--- id: "xAVzE-OdIeo" title: "What It’s Like Running a Billion-Dollar Market-Neutral Fund in Crypto" channel: "1000x" host: [] guests: ["Evgeny"] date: "2026-08-24" updated: "2026-10-15" duration: "34:57" duration_seconds: 2097 source_type: "youtube" youtube: "https://www.youtube.com/watch?v=xAVzE-OdIeo" canonical: "https://pod-exp.pages.dev/en/xAVzE-OdIeo/" transcript_jsonl: "https://pod-exp.pages.dev/en/xAVzE-OdIeo/transcript.jsonl" language: "en" translation: false timestamp_precision: "block" topics: ["Crypto and Web3","Investing","Trading","Financial infrastructure"] series: ["Crypto investing"] --- # What It’s Like Running a Billion-Dollar Market-Neutral Fund in Crypto > English transcript prepared from captions; audio accuracy has not been verified. `>>` marks a speaker change where captions do not name the speaker. Timestamps are block-level (start of the timestamped block), not per sentence, unless a paragraph carries its own [hh:mm:ss]. > Prepared from English captions; manual or automatic track origin is unknown. Title, summary and chapter labels are editorial additions. Audio accuracy has not been verified. **Summary:** Evgeny describes how his background in traditional finance led him to build a market-neutral crypto firm, from emerging-market research to DeFi. The discussion follows his use of supply-chain analysis to find trades, the limits of AI-assisted investment research, and an autonomous tokenized venture experiment. He explains how the firm defines DeFi yield, earns fees by providing liquidity and lending, and uses vaults as a technical wrapper for managed strategies. The conversation also covers institutional and on-chain investors, risk controls, Anchor and Luna, tokenized stocks, market making, and security practices as AI tools expose operational weaknesses. The episode closes with a distinction between smart-contract risk and older operational-security failures. ## [0:00] AI Security Concerns and the Fund’s Background · YouTube So, we spent a lot of time looking into our risk because our concern was, well, what if DeFi's uninvestable now? Because Claude and myths and fables can just destroy everything. And what uh our research has shown is that all the hacks or 99% of hacks that actually happened wasn't AI finding a way to break a smart contract. It is AI finding legacy opsec vulnerabilities and exploiting them. And the metaphor I kind of use is imagine you have a bank which has a security up to standard. So, AI doesn't invent an amazing drill that breaks from a metal vault. What AI does, it finds 100 old banks with wooden doors that you can knock out with a \[music\] with a kick. \>\> \[music\] \>\> Welcome, everybody. Welcome to another Thousand X show. We are actually recording at the Out East Summit hosted by the TiE. We're super happy to be here because we have an amazing guest and a good lineup today. We're in a beautiful vineyard. Welcome, Evgeny. Pleasure to be here. Welcome to the podcast. I want to start by saying you are one of the few market neutral funds really left in crypto that are actually managing substantial capital. And maybe tell us a little bit about yourself first. ## [1:24] From Traditional Finance to Emerging-Market Trades · YouTube How did you even get into this industry? Who are you? \>\> Yeah, we we do carry the flag on the market neutral side. And yeah, I launched uh launched 37 5 years ago. We started as a market neutral funds and that was kind of inspired by my experience in TradFi. I spent 10 years working in that world, at first in a hedge fund doing equity long short, and then UBS and Deutsche on the portfolio management side. \>\> So, tell me a little bit about what it was like to be on an equity long short desk back then? Like what were some of the things that you were looking at or doing? What were the strategies that you were running while you were \>\> Well, that was uh that was a dream come true. It was a fundamental discretionary strategy uh covering a EM. So, we had an opportunity to go into Egypt after Arab Spring. Uh, we had an opportunity to go into some unique companies in like small gaps in Turkey. Uh, shorting, you know, Chinese real estate market by shorting iron ore companies in Australia. And I think that kind of inspired me to look for inspiration in unorthodox places because that's where it felt the value really light. \>\> So, actually, I want to go into that. You went into Egypt after the Arabs. Physically you went into Egypt? Or is it Egyptian stocks? Okay, you went into Egyptian stocks. \>\> Yeah, so they they closed the exchange when the Arab Spring started. We've done a lot of work and then we found there were some listed real estate companies trading at like 30 cents on the dollar and we did some some trades there. \>\> Did you have to How did you get the information needed to make those bets? \>\> Well, the the beautiful thing of working in a in a large institutional hedge fund in TradFi is that you just get access to people through brokers. Okay. Right. So, we would call it was very easy actually looking back. Um, you call a sell-side analyst and you know, you would ask him to arrange line up a few meetings with people who are running those companies. And then back in the day, you know, there were all these CEOs coming to sell-side conferences. So, then they would fly to London, which is where I was working at the time, and then you go and meet everyone and you have access because you have capital. \>\> When