efficiency point of view. Hence, one needs to optimize capital allocation between individual sub-strategies as well as trading venues to optimise the overall efficiency of capital deployed. It is a part of the daily routine within a never-ending optimisation cycle! Anatoly
  • SM
    Suzanne M.
    22 January 2021 @ 16:34
    3 0
    Another fascinating deep dive. Many parts were way over my head but I just let it wash over me in hopes of gleaning a nugget here and there. Liked the charts.
    • AC
      Anatoly C.
      22 January 2021 @ 16:46
      4 0
      Suzanne, thank you for your kind feedback. I was trying to keep strategy overview down to earth, but sometimes it may inevitably get a bit technical. Visuals, on the other hand, can indeed bring clarity! Glad it was useful.
  • JD
    John D.
    21 January 2021 @ 09:06
    1 0
    Shamir secret sharing is a bad idea. It gives single point of failure when the keys are combined and you have the master key. With the master key there is a single party with full control. Also there is no guarantee that the master key has been wiped after creation or after moving the bitcoin. Multisig is much more robust. You just have multiple keys. And subset of keys need to sign every transaction. Much more secure because the keys never come together they never leave their custodian and they haven't been together at the time of set up. What moves is the transaction. The transaction comes to the first key hold by the first custodian to be signed then to the second and so on without exposing the keys. They will learn hard way. Looks like being an institution and having a lot of money doesn't prevent you from making stupid mistakes and losing your bitcoin in the same way as retail noobs do all the time.
    • BR
      Benjamin R.
      22 January 2021 @ 04:31
      1 0
      I would tend to agree. I'm not sure why they would be using a shamir approach as described in the slide, unless each set of keys is single-use and only combined once before it's thrown away and re-created. That is certainly possible, but just seems like more work than multisig.
    • JD
      John D.
      22 January 2021 @ 09:41
      0 0
      Unfortunately even single use doesn't help. Because the master key needs to be created at one place and time and then split into shards and the master key would have to be wiped. Which is impossible to guarantee destruction of the master key from the initial set up.
    • AC
      Anatoly C.
      22 January 2021 @ 13:16
      5 0
      Thank you for raising a valid concern. I have since checked back with the technical members of our team, and all of our co-signing procedures have already migrated to MPC protocols that don't require putting of the master key together (neither at creation, nor for signing), but involves a complicated process of sequential steps from couterparties. Importantly, the same logic I described applies to self-custody concerns like lost key-shares - any two can create a valid transaction and recover the clients' funds. Anatoly, Nickel Digital

Chapters

  1. 00:00:50
    Background
  2. 00:08:37
    Custody
  3. 00:15:23
    Alpha in Tracking and Arbitrage
  4. 00:20:30
    Managing Fees
  5. 00:27:40
    Trading Markets
  6. 00:34:47
    Bitcoin Tracker
  7. 00:41:17
    Handling Institutional Capital
  8. 00:45:03
    Where Is The Space Going?