Politics, Culture Among Hurdles for Institutional Crypto
Markets Media recently caught up with Derek Urben, CFO and director of business development at Coingy to discuss how it is more than trading technology that is keeping institutional crypto investment at bay.
As Coinigy’s CFO and director of business development, what are your primary day-to-day responsibilities?
Business development takes up the largest chunk of my day. This includes B2B partnerships, joint research partnerships, and marketing deals, among other things. I also handle most of the admin, operational, back office, accounting, and HR work for Coinigy.
Which projects are keeping you the busiest these days?
Data partnerships are a big force right now. Coinigy is the market leader in crypto exchange data — we have collected more than four years of raw tick data across more than 50 exchanges and thousands of markets. We do, however, understand that there is a plethora of other data out there. We have some upcoming partnership announcements that we are excited about, which will enable us to provide our clients important datasets beyond trading data. There are also many initiatives down the road on the data front. We will be announcing a partnership with a global market data leader to aid Coinigy’s data distribution efforts in the coming weeks.
Why is the company based in Milwaukee? The city doesn’t grab a lot of crypto headlines, but what does it offer that coastal crypto hotspots do not?
The two co-founders, Rob and William, are Wisconsinites — born and raised. The classic question, “is it better to be a big fish in a small pond, or a small fish in a big pond?” is quite appropriate for our situation. We are the largest crypto operation in Milwaukee, while still being a relatively small company, which creates some cool opportunities locally. If we were in The Valley or NYC, it would be more challenging to get the local attention we draw since the space is far more crowded in those regions. Being 90 minutes away from Chicago is highly beneficial as well, as Chicago is quickly becoming the trading capital of the crypto world.
Buy-side executives often cite the lack of professional grade “infrastructure” and trading tools as the reasons they have not dived into crypto trading. How do you respond to these concerns?
Most large-scale buy-side firms build out many of their trading tools themselves. The exchange venue infrastructure, therefore, is the roadblock here, as we at Coinigy know full well. Exchange APIs are still quite weak, slow, poorly maintained, and unreliable, and there is a general theme we have seen where exchanges are platform-first and not API-first companies.
Another common concern along the same lines is the need for an exchange-traded fund to bring true retail money to crypto. I have never understood this concern for two reasons:
First, bitcoin/crypto is trying to get away from the over-institutionalization of financial securities. ETFs are the epitome of this institutionalization and, arguably, the reason for many modern-day traditional market inefficiencies, systemic risks, and structural issues.
Secondly, I would argue that buying one bitcoin is actually easier than purchasing an ETF in some cases. Outside of Robinhood, the sign-up, verification, and funding process for brokerage services is more difficult than signing up, verifying, and funding a Coinbase account and purchasing your first bitcoin. Therefore, the argument that an ETF will open the floodgates for retail adoption is not quite true, and I would argue there is still an educational block, a user-experience block, and much of this results from media/government parties creating untrue narratives around the asset class and industry.
In your opinion, is it the technological or regulatory issues holding asset managers back from investing in crypto and crypto assets? Or is it something else?
There are a number of factors that lead to the resistance and hesitation of traditional buy-side firms when it comes to releasing crypto products to their clients. First, it is important to note that essentially every single prop trading shop, hedge fund, and family office has some type of investment (whether it be direct holding of crypto-assets or through a venture arm/proxy) within crypto. The banks and traditional buy-side firms are the ones that are still mainly on the sidelines. I think regulatory ambiguity and a desire for a trusted, mature infrastructure to support the needs of trillion-dollar asset managers are equally responsible. The latest round of custody products being announced should help spark an inflow, and new insurance products coming online will create some further security. One other important note is that banks, by nature, are against crypto since it is principally against their main business of holding and lending capital. This creates a political and cultural hurdle that prevents their investment and buy-side arms from moving into the space.
Which characteristics does a crypto-related person of publication must possess before you follow them on social media? Which red flags do you encounter the most?
A major red flag for me is when someone discredits crypto but follows up by saying they love the idea of “blockchain.” To me, this means that they don’t understand the very basics of what blockchains do or are meant for. Beyond that, I think it is irresponsible to draw relative parallels between crypto and other technologies like Web 1.0 and the timeline it took for the Internet to come online across the globe. The adoption curves of these technologies will be drastically different due to their basic, underlying differences in architecture, economics, and incentives.
During your off hours, how do you describe to people what you do?
I help run a company that builds technology that is powering the future of financial markets.
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