you say back in the day, is that no longer the case? You said CEOs are going CEOs are going to sell-side conferences. Now they're not? \>\> Back in the day compared to trip to crypto. crypto. crypto. \>\> Okay. \>\> Uh, where you know, it's uh it's an anon person on Twitter that you have to find a chance to speak to rather sitting down with the CEO. \>\> Right, that's what I'm at. It's it's a lot harder in crypto to get real actual information out of people. \>\> Legitimate information. It's very easy to have someone in a Telegram group or on Twitter, but actually to have an institutional stock conversation, that's much much less uh frequent. \>\> But people still in the traditional world, they still lie to you. I'm reminded of this story by one of my former bosses who used to work at Merrill Lynch and he was on the commodities trading desk, and they invested in some coal mines in Indonesia, and then 3 years later it turned out those coal mines didn't exist. And I'm wondering if anything like that or if you came across anything like that cuz if you're doing if you're going into Egypt, if you're going into I mean Australia probably not so much, if you're going into all these different emerging markets, in for like access to information is so important. Like how do you make sure that what you're getting is real? \>\> Well, you have to vet everything, right? So, I think there is no sacred place. There is no safe environment where you can operate, but there is a reason why governance is better in developed markets. It's maybe less developed in emerging markets, and it basically doesn't exist in crypto, right? So, these are spectrums. So, the higher the level of confidence you have in information, the less you have to vet it. And then, you know, the higher the cost of lying is to someone, the more you can rely on it. But yeah, when you're faced with the M, you have to vet the validity of information, but ultimately you dig a view. \>\> Yeah, and I I've been in situations where you know, there would be a CEO of a company, and he would walk me through a deck, and then I would ask him a couple of questions like what if this forecast doesn't materialize, and he would, you know, shut the deck and say, "Well, then we're done." Right? So, like you get to these personal conversations with people like anywhere else. \>\> How do you even respond to that? \>\> I'm like, "Well, this is very helpful. Thank you. I've let me cross this off from my list." \>\> It's like if the CEO throws a temper tantrum, I'm not investing in that company. \>\> That's usually a good sign. \>\> Yeah, okay. That's good. You got to keep your cool. ## [5:18] Macro Themes and the China Real-Estate Short · YouTube I actually think we could do an entire podcast on like the first part of the conversation. You could probably talk for like 20 minutes about what happened in Egypt if you wanted to. \>\> Yeah? \>\> Like that would be kind of fascinating. \>\> Yeah, yeah. Yeah. Uh you know, I was the I started trading personally like with tiny tiny amounts when it like 2007. So, I experienced the whole of 2008. And I was inspired by like I want to be like a George Soros and like find these like a trade macro themes. So, I spent most of my time looking at that when I was in the fund. And, you know, Chinese kind of real estate captured my imagination, and I was looking into okay, how do we short it? And you can't really short anything in China at least not back in the day cuz you know, it's just it's all that market you can actually do that in. So we were looking for proxies. And then I was like okay, well what will suffer the most if Chinese real estate starts to suffer and it's you know, what what goes into building real estate, you know, copper and all whatever. Um or steel would be more precise. So then you look at the steel okay, there's coal and there's iron ore. And then we looked into iron ore companies and you know, I don't remember the numbers exactly but uh commodities are extremely cyclical. Right, so like crypto. Right. Um so when you have a commodity that's in deficit but the marginal buyer is starting to fade away and these companies have a lot of leverage, you can have one-way street. So then we you know, shorted some iron ore companies and then did pretty well. Yeah, that was that was a lot of fun. That's that that's \>\> When you when you say iron Did you have to go into specifically figure out which iron ore companies are selling directly to China? Like when you construct a trade like that, what's \>\> Well, you it's a you work you work backwards, right? It's like a domino that you have to collect collect on the back and say okay, um what does China need the most? Steel. Okay, great. Um they also need you know, 10 other things. So which one is most valuable? Oh, the steel supply chain is most valuable. Okay, great. So then within that supply chain what do you have? You have people on the smelting side, on the distribution, so on and so forth and then you have the supplies of raw commodities into that. So then okay, well that's an interesting bit. Then you look into coal and you're like well actually there's nothing clean I can short. So okay, let's look at iron ore. \>\> Right. \>\> So you just go all the way up to the underlying business and then you find something that has a very clear correlation and like oh, if Chinese real estate is down then these guys will lose 90% of their net or profit. ## [7:28] AI