The Wolf Of All Streets - Building The Tools For A Bitcoin Bull Run with James Putra from TradeStation Crypto

Episode Date: January 28, 2021

To make money in crypto, you have to have some skin in the game. But for the masses to enter, someone has to build the infrastructure and tools for traders to utilize. James Putra, head of product strategy at TradeStation, is more than just a designer and builder, he is a trader at heart and knows exactly what features people need to gain exposure to digital assets. It doesn't hurt that James is also a mega bull. Scott Melker and James Putra discuss the ultimate Swiss Franc Forex trade, the jargon of trading, the psychology of trading, the costs of short term capital gains, the root of FUD headlines, miners taking profit, 30% dips, the systemic risk of Tether, awakening bears, retiring off Home Depot stock, the crypto supply crisis, negative interest rates, endless money printing, Miami as the crypto hub, the 2021 crypto outlook and more.  ---- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co

What is up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast. Today's guest is a true trader at heart. As the head of product strategy at TradeStation Crypto, James Puchra is using that knowledge to build the complex infrastructure needed to allow traders to do what they do best, make money. Some would argue that what traders do best actually is lose money, but we can discuss that later. In addition to trading, James has been an investor, builder, and vocal advocate for mass crypto adoption. I'm looking forward to hearing his secrets to be a successful trader and to discussing what we can expect from the crypto market and from TradeStation in 2021. James Putra, thank you so much for coming on the show.

Thanks, Scott, for having us. It's funny you mentioned, I think we remember our losses the most. It's like the times you get knocked out in the fight. I still remember like the Swiss franc getting nailed. I killed it on the way up when they did the peg and got crushed on the way down when they took the peg off. I swear to God, every time I talked to any Forex trader, they were in that trade one way or another, right? Yeah, it was funny. I think it's the only time I've ever had to come into work with a check to pay my employer was on the unpegging of the Swiss. Well, we can get into that in a minute.

But before we get into the rest of the questions, you are once again listening to the Wolf of Wall Street's podcast, which comes out twice a week where I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics. Show is powered by Blockworks Group, a media company with over 20 podcasts in their network.

You can check them out at blockworksgroup.io. And if you like the podcast, follow me on Twitter, check out my website, join my newsletter. You can do both of those things at thewolfofallstreets.io. Let's jump into what you were just talking about. And something I mentioned, traders, obviously, we know, we see the statistics, 95% of traders lose. It's hard to beat the market. If you had simply invested in an index fund, you would have done better than banging your head against the walls of a trader. What is it that makes trading so difficult and why do we remember those losses like you just said and realize them? I think that's a good question. Trading should be boring, but we like this kind of thrill of excitement. And as humans, there's a part of our brain that gets super stimulated

when we're making money. It's this dopamine center. So you get really excited about it. So you get this draw to that excitement. But in reality, trading is pretty mechanical and pretty boring. If you're having like crazy fun, you're probably doing it wrong. You're probably in too much risk. And I think there's so much that goes into trading that people take for granted. You know, a lot of folks, doctors, lawyers, engineers, they have wildly successful careers and they come out and say, okay, I'm going to retire and I'm going to become a trader, but they forget to become a doctor. It took them 10, 15 years just to get through school. And it's not like you can just turn it on and go. I think most people probably

could get in the market and buy and hold onto something. That's pretty straightforward to do, but there's this language you got to learn, right? This, we talk in a funny language around order types, market types, market structure. Then you got to figure out how to use the tools. Then you got to figure out what to even put your money in. And then you got to figure out what your risk parameters. There's just so much complexity. I think that's probably where people get lost in, either get stuck on this education path

or they get a little bit concerned about losing money. So it takes a lot of psychology to become really good. And it's just kind of boring when you're really good at it. I was just gonna say, you just listed all those things that you need to learn how to do, all of which are rendered immediately irrelevant

the second that your stop loss is about to hit or your take profit is there and you wanna remove it. So you can have every rule in the world, but then emotionally change it in the middle, which to me was the most difficult lesson to learn through all of my losses. And as I said, sort of banging my head against the wall. So obviously you are a trader, you understand trading and you're building the tools that we need to do so. And for so many years, those tools have been subpar in crypto. I can certainly remember the 2016, 2017 going on exchanges that had no stop losses and no complex orders and you couldn't get in and out of positions. So what are you seeing as this market matures as the necessary tools to give like really institutional grade structure to what

you're building? Yeah, I think, I mean, it's interesting. You know, you look at when we first got involved in the space, a lot of the counterparties wanted to trade across Skype with us. How do you offer a service for a large institutional retail audience that trades on Skype? It just isn't going to work. But kind of fast forward to now, when you look at how TradeStation looks at the world, we tend to draw people to us that have a good understanding of trading. They want complex orders. They want stop losses, trailing orders.

