• Marina Gurevich

Who’s behind this? Evgeny Gaevoy, CEO Wintermute Trading

Here is Evgeny's interview with euCryptoNewsletter, originally posted here by Etinenne Brunet.

Wintermute Trading

Background: Most people are unaware that there are more than traders and crypto funds. Moreover, the term market maker does not only include makers that specialize in OTC, dark pools, and execution services but also HFT firms that operate as proprietary trading companies and leverage their algorithms to create liquidity. Wintermute is the latest. They are based in London and have quickly becoming one of the top HFTs.

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How did you get into the bitcoin and blockchain industry?

Having spent 10+ years in capital markets and financial services, I’ve seen many inefficiencies and “dead weight” in the industry. I could say that while I was tirelessly working to make markets more efficient, I secretly hoped that one day I would take it to the next level and focus on disrupting traditional finance. I played with the idea of alternative exchanges, asset cases and disintermediation before I learned about crypto.

At some point in 2015 I discovered crypto. I looked at the exchanges and exchange volumes at the time and decided that the volumes were too small to make any meaningful money. I’ve missed my chance to belong to that elite group of LinkedIn visionaries as I didn’t buy bitcoin. At that time, I was building a new business at Optiver and doing my executive MBA at LBS, deciding to focus on that and come back to crypto later. In the beginning of 2017, I dug out my notes and started Wintermute together with Harro feeling that the time was right.

You used to work at a large market maker, what would be your advice for anyone wanting to bridge the gap between finance and crypto?

Sometimes it is easier to build things from scratch than trying to repair the old ones. In some ways, I believe this refers to legacy finance today. The question is: do we want to bridge the gap or do we want to create something new?

Of course, the answer is not so straightforward and will depend on how the industry evolves. For example, if crypto remains largely centralized, I can see much more rationale for ultimately merging the two. If DeFi gets adopted — which I personally believe is a much more interesting outcome — there is no need for legacy finance to remain. It will either have to reinvent itself or give way to open finance.

The most important question for all of us in finance, whether it is legacy finance, centralized crypto or DeFi, is to always be clear about what makes sense. What are we trying to achieve, what problem are we solving and what are we optimizing for? With this perspective in mind the key question is: what is required for the crypto ecosystem to be a true improvement over legacy finance?

People with traditional finance backgrounds should think about what contributes to this 10x improvement first and only then look at their own domain expertise. A wrong kind of reasoning starts with just assuming that whatever you did in legacy finance is necessary in crypto. When I look at parts of the centralized crypto ecosystem, I see a lot of replication of legacy finance — custodians, aggregators, brokers and other types of middlemen. Ironically, this is what blockchain was meant to avoid. I firmly believe that there is very limited benefit in replicating the existing system.

Furthermore, many leading crypto companies are now recruiting people with traditional financial backgrounds. While I absolutely believe that fundamental financial knowledge and experience are valuable, I hope these steps will not contribute to the replication of the financial system as we know it.

What is the vision of Wintermute? What makes it special compared to your competitors and other solutions?

Our vision is to become the number one algorithmic liquidity provider in both centralized and decentralized worlds. In DeFi specifically, this means solving the liquidity problem that currently limits the adoption of the whole space.

At Wintermute, we have made a very deliberate decision to be a technology company, not a financial services or a trading company. This drives many of the choices we make; for example, we are a private limited company, not a hedge fund. This allows us to build for the future, solve the big challenges and invest in strategic partnerships without the pressure of immediate monthly returns. This way, we are aligning our incentives with those of the industry and our long-term equity investors. It also means that we are approaching new trading venues looking primarily at how we can create value with our trading solutions rather than being driven by the end-of-year bonus seeking behavior of a trader sitting at a desk in a more traditional HFT firm.

People talk about “market makers” as a group, but in fact there are not many high-frequency market makers in crypto and an even smaller number of companies are looking to provide liquidity in DeFi. Many market makers specialize in OTC, dark pools, and execution services which are different from high-frequency trading (HFT) in terms of how they use the algorithms and business models.

Who is your target audience?

The high-frequency market making business model is really unique in a sense that it doesn’t have any direct customers. We do not sell anything to consumers or even businesses — we mostly make money on trading. We do, however, invest a lot of resources into developing strategic partnerships and relationships with the world’s best crypto players. For example, we are partnering with players like Coinlist and SeedCX to provide liquidity on their platforms. We are also super excited about some even larger partnerships that we cannot yet disclose.

It is common to keep a very low profile in HFT. Unlike many other market makers, we don’t want to be invisible and just do our thing. We are excited about solving big challenges, such as solving the liquidity problem within the DeFi platforms, which is core to the adoption of decentralized finance and cannot afford to be invisible.

What are your thoughts on the crypto European ecosystem?

Being very internationally-minded myself, I’d love to think that the borders are disappearing. We are based in Europe today, but most of our clients and partners are currently located in the United States and Asia. Having said this, I do think that Europe is lagging behind the US in many respects. I am constantly pushing myself and I would strongly encourage European founders to be bolder and think bigger. This relates to vision, innovation, investments and hiring.

One thing that I am very lucky to have here in London is access to talent exposed to both technology and finance.

The crypto industry is very good at technology, but deep financial expertise is sometimes lacking. In a financial and startup hub like London, I am very lucky to have access to both.

Anything to add?

We are growing fast, so we are always looking for great talent! We are looking for software developers of different levels and developer-traders — i.e., traders who can code or developers who would like to trade.

Reach out to me on LinkedIn or AngelList if you are interested! And if you are still working in legacy finance, it may be the right time to consider other options!

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