Research, False Positives, and Autonomous Investing · YouTube \>\> That's what I'm saying. It's something I think about a lot these days because of how AI has made research so much easier to do. Yeah. Is that back back then, I mean you actually had to really spend a lot of time digging into things and figuring out okay, well what What downstream effects? And I think it's actually destroying the market in some ways today because everyone will now just go on Claude and they'll say, "Okay, if there's a bottleneck in AI, if there's a bottleneck in data centers, what are the downstream companies that are actually supplying this? Like what's needed to build out a data center? What's needed to to fabricate these chips?" And you're like easily pulling up these companies. And so like for example, they like something like CCOI uh had a massive ripper because I think actually a bunch of people just it popped up super early on Claude. And people bought it, and then it actually just did not materialize at all and like so so sold off 70% because nobody had actually done the real research. And so it's kind of it's like there's almost both more opportunity and less opportunity in this deep deep type of downstream research kind of thing. It's kind of but that's what you've been doing for you did that for a while. \>\> I think that's a great point. So we we always knew there are kind of cool things that are emerging. So a year and a half ago, we rolled out a fully autonomous AI agent kind of venture fund that's tokenized on base. Um where it's like you buy a token, it takes your money, and like goes and makes like venture. That's what's on chain. Liquid venture. And through that, we learned a lot about how to use agents for investment research cuz it's highly experimental. We didn't advertise it, we didn't raise anything for it, we just kind of shipped it. And it's actually done pretty well. Um but what it told us is that what does that mean a like a fully autonomous agent? \>\> Like what's like your it's literally making all of it you there's no oversight at all on your on your part? \>\> Not not now. Yeah, it used to be in the beginning and then like eventually we \>\> Who's feeding it the information? \>\> So we build that framework. Like imagine you're hiring an analyst today, right? Zero experience. You tell it where to look and how to think. But then once it gets all information, it decides on its own. \>\> What framework are you using? Are you using Are you using like open call like that? \>\> Yeah, okay. Okay. Yeah. Um and that told us that you can use agents for a lot of stuff, but actually you can't replace a senior analyst, right? So in our in our world, it can replace a junior analyst because it can do repeatable tasks, but we don't feel it's at the point where we we can actually replace an expert. Okay. So I think to I think your point is spot on because yes, it's much easier to do your research right now, but it will also give you a lot of false positives. A ton. Because you, like a person who doesn't know with like if I start reading about biotech stocks, right? I don't understand the sector. It will give me an answer, and I'll think that's the truth. And then if you're a specialist, you can then deduce what Claude is telling me, and then you'll find the alpha in the spread. So it's like it's changing the whole game. \>\> This is what people I think a lot miss a lot of times with AI is they kind of just assume that its capabilities are that it will just give you the right answer. No, it's not. And it's just not That's not that at all. I mean I There was just one thing that just went super viral. That's called the world monitor. Some guy rebuilt Palantir's dashboard for monitoring the world, and it went super viral on Twitter. And the first question that you have to ask yourself is okay, but is the data right? Like like like like I mean like the entire point of Palantir is that if you pay for their data, if you pay for their monitor, the actual numbers are correct. The actual things that you're looking at are correct. correct. correct. \>\> Exactly. \>\> And there's kind of no way to tell, right? The entire premise of the business is that they've spent billions and billions and billions of dollars on making sure that it's right. They've hired a ton of people. They have on on the ground, you know, individuals detailing all this stuff, and you can't just hope and dream that AI is going to do it. Which is again why why experts I think are still very valuable. But \>\> I agree. People have very short attention spans, and they want easy fixes to their problems, so they think one message to Claude will give them an answer, but that's not how it works. \>\> But you can use it effectively, right? So if you if you collate all the data, you find all the different companies, and then you yourself have at least narrowed the space that you could search. I think that's one of the most valuable especially in investing is narrowing the space that you have to search for your answer. \>\> So I think it accelerates your work by a magnitude of a 10x, if not more, but it doesn't replace the need to have you think. think. think. \>\> Yes. \>\> And I think that's where people get it wrong, because they just stop thinking. \>\> Yeah. \>\> They just ask the question, and they take the answer without actually processing the information themselves. \>\> So you were you were in that world for almost a decade, or more than a