They are used to a world that they would trade in equities and futures. And when they get into crypto, they're like, why is there no bracket? What happened to the stop loss? So those basic fundamental components are essential to be able to allow traders to have the right tools to get in and mix it up in the market. When we look at the space, we tend to come at it with all the knowledge we have from our traditional background and look at the crypto and say, okay, all right, I need a good market structure.

I need to make sure that we have a healthy liquidity for our customers. I need to make sure that we have good order types. Simple things like a trailing stop is important. Doing some type of bracket order entries that allow people to have strategies. Things that are super interesting for us are like cross-margining. We find a lot of folks come in where they have, they hold spot, they want to trade futures.

So finding out how we can unlock those capabilities for them. Today, what we see is customers have really expanded beyond just the spot market. So if you're a crypto trader, you find that spot's great, but it's limiting. So you want exposure and potentially crypto futures or crypto options. And you might not be so comfortable to go on an international exchange, maybe BitMEX, Deribit, and try those synthetic options, perpetual swaps. But you may be more comfortable with something like a CME futures product. of it and try those synthetic swaps, natural swaps. But you may be more comfortable with something like a CME futures product.

And I think the higher up the food chain you go in terms of sophistication, the more comfortable you are with the CME products and the less comfortable you are with the swaps that happen overseas. I think eventually we'll get there. That infrastructure will be a little bit better, but the, you know, it's difficult when the systems are kind of built from scratch and they're new and they have not really been time tested on kind of margining, but kind of going off on a tangent there, the, when we think about the markets for us, it's super important to have a quality market structure. And it's one of the reasons that we didn't want to become another exchange. We positioned ourselves as a broker. So we will connect to a number of

different exchanges. And that allows us to provide the customer with a picture across multiple markets of a consolidated order book, and then interact with all those different markets. So we take the headache out of it as much as possible, meaning we're going to show you a consolidated order book of all the markets we're connected to. And when you hit buy, our order router is going to go and break that order up in the most efficient way to get you executed at the best possible prices. That's a super important piece of infrastructure, especially if you come from a traditional markets background and when, you know, when you buy Apple, you don't care where it gets executed. You just want a good fill. And on a crypto side,

if you're used to trading on Coinbase, Kraken, Bitstamp, you have to juggle money all over the place and it becomes a headache and you've got risk everywhere. So those things are super important. And we saw that as like a natural starting point for us and just something that was essential for us to be able to operate as a business, allowing us to have credit lines across a number of different venues, not post collateral and have risk spread across the entire market, but be able to manage that cross exchange settlements so that the customers could just do what they want to do, focus on finding the trade, getting in and out of the market. And then our job again is just stay up and stay operational, provide good liquidity, answer the customers when they call. Those things, I think a lot of people take for granted that when you're trading and you're in a rhythm, you kind of find that flow state and any little thing throws you off your game.

Like, why did the screen flicker? Oh, why did it not fill what I thought it would be? Now you're off the game and you're trying to call. So we, we try to as much as possible, be there for the customer and respond. You got a problem. You call us, we'll answer the phone. We'll try to answer that question as quickly as possible. We could always do better, but that's, you know, we understand that trader mindset that how easy it is to be thrown off your game. So maybe I'm

rambling a little bit, but definitely the tools, the market structure and being there for the customers are probably the most important things we can do right now. Kind of looking down the next part of the one, the two years, there's a lot of pent up interest that we see in the marketplace. Simple things like retirement accounts. That's a huge opportunity for companies to get involved. Today, it's not easy and it's super expensive. I mean, who wants to go and open up a futures IRA, set up an LLC, go on an exchange, have a custodial relationship, pay the fees all across the board just so you can hold spot. I mean, today, if you hold, you can hold Apple in your IRA.

