How Crypto Offers 10% Yields - [Web3 Breakdowns, EP. 15]

I’m Eric Golden and my guest today is Matt Ballensweig, Co-Head of Trading and Lending at Genesis where he’s responsible for trading, origination and execution of all digital assets and loans. I got connected with Matt when I started trying to find out how investors are able to generate double-digit yields by lending out their crypto assets. Beyond answering this question, we also discuss how traditional prime brokerage works and the unique set of challenges of building similar infrastructure in crypto. Please enjoy this discussion with Matt Ballensweig.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:13] - [First question] - Why does a massive difference in interest rates exist between crypto and money market accounts

[00:05:12] - The average spread market makers earn on crypto assets

[00:08:22] - The trade of going long btc spot, shorting the near term future and the type of interest rate or yield the trade creates

[00:12:34] - Explaining what it means to have a delta view and to be delta long and delta neutral 

[00:12:50] - Genesis’ loan structure and framework

[00:16:02] - How collateralized lending can be a zero loss business 

[00:18:36] - Percentage differences between collateralized and uncollateralized loans and their uncollateralized loan process

[00:22:25] - Types of uncollateralized parties and how they are using their debt 

[00:24:22] - Has Genesis seen defaults and low masses on the uncollateralized business

[00:25:18] - Overview of Genesis, their divisions, and how they make their money beyond lending

[00:27:50] - His view on a healthy market structure and how short sellers help the market function

[00:29:32] - What traditional prime brokers do and how much of Genesis is modeled off of them

[00:31:44] - Why the crypto and TradFi worlds can’t simplistically blend

[00:34:22] - Will Genesis ever bridge the prime brokerage business into traditional assets

[00:35:28] - DCG’s founding, what it is, and Genesis’ role in the DCG empire

[00:38:06] - How much interplay Genesis has with other DCG companies

[00:43:28] - Does he feel like he works for Genesis or for DCG 

[00:44:46] - How integral Genesis is to platforms like BlockFi, Gemini and Celsius

[00:48:49] - How systems are tested when there are drawdowns and how counterparts interact with each other

[00:52:12] - Knock-on effects that could lead to a ‘Lehman style event’ given crypto’s systemic risk nature

[00:55:18] - How Genesis participates in the DeFi markets and their biggest gating issues

[00:58:26] - Views on centralized and decentralized exchanges 

[01:00:35] - His desire to share data and the PIF protocol

[01:02:42] - Why NFT lending makes sense given its different risk profile from crypto

[01:05:08] - What he’s most excited about building over the next 6 months and the next 6 years

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