decade. \>\> About a decade. \>\> About about a decade and then you find your way into crypto. Uh ## [11:39] Leaving Traditional Finance for Crypto and DeFi · YouTube Why why did you leave? What drew you out of your seat which presumably was actually quite interesting and fun? \>\> I was working in a very well-established, you know, investment world and I was thinking like how do I a thousand X, uh you know, \>\> \[laughter\] \>\> my uh my personal growth. And it became very clear that the hedge fund world and the banking world is, you know, still established, still uh restrictive. And especially in London, which I would assume New York is probably a little bit different opportunity-set-wise, but coming out of the the European Greek debt crisis, you know, the opportunities were pretty limited. So, I was thinking, well, what is the the most realistic way to, you know, meaningfully grow my career and opportunity set while still doing something that's exciting? And I couldn't find anything in the TradFi world, so I started educating myself on tech, on fintech, and that's how I came across blockchain cuz like most people I would have heard about Bitcoin in probably 2011, 2012, didn't really understand it, didn't click with me. And then seeing blockchain and then, you know, discovering Vitalik in Ethereum in 2015, that was my kind of aha moment coming to the space. \>\> That's actually quite you had a method to actually approaching this, which I think is very different from a lot of other people, where sometimes when I interview people or even my myself, I think I had more of your approach where I was looking for edge. A lot of people just sort of fell in love with crypto. It seems like you were searching for an opportunity. So, can you walk me through that process? How did you How did you approach searching for that opportunity? \>\> Yeah, I was trying to be systematic cuz I'm always hopeful, you know, to fall in love with something, but it, you know, it never happens or it never happened and therefore you have to make it happen for you, right? \>\> Right. \>\> So, I was thinking, what is the thing I know nothing about but is very important? And that was tech cuz I come from a very traditional economics and finance background. So, I, you know, convinced my boss to pay for me to do a course at Stanford. As I did that, I was like, okay, now I kind of that. I kind of understand finance." So, I started looking into fintech. And I was like, "Okay, I want to learn. What's the fastest way to learn? Is to lose money." What's the best way to lose money? Is to be an angel investor. \>\> Yeah. \>\> So, I made a few angel investments in the fintech world, and through that I discovered blockchain. \>\> Okay. \>\> And I was like, "Okay, this is the whole crypto thing. Feels very scary. Lots of negative articles about it. Maybe it's a scam." So, I made a decision to not make any investments for the first year. And I decided to allocate two evenings a week to go to meetups and lectures and seminars. By the virtue of doing that, I attended 100 events over the course of the year. And uh \>\> You're a busy guy. \>\> 100 events over the course of the year. \>\> Yeah. \>\> Well, that's actually, if you think about it, two nights a week is not that much. much. much. \>\> Yeah. \>\> If you It's just It's all about consistency, and I think it It's all about you really wanting to get something out of that. And then through that, I was lucky enough to attend a a meetup where Vitalik was speaking. And you know, that one meetup was my gateway into the space. \>\> And what year was this? When did that happen? 2015. 2015. Okay. And so, you hear Vitalik speak, and you decide to yourself, "Screw EM. Screw TradFi. Let me get in." What was the first step that you took? \>\> The first step was trying cuz, you know, I I attended a lecture where he Vitalik was speaking, and I didn't understand anything he was saying. But it was very clear, this is the future, and this is going to be beautiful mind that's building that future. So, I just went very deep into the Ethereum world, and then I started proactively building a network, meeting people, and then doing research on the space, and then eventually ended up investing uh \>\> Okay. But now you A lot of people, I think, when they get into crypto, they start off by just directionally investing. You maybe you buy some Ethereum, you buy some Bitcoin, you you buy this. What you do now is you run systematic strategies to take advantage of the cryptocurrency markets and all the inefficiencies that exist. So, when did that start happening? When did you start building strategies to trade crypto? \>\> When DeFi went live. So, most people do come and buy coins, uh but most people don't have a system, they don't have a framework, right? They buy because a friend tells them, but if you buy something, you don't learn anything, right? So, you need to choose what you want to learn. And if when you're starting to learn, you want to understand if you can have a method and a sustainable process. Because one thing to trade on the weekend, it's another thing to build a business, go out to people to raise capital, and then hire people whom you're responsible for. So, when I saw DeFi, that was my second aha moment because prior to that, it was very exciting to invest in venture, to invest on the liquid side, but this was basically buying a story and buying a promise of the future. And the promise of