It's not a problem. So we need to get to that place where we can allow retirement accounts to be able to engage in spot trading and crypto assets. We need to get to a place where we can bring in other participants like investment advisors. And certainly, I don't think investment advisors are going to take a ton of exposure on spot. But once we see the ETF, I would think that that's going to be really where you get the bang for the buck. Yeah, you're talking about the self-directed IRAs and the IRA challenges. I was going to bring up, obviously, an ETF, which I think is imminent and I think is this year, to be quite honest. I think that we've

matured enough that the arguments against it are somewhat moot. So do you think that that will be the game changer for investment advisors and for people who've been looking for exposure for institutions that really can't touch the trusts and don't want a custody spot. I mean, do you think the ETF is kind of the final boss here? I think without a doubt, it's a game changer. I'm not sure if it's the final boss. We'll probably find some new, some new innovations to bring to the space, but definitely it's going to make it much more accessible.

If you look at even just look across the retail brokers in the US, so we're super US focused, but retail brokers, about 54% of the US population has some exposure to the equity markets through a retail broker. Right. So as soon as you make it accessible,

for example, an ETF, now you can be listed on any of the big bucks brokers. So TD, Schwab, Fidelity, right away, they can turn it on. I mean, TradeStation also. So it just unlocks doors to capital that's been stuck on the sidelines that hasn't maybe been comfortable enough to open a crypto account and engage a spot directly. So it's interesting. Also, you talked about the fact that, you know, people come, they understand buying and selling spot. Maybe that becomes a little bit boring, or if they are a bit more advanced, maybe they're looking for a way to degree and products sort of more focused on futures and obviously some leverage.

I mean, it's very hard. It's still very hard for an American to hedge their spot exposure. Yeah, I mean, for U.S. persons, you're really long only at this point. Once we get ETFs, presumably at some point they'll be shortable. And then you have kind of an easy, understandable strategy for a US person, right? I'm long spot. I can be short the ETF or the stock. Once you have ETFs,

it's very short to be very quickly. You're going to end up with options. And those markets tend to be easier for customers to engage with. Equities and options are, for retail audiences, a little bit easier to grasp than futures. Not often in an equities market, you come in and you're completely upside down. Futures, different risk profile,

and may end up upside down really quickly. But I think there's a lot of tools that are starting to open up for traders that are beyond just the spot markets. I mean, we have the futures, soon there'll be an ETF, soon there'll be options on those ETFs. And that'll really start to open up doors to new capital, but really interesting ways that we can trade the markets and potentially find better price discovery with the ability to do some shorting on these products. Right. And as you said, you were talking about liquidity and the advantages that you have, obviously, as a broker, because you can source liquidity.

It was recently reported that eToro effectively ran out of Bitcoin. They had to send out an email to millions of people saying, maybe don't put in any buy orders right now. We're not sure we'll be able to fill them on the sell side. Awesome. First of all, that's awesome because we kind of talk about this myth of a sell side liquidity crisis that everybody's buying and nobody's selling this time. You obviously solve for that as a broker, but do you think that there really could be supply side shock in Bitcoin in 2021? I think we see it. We love all of our trading partners that we interact with, but they're definitely feeling the crunch.

They're definitely feeling it. The exchanges have a little bit of a different perspective than the OTC desks, but the OTC desks are vocally saying it's harder and harder to find supply and it's harder and harder to be able to move those funds around that they need to. So without a doubt, we're seeing crunches on the supply. We have a number of different avenues to be able to source. So we fortunately not run into those types of issues, but if the market keeps going up and larger firms keep coming in and taking crypto out of the market, it's going to naturally shrink the supply that we have or that is available for us.

Right. I mean, right now, every metric indicates that that's happening. I mean, we see huge buys on exchanges and outflows instead of like whales inflow. A lot of cash going to exchange, a lot of crypto coming off exchange. Yeah. And you have to imagine that those buyers, if they're truly buying it as a hedge, or if the narrative is that it's a replacement for cash in a reserve, they're not selling anytime soon, right? In fact, it would be somewhat embarrassing for them if they did. Also, don't they have to consider short-term versus long-term cap gains to some degree? You have to imagine that if they're buying it now, they're holding it at least a year if they're

in the United States just to mitigate the risk of higher taxes. I think that's a super interesting point. I love trading and I trade as much as I can, but I'm in a funky spot now. My cost basis sits somewhere around 8,000. The moment I just trade or try to scalp something, I'm out 30%, 35% on cap gains without even making any money on the trade. So it's a really interesting spot. I'm definitely of the longer term view that right now the market's going up, but I can't do better than just sitting on it. I think there's probably people that are much smarter than me that can take the longer term view that right now the market's going up, but I can't do better than just sitting on it. I think there's probably people that are much smarter than me that can take advantage of this, but it's just going one direction. I'm just trying to ride the tide. My man, I couldn't agree

