Interview with a Crypto Trader

Cryptocurrencies are a very hot topic in the financial world which seems to have transitioned fully to the general public having even captured the attention of people who never thought about getting involved in finance and trading. As such we at SECTOR had the lucky opportunity, thanks to Flow Traders, to interview one of their traders working on crypto to get some insights on crypto trading from an experienced person working in this new and exciting field.

Could you tell us a bit about yourself?

I’m Ruslan and I am a crypto trader at Flow Traders.  I joined the company last January and before that I worked for two and a half years for a smaller market making company back in my hometown, Moscow. I have some work experience working in risk management in the second largest bank in Russia, and working as a consultant in WorldQuant, that's a hedge fund based in the US. Apart from that, I have a Bachelor and master’s degree in applied math and computer science. Two years after I started my university, I decided that I wanted to use my math and computer science skills for trading. Since then, I started going deeper in that field, and ended up working at Flow Traders.

How would you say your experience at Flow Traders is?

It's been a great year and Flow Trader is a great company to work for! There were a lot of challenges but I like working in this dynamic environment. Every day you need to think carefully about what you're trying to achieve and then decide on what steps you want to take to achieve that. You get a lot of responsibility from early on in your career. Not only if you join as an experienced trader but also as a graduate. The work environment is very open and collaborative. Market making is a very competitive world, but internally it is all about teamwork and our desire to win together. This creates a relaxed working environment in my opinion.

What is the difference between Classic trading and Crypto trading?

Crypto is trading 24/7, without any holidays, without any breaks. You need to be ready any time of the day, regardless of what day it is. This affects our set up and the trading desk as well. There is a lot of retail order flow in crypto, for example, we could just register from our smartphone on any exchange and start trading crypto right away.

Another difference is that it also looks like a lot of self-taught traders are trading crypto right now. Since the beginning of the pandemic, and the general situation in markets, more and more retail counterparties started going into markets in general. Also fair to say for American equities, people just aren't satisfied anymore with a zero-interest rate which they can achieve with a bank deposit. So they put their money in the S&P 500 instead in order to get a higher yield. This is even more exaggerated in crypto since it's in general much easier for an individual person to start trading. This results in a lot of order flow in general and a lot of order flow with small quantities. Normal people like you and I, we usually don't have millions of dollars we can invest into trading on our crypto exchanges. So in general, we see a lot of trades with really small sizes like $50 or $100 happening.

We have to work with more market data if we want to do some statistical analysis or come up with trading strategies. Another thing would be that crypto tends to be more volatile than classical asset classes. These are some examples to take into account when you go from trading classical assets to crypto.

What does your working day look like?

We don't have market open or market flows like traditional traders. With this in mind you need to decide for yourself and with your team, when you're going to start trading and when you're going to end trading. At Flow Traders we have day shifts and night shifts. We have a very big team so only a couple days a month I have to stay for the night shift. We also have an office in Hong Kong so the night shift ends never later than 12 AM as their office takes over. Besides my day to day responsibilities, I really like the work life balance that you have at Flow. We do not get a work phone or work laptop so when you are home, you are home. We also have a very nice office with free breakfast, lunch, a bar, and a gym with personal trainers and masseuses so they take good care of us!

What makes a good crypto trader?

It’s very important to be able to think analytically, which luckily is a characteristic of most econometrics students. Aside from this, you have to be sharp throughout the day and be able to make split second decisions under pressure. If you price a product wrong, our competitors can profit from this greatly. Most essentially, it helps if you are interested in crypto and if you enjoy the “game” of trading.

How would you comment on this quote: “The cryptocurrency is a tulip bubble without aesthetics” and more in general what is your stance on cryptocurrencies being a bubble?

If we're speaking about nowadays, and if we're referring as a bubble to anything that is, or that looks overpriced we can make such a conclusion about crypto but crypto is not alone in that. In 2021/2022 different asset classes hit their all-time highs not only in crypto, but also stocks, real estate, crude oil and stuff like that. So, there is a general trend with people getting more interested in investing in risky assets, because they are not satisfied with the yield that less riskier assets provide. Nowadays, crypto is not alone in being or looking overpriced. But at the same time, we can consider two peaks crypto had: we know that in 2017 Bitcoin went up a lot, then it went down pretty much a lot. We observed quite a similar trend in terms of bitcoin price going up in 2020 and 2021. I think that now the situation is much more different from what we've seen in 2017. In 2017, we might have said that crypto was more like a bubble. Now, I feel the situation is a bit different from what it used to be. Because we see much more adoption in our day-to-day life and adoption of crypto by a lot of institutional counterparties. They might be buying crypto as part of their cash savings for instance. Another example is Tesla which owns a lot of Bitcoin. Recently, the US launched their first official ETF on Bitcoin futures. Enabling institutional counterparties to have a more traditional sort of a way to have exposure on Bitcoin and crypto in general. Another thing is that now, day-to-day adoption is even more widespread because you can order Visa or MasterCard cards, which are stitched to some crypto currency service. You can even pay with this card using your crypto. That also relates to last year, when Elon Musk announced that he was going to sell Tesla for bitcoins. He subsequently withdrew his claim, of course, but still, this all points towards the fact that the adoption of crypto on both institutional level and individual level is growing. So, it looks like now crypto has much more value than it used to have before. But of course, this is still a market which is constantly developing, and it might even die down in a couple of years or it might also become as essential as other financial markets. So, a lot of exciting things are happening now, and it looks like there's much more value in them than there used to be before.

What would you say your desk and Flow Traders policy is in regard to the almost infinite number of crypto currencies one can find on the market? Do you keep a wide array? Do you try to diversify it?

I would say that Flow Traders in the first place is a liquidity provider. So, our goal essentially is to provide liquidity to different financial markets for different products. All decisions that we make regarding whether or not we want to trade something, are related to our primary goal which is providing liquidity. We are looking into a broader range of cryptocurrencies, points, and different projects. Simultaneously, we have compliance procedures, which we go through before we start trading any new coin so we carefully choose what we want to trade, such that we are not involved in dealing with different possible scams that for sure might appear very often since this is still an unregulated market, or at least a very slightly regulated market. Basically, all those rules and regulations they're just started to be developed. You have to be careful and you have to know what you're dealing with.