brighter tomorrow because there was nothing fundamental, right? There was, "Oh, let's build this network and then maybe people will come and use it. Let's build, you know, an Uber on chain. Let's build an Airbnb on chain. Let's build this and that." But there was nothing fundamental. When DeFi started in 2019, it became very clear that for the first time in the history of crypto, we had real decentralized apps, which you could use and they would monetize that, right? They would charge you a fee in some shape or form. And when you have an app that charges you a fee, whether it's on App Store or on Ethereum, it now is a real business. Because you can value it and you can measure it and you can monitor it. And then give me confidence to dive into that basically full-time and build a career around it um because that was an ecosystem where you could make liquid investments with a framework and you could earn yield with a framework. ## [16:42] How DeFi Yield Is Earned · YouTube \>\> I think DeFi yield has taken on a little bit of a negative connotation these days because when you look back at 2021, there was DeFi yield were these companies that were issuing tokens to people for uses of the platform and basically paying far too much for customer acquisition. And so, yield back then meant parking your capital in some pool, using an application, and then just ran just getting paid out by DeFi protocols for doing that. When you talk about yields, I can't imagine that's what you're still doing. You must be talking about something slightly different or is that still the world of DeFi today? \>\> So, I think that's a great question because it comes down to a framework, right? So, to me DeFi yield is something very simple where I would speak to you and I would suggest that there's an opportunity for you to invest invest $1 of your capital, right? And then you ask me, "Okay, that's great. What is the risk that I'm taking?" So, as long as I'm delivering you a strategy where you only take smart contract risk, the risk of a DeFi platform collapsing from a software failure rather than a market failure, that's what I classify as DeFi yield. And then there's the source of that yield, right? Is it what you said which is basically companies using their what's that equity as a marketing budget. It's like, "Hey, open an account with me. I'll give you a piece of my business." which they did with tokens. That was obviously is dead because the token market is dead. But, there are other things you can be doing uh with within the space where you're getting paid uh by the virtue of being an operator in that platform or in that ecosystem and we have a core framework that we've developed around that. \>\> Right. And so, can you talk to us about maybe a specific type of strategy that you're running right now that illustrates what that looks like like concretely cuz I think sometimes it's hard to wrap your head around okay, if I if I have this dollar, what am I going to actually do with this dollar? \>\> Yep. So, it's actually DeFi is way uh over complicated for what it is. These are all very very simple concepts, right? What you get paid for? You get paid when you process someone's trade, right? So, you put money in the Uniswap pool, you take, you know, one stable coin, another stable coin and then you collect a fee. And then maybe that yield is attractive to you or maybe not. So, if it's not, you go further. Then you can lend, right? And you can lend your stable coins against um coins which are very volatile and very risky or less volatile and less risky. More recently, you can be lending against RWAs, basically tokenized credit, which is great because we're basically back to what TradFi is. Uh but, I think that's been most exciting more recently is uh tokenized stocks on chain. Because you your yield or at least our yield is an expression and a derivative of the market environment. When it's a bear market, there is less appetite to trade, there's less appetite to lever up, and therefore, if you're an economic agent that benefits from servicing the ecosystem from a liquidity standpoint, you make less. When there's a bull market somewhere, you get paid much more because people are willing to pay more for leverage, they're willing to trade more, so on and so forth. And there's a bull market in AI stocks right now. So, the same things we used to be doing with meme coins or other assets being fully marketed before we're doing with tokenized Nvidia and other assets like that. ## [19:43] Yield Sources and TradFi Convergence · YouTube \>\> And so, why why is there a spread between whatever yield you can get doing this in the traditional markets and the yield that you can get in crypto? I think that's that's a big question a lot of people ask is there's a yield in crypto specifically because there's a higher risk associated with that, and so what you're just getting compensated for is you're getting compensated for the risk that Claude Mythos comes in and breaks one of these platforms. You're getting compensated for the fact that you know, whoever you're lending to is actually a much higher risk of default just by virtue of being in crypto. And so, maybe talk about that. \>\> So, there are probably two two answers to this question. On the AI side, I can address this, you know, the second half, but I think people fundamentally misunderstand what where the yield comes from. Right? The yield doesn't come from someone coming to you