more. And I preach it and I'm getting yelled at. I've been saying to people, I just can't really trade right now because A, all of our portfolios have grown so much on the investment side. If you have a well-balanced portfolio, obviously you shouldn't be holding spot as a majority of your portfolio, no matter how God tier of a trader you think you are. Right. So for me now to like scale up to the percentages that I would be comfortable with to make it meaningful and to, as you said, avoid that tax risk, I'd be trading with size much greater than I'm comfortable with. Yeah. I mean, you want to trade one Bitcoin, you're throwing a $40,000 position in and out of the market. Yeah. And it's a very weird situation, but it's like you said,

and I pointed out to someone recently, this is why I traded so that I don't have to right now. What do we do for the last three years if I have to like degenerate scalp on exchanges when Bitcoin is going up, you know, a few multiples. I think Raul talks about this as the most boring trade. Like it really is. There's nothing to do. And that's probably the hardest thing for me as a trader and probably a trading addict is to not push the button. So it's like, I got to find something else to do to trade. Typically, what I do is I'll have my larger portfolio that's just locked away out of reach. And then I'll have a couple thousand bucks that I'll feed that addiction with. I'm doing that now on some of the altcoins, but really, it's just watching is exciting.

Right. I was just gonna ask. So to ask. So the Bitcoin trade is very difficult now, but we still have the crazy volatility and I think potential upside in the altcoin market. So is that something that you guys service and how do you approach that? We do. We offer, I think we offer a total of five, so four altcoins at the moment. We get traction there. I think we don't have the breadth that some of the other exchanges do. We'd like to offer some more volatile coins, but our customer base is really, I think it's across the industry, the lion's share happens in Bitcoin. It's like 70%. So we can offer other assets and there is a moderate demand, but the people that we're generally attracting are not so far down the risk curve of the altcoins.

They're pretty happy with the primary top coins. So as a trader yourself, I'm curious how you approach your portfolio management. I touched on mine, obviously. I like to generally be around 70% hold and don't touch it, which is primarily Bitcoin with some Ethereum and then fractions of the altcoin positions that I once held that did exceptionally well. And I figure, you know, I keep the good old fashioned moon bag as we like to call it in crypto.

But how do you manage your portfolio overall as a trader versus an investor? Yeah. So that's a good question. It depends for me. I tend to adjust over time, my perspective at the moment, I'm very much just buying and holding. I'm just sitting on everything. And I think it's probably 95% of what I'm doing. It's just letting it sit and enjoy the ride up. I've got a small percentage that I experiment with. I've never been a huge fan of paper trading. I like to just get in and start battling. So I just did a Ethereum staking node.

I read a little bit about it, got excited. I said, okay, that looks interesting. I'd like to have some Ethereum exposure. I don't plan to sell it. Let me do one of these ETH2 staking nodes. So that's a part of that play money just to see how that goes. But it's interesting because once you're in the game, you really start paying attention to it. I thought I knew about staking and ETH ahead of this, but until you actually put capital at risk, that's when you really dig into it. So generally portfolio right now,

the lion's share sits. You're holding. I let it rides. And then I'm experimenting a few things. I like to dabble in some of the altcoins, but it's really, I don't have as much bandwidth to go and really understand what's going on. I try to look at the technicals and they're good,

but there's a lot of kind of interesting stuff behind the scenes. I think that I'd rather look at than just the chart trading. So the narrative obviously is that 2017 was retail FOMO and speculation and that 2020 was the rise of, you know, institutional investment and FOMO for holding, I guess, instead of FOMO for speculating. What are you seeing as far as, you know, new customers, what kind of customers at what velocity are they signing up? Are you seeing that reflected? Or is there a different narrative, you know, based on what you're seeing with traders actually signing up to use the platform? So it's a good question. I mean, I look at like, if you're involved in 2013, you're just gambling. In 2017, you're really trying to get involved, but you are super early adopter. We had to do things like show your

passport and kind of grind your way through to figure it out. And yes, there was definitely retail participation there because it was not large enough for meaningful players to get involved. 2020 is definitely a different type of customer that we see. In 2020, you have a lot more B2B2C players coming in. So a lot of folks forget that that's a huge institution. You bring someone like PayPal to the table with 300 million customers. That is an institution, but they're B2B2C and they're opening the funnel up for a large number of folks. So what we see happening is sort of two areas starting to emerge. The type of banking style products like a PayPal, a Venmo that cater to mass market retail and the customers that don't really know or care so much about the trading side, but they just want to hold on to this thing and part of an investment

for them. And we sit on the more investment side of things where we're seeing a flow of customers that are knowledgeable about trading, definitely would like to have exposure. We get a lot of crossover from the traditional business. Now things are exciting. People move over. We also are bringing in a lot of people that are just outgrowing their spot exchanges. In terms of customer growth, it's been incredible. I think the... Yeah.

