AVOID BASIS TRADE

“It also is just by the nature of the product where you are trading often, like, six month dated or twelve month dated options. Once you have a trade expiring in a year, the market maker needs capital on that exchange for a year. And the trader has some capital and some positions on the exchange for a year. This is very difficult to rest wrestle someone away, from an existing exchange for another exchange once all of that is set up.”

“We originally tried to make options and selling options competitive in 2024. And so a lot of this insight was driven by that experience of trying to get, you know, bigger some of the big funds in the space to sell options, which is what happens at scale in traditional, you know, finance for, you know, 20% yield in USD terms. And it was impossible. Like, it was actually, like, just impossible to make any headway. The reason why is because either the basis trade, which they could lever up was yielding 15 to 30%, almost risk free, like, certainly delta neutral. Or they had the ability to do a deal with a team that was going to launch a token and needed TVL.”

“The key thing is just about, like, accessibility and openness now. And and that's kinda what I'm looking for is, like, how can we open and make these accessible without necessarily having the same cumbersome KYC? Like, there's some interesting stuff. You know? ZKTLS for for KYC, etcetera, etcetera, or, like, Kraken has this thing where, you know, you can link your on chain wallet to your Kraken account, so you can kind of trade centralized but on chain, and that's kinda cool.”

“There was Open, Hejic, Dopex, Strike. Like, Open originally got hit with, like, a CFTC fine. So this is partly, like, regulatory, which kinda is tough, like, a lot of stuff back then, tornado cash. And the fine was huge, and they basically just had to shut down after that, unfortunately. I believe a founder quit off the top of my head. And then, like, similar stuff has into Hijic. Their their risk management via smart contracts is not that good. So there's, like, a TV alt death spiral that happened. They lost, like, 80, I believe, in in the span of of a couple bits.”

“What happened on 10/10 was kind of the best thing that could have been you know, could have happened to us in in some ways in terms of the market structure. And that was effectively, it was the final nail in the coffin for the basis trade, you know, which was already in decline really over the course of 2025. But then also, it really hit a lot of the valuations for a lot of these alts in crypto, which, as I said, a lot of these funds had built all of their returns around.”

“I think AI agents, right, like, that is not an issue for them. They can take that opinion and translate it very cleanly into the right structure, which might be like, you know, buying a call spread, you know, in Bitcoin as well as pairing it with, you know, a ratio put spread to the downside. Like, very difficult to come up with on your own and is a big blocker for a lot of people trying to access, options in general, even, again, people who have have, you know, a decade of experience in finance.”

“Yeah. You just need, differentiated order flow, like real organic users of options. You need that, to get market makers over the line. That begets more, you know, liquidity, which makes it easier to attract that next level of organic order flow. It's kinda why Ribbon managed to make it work way back in 2018, 2019. Not the greatest product in my opinion for the users, but it was great for onboarding liquidity because they offered market makers very cheap volatility, in massive size.”

“One of the big blockers we've had to institutional adoption is to some extent, like, custody. It blocks a lot of institutions from, like, within their mandate being able to come and trade on chain. We've actually developed, like, I think, a a unique, product where, we work with some of the big custodians, the qualified custodians, tokenize their balances with a partner called Strands who, you know, tokenize the balance and say your BitGo account, whether it's Bitcoin or USDC. And then those tokens, you know, the those funds are, you know, segregated. They can't be double pledged.”