and say, "Hey, this is a risky platform, therefore you get paid." You actually get paid for being a lender. You get paid for acting as a market maker. So, these are the roles that in the traditional world belong to prime brokers, banks, and you know, the Citadels of this world. In this world, they're outsourced. So, my inspiration to start the firm wasn't that I was excited about the specific strategy. It was a thesis that DeFi is only different from TradFi for one reason, and that is the role of a platform is separated from a role of liquidity provider. So, if you have a bank in the traditional world, you walk into a building, so it's in like a physical interface, you talk to someone. The bank matches borrowers and lenders, and the bank has its own capital. You would think of Uniswap, it has an interface, and it matches the buyers and sellers, but it has no capital. So, the role of a capital provider is outsourced to the market to the individual market participant or to professional market participant. So, we do what banks do in the real world. We provide liquidity to the ecosystem and what a JP Morgan is earning because somebody's trading or leveraging up on Nvidia with them, we're doing that on chain. So, we're not getting paid because DeFi is risky. We're getting paid because there is economic activity on chain and then we're the ones making it happen. \>\> And so, as crypto and traditional finance sort of converge, I assume that you're going to have to become competitive again. Do you think the JP Morgan's going to come in here and start doing these things? Do you think that other firms are or are you already seeing that? Is Edge already eroding? \>\> So, that's a great question and when it comes to the source of my yield, I would separate it into categories. One is the crypto native yield where a DeFi platform comes to me and says, "Hey, please let us stable coins against BTC." And I'm going to pay you a lot of money because we're new and very risky. So, then we're explicitly taking a crypto risk and then we need to think whether AI can break that platform. \>\> Right. \>\> Um and that's not something we're competing against a JP Morgan, right? If someone wants to borrow against tokenized Nvidia, we're explicitly competing with a traditional world and these worlds are converging and colliding very, very quickly. We're speaking to banks who are looking to lend stable coins into some of the vaults that we're running. We're looking for people to tokenize their equity or their credit and put it into the DeFi vaults that we're managing. We're looking for people to who come to us and they want to take a loan on the back of their real world position they have with a reinsurance or a credit investment. ## [22:49] Vaults, Investors, and Strategy Wrappers · YouTube \>\> Can you explain the concept of a vault to people? When you talk about DeFi vaults, I assume that half of our audience is familiar with it, but there's a probably substantial amount of people out there going, "What are you talking about? What What is a DeFi vault? and why is and not only that why are Dfi vaults useful? \>\> That's uh that's a great question and goes back to the to my kind of assumption and the thesis that Dfi terminology is just terrible. A word vault doesn't really mean anything. \>\> Pe- people just randomly came up with the word Dfi one day too. And that's very true. It's just and it just stuck. And now we have to contend with that. And now we have to explain to normal people. \>\> Yeah, exactly. \>\> Like what is a \>\> So a vault is basically, you know, it's an investment box. \>\> Yeah. \>\> Right? Inside that box you can put a meme coin. So I can say I have a vault that will buy a meme coin for you. \>\> And you're like, "Well, great. Thank you very much." \>\> Or I can have a vault uh which is running hedge fund strategy. Right? So just like a word fund doesn't mean anything, you need to understand what the fund issue does. The same goes for the vault. So you can think of it as an automated financial activity which sometimes is all about finding a trading strategy edge. Sometimes is basically running a lending book. So it's acting as a risk manager in the bank where you're designing, you know, am I giving out a mortgage to person A or person B. \>\> I guess the the the obvious follow-up question there is, but what makes that more useful than just a fund? Right? Like why like why is that a better product to offer people? \>\> It's it's not that I wouldn't think of it as a better product. It's a technical evolution of what the product looks like. So for example, um 30 years ago, if you wanted to invest into a fund, you would have to fill in a form. More recently, you can call your banker and they will buy the fund digitally for you. Or you can buy an ETF because it's much cheaper to launch ETFs these days. So it's simply a different wrapper. It doesn't make it better or worse because you can have an amazing fund which is extremely clunky. And you can have a terrible vault or vice versa. So it makes things more accessible. It makes them easier and more transparent. But these are the features that can't really make a strategy better. They just make explaining and selling that strategy better. \>\> That makes sense. And so the types of people that are interested in invest So you run Dfi vaults, you run individual strategies and one question is who is actually putting money to work here? Right? You run over you you ran over a billion dollars. Whose money is that? Who's coming in? Who's interested? Is it is it And is the market growing or is the market shrinking? \>\> So, in terms of who these people are, it's a broad mix. When it comes to some of the dual fund, you know, dual funds like we've been approved by several very large global investment banks to be put on their platform. So, we have banks and clients of those banks. We have foundations and endowments fund of funds, professional investors. Uh when it comes to D5 vault market participants, most of them are on-chain users. Well, not most, all of them are on-chain users. And some of them are large crypto holders like DAOs or whales or just individual people depositing into vaults. Um and in terms of capital going one way or another, so our business has grown uh quite meaningfully over the last 5 years even though the space hasn't really grown that much. But more recently, we've seen \>\> And what Why do you think that is? Why Why have you grown when other people haven't? What are you doing differently? ## [26:00] Survival, Due Diligence, and Risk Controls · YouTube \>\> I think just surviving. Uh I think, you know, I ask myself that every day and if someone was early to D5, they couldn't have become early to D5 if they were early to crypto, right? And then most people who were early to crypto were reasonably young and they were started playing with it without a very clear strategy. It's quite rare, I think, for someone to have spent 10 years in TradFi and then go into D5. So, we have a 5-year track in our flagship D5 yield fund. Going back to the early days of D5 summer. And what gave us the confidence to launch it was the fact that we were in D5 since day one. \>\> Right. \>\> And then, what also gave us confidence is that we have been able to develop a risk framework around D5 because you're right, people don't understand and they're very anxious about it. But when you actually develop a whole risk framework, then it's not rocket science and you can make it work. But not everyone was following uh a risk framework. Lots of people were looking at me like it was an idiot when I wasn't getting 20% yields in Anchor back in the day. \>\> Right. \>\> And some of those people are no longer around. So, yeah, if you it's I think I wish someone would tell me the secret sauce. \>\> But it's just sticking around it. \>\> It's just It's just showing up and executing. \>\> You were running a fund during the collapse of Luna. I mean, that was probably a very interesting time for you, Marcus fund. Did you ever have any exposure to that? I mean, that you never did. \>\> Yeah, we So, we looked into Anchor and it just didn't pass our due diligence. So, we red-flagged it and we have never had a single cent in that twice. \>\> Do you see any correlates between what Michael Saylor is doing and what happened with Luna with with stretch? \>\> Not really. Not at all, actually, because Luna was debt-backed by equity and that equity was worth nothing because it wasn't doing anything. Here we have basically like a Lombard loan. \>\> Right. \>\> You have He's holding an asset that's worth $100 and he's borrowed I don't remember the latest number, but let's say 30. So, could this be, you know, Bitcoin goes down by 90%? Could then he be forced to sell and then pushing the price down further? Yes, of course. But at the current levels of leverage, it doesn't feel like it's a risky thing. \>\> Do you do you foresee yourself getting more involved in traditional markets now that I mean people are talking about the fact that crypto is really the economic activity is sort of taking a hit. We're in a slow period of the market and the aftermarkets are actually trading in ways that they've never really traded before. There's so much activity happening there. Do you ever look over and say, "Hey, there's some strategies that we run that we could probably do in the traditional markets as well?" \>\> There is always a temptation to go beyond your core area of expertise. So far, we've said no to that because we've built a very considerable kind of superior edge around DeFi risk management and that's our core expertise. When I think of myself going to our investors or potential investors and telling them that they can trade Apple better than, you know, Citadel or source, you know, I don't think I can do that. Um as these worlds converge though, there's going to be more opportunities for kind of the DFI native blenders and market makers and traders. And that's where we can uh benefit from that because we can structure those we can find spreads, we can find arbitrage. Uh but we have to do it on chain, which is where our strength lies. But also we take a different view um on the crypto economy itself where we think actually it's likely to accelerate as in we're more bullish the market rather than bearish. And that's why we want to stick to our guns. \>\> Do you guys do any market making on platforms like liquid or or sorry like hyper liquid or lighter? \>\> Um some yeah. \>\> Some. So, when when you talk about DFI strategies, does that uh What right now is interesting to you in DFI? Is there any I think a lot of people have sort of taken their foot off the gas and are not really looking at DFI anymore. Are there any innovations in the last six months, 12 months, 18 months that excite you? ## [29:47] Tokenized Stocks, DeFi Risk, and AI Security · YouTube \>\> So, I think when it comes to what's exciting in DFI yield right now is everything around tokenized stocks. The spreads you can earn and the trades you can do in a fully market mutual fashion. In terms of new opportunities in DFI innovation, you get very jaded and very blurred at some point cuz like you would have seen you know 10,000 platforms. The coolest thing we see even recently is probably tranching. It's been around as a concept for a long time, but only recently have we seen people starting to execute on it. And that's a that's basically rebuilding traditional finance. So, I wouldn't say it's very novel from a financial engineering standpoint, but it's definitely novel to DFI. And uh it's useful. \>\> Do Do you need Do you need a really robust tech stack to be able to take advantage of these opportunities? Or are there things out there that your average person could go in and allocate their capital to and earn a good risk adjusted reward? \>\> I think the hard part is not the tech stack to allocate. It's the ability to risk manage. Right? Right? Because you're putting money into a DFI platform, how do you know it's not going to they hacked, right? What's your framework? And I think it's very hard to do that as an individual because the process isn't clear. It's like it as an individual should like we think of DeFi as high yield bonds. Right? You have a set of platforms that sometimes collapse. So, as long as your yield is higher than your kind of cost of default, then you're okay. But as an average person, like if you show me couple of bonds issued by companies I've never heard of, how am I expected to spend my Saturday evening, you know, doing my research? You can't really do that. Right? So, when people go into DeFi, realistically, they they go blindly. They go on the back of a brand uh that they trust and a CEO who's active on Twitter, but they're not really doing their research. Well, sometimes it's good and sometimes it's bad. \>\> My point exactly. So, it's pretty dangerous and you need to get lucky, right? You need to get lucky to not get wiped out because once you do, you're gone, right? And you're hoping to earn 10% or 20 or 30, whatever. But if you lose 100%, you know, in the second after you deploy, that's it. \>\> What do you think is a reasonable yield right now in DeFi? \>\> We're getting like 11, 12% or 11, 12%. \>\> Consistently, that's that's pretty solid. And when it comes to actual specific platforms, I'm curious if you have any takes on what platforms are actually in that high yield bucket. Like or sorry, in that in that high grade bucket. \>\> So, the way how we operate is uh we've developed a probabilistic risk rating system for DeFi and we rank everything as in a triple A through a triple C. And obviously, the usual suspects would be in the triple A kind of category, right? This you know, your Aavas. \>\> Are there any things that you specifically look at that might not be obvious to people on how to rank these in terms of safety? Like how what goes into the safety rankings for you? \>\> It's it's a very long process with like dozens and dozens of checkpoints, but I would highlight one specifically that I think is absolutely critical in the context of AI risk. Right? So, we've seen record number of hacks in uh March, April. Right? When you actually look at them in terms of dollar value lost, uh it's very normalized. It's below 2% annualized, but the number of events is very, very high. So, we spent a lot of time looking into a risk because our concern was, well, what if DeFi's uninvestable now because clawback methods and fables can just destroy everything? And what our research has shown is that all the hacks or 99% of hacks that actually happened wasn't AI finding a way to break a smart contract. It is AI finding legacy opsec vulnerabilities and exploiting them. So, I spent all of my time talking to Trail of Bits and the metaphor I kind of use is imagine you have a bank which has a security up to standard, a great, you know, metal vault. So, AI doesn't invent an amazing drill that breaks through metal vault. What AI does, it finds a hundred old banks with wooden doors that you can knock out, you know, knock in with a with a kick. So, we spent a lot of time looking into opsec. And that's probably the most critical part right now. \>\> Do you think that we're going to get a a ton of upgrades in the future and at some point this is going to become even more secure? Or Okay, so that that that's your take, is that we're actually trending towards security, not away from security. \>\> I think that's the trend we're seeing very clearly because not a single like out of the, let's say, 60 hacks roughly that happened this year, we didn't even know 50 of those 60 platforms. Right. And like if our job was to know every single platform that the sign would know some platforms, it probably means they're not very large and not very serious. \>\> Makes sense. Evgeny, I think this was a this is a good place to wrap. Evgeny, thank you so much for coming on to the Thousand X podcast. This is a lot of fun and it's good to good to have you. We'll have you on at some point. \>\> My pleasure. Thank you. \>\> \[music\] \>\> Nothing said \[music\] on the Thousand X podcast is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, \[music\] not financial advice or necessarily the views of 1K X media. Our hosts, guests, and the 1K X team may hold positions \[music\] in the companies, funds, or projects discussed.