Beginning of 2020, when all the stuff started happening with COVID, we prepared ourselves, we bent on the hatches, we thought this is going to be an absolutely brutal year. And it turned out to be one of the best years we've ever had as a firm. We were very fortunate about this. I think, you know, you take a lot of people, you put them at home in front of their computer all day long, and they know sports, no sports they're gonna do something and so that capital along with the ease of access from the the b2b to c like tracation or square and paypal really opened up a huge funnel of of money to be able to come in and alongside the obvious ones the gray scales that's that's brought a lot more exposure and and access to a huge audience at least in the u.s um alongside of it you have then the like the novigrads the

sailors the paul raul pauls that are all coming in and buying up huge amounts from kind of a a macro perspective and they're seeing things that they want this couple of years or maybe throughout their life so it just it's this perfect storm of activity which is like ease of access bigger demand because the larger market cap people stuck at home in those sports and it just it fueled this kind of self uh spiral of activity that just kept growing and growing and growing. And, you know, as the, as the price rockets up from 10,000 to 20,000, it draws immediate attention, draws more people in the market cap is bigger, so you can get larger players. So it's, it just continues to grow, which is great. I think it's nice that we had this last, what, 30 something percent blow off. I was good. Yeah, that actually, that, that something percent blow off. I was going to add that. Actually,

that was what I intended to ask you about as the first question, but then we started about trading and everyone went, it's like they've never been through it before. All of a sudden, you see everyone talking about, I'm in CNN, crypto's in a bear market. Bitcoin's in a bear market for 30 seconds, right? I mean, maybe, okay? And then you start seeing, you know, the regular community, the bears come out roaring, talking about 20,000 retests and 10,000 retests and new lows. And I mean, just complete insanity.

Why? Isn't a 30% retest? We saw that like six times in 2017. Before hundreds of percent gains each time. I mean, it makes for good headlines. That article on CNN, I was quoted in, which like, weirdly exploded all around the world. Like, I got it was translated in the Czech, Indonesia, and it was in Australia. So I had all those people from the world calling me like, I saw you in this article. But it makes for good headlines. I think that we see as the run up late last year, every bank analyst wanted to come out with a

target and they want to have the higher target. They want to make the headlines. It's $400,000 higher. It's great headlines. Market sells off in the bear market. Crypto's us it it's great headlines uh market sells off is in a bear market crypto's dead it's great headlines um it's just noise i think that and you've been trading for a long time it's exciting it's interesting to look at but it's noise you just got to look at the fundamentals and the overall direction of things that are happening and right price dropping doesn't change anything from a fundamental perspective right and that's what people need to keep in mind it's not like like Grayscale. Well, Grayscale did shut down for a period of time, but like briefly, it's not like price was down because they couldn't service enough customers. I mean, that's an opposite problem, right? That's more of the supply side shock kind of thing. But I'm curious,

what happens to a Grayscale trust when there's an ETF? My opinion is the premium roads. I still think that they continue to grow. They have a great product, or I think they have a great product. It's not a trade station sponsorship, but going in from that private placement to be able to hold those shares and move them out to brokerage, pretty unique way to get into this. I still think you carry a premium on this product. ETF will be interesting to see if the ETF is structured like a grayscale product where there's direct spot exposure or if it's based on futures or not. So

that will determine how much that premium erodes. That premium can be absurd, especially on their altcoin products. I i mean there was a moment there a couple weeks ago where you could buy if you were credited you know into the litecoin trust basically it was either you know six month lockup or a year lockup but basically you were guaranteed to make money as long as litecoin dropped anything less than 90 percent in the last next six months to a year so that grayscale trade probably is somewhat contributed to this meteoric rise because it has been the easiest trade in the world.

It's guaranteed profit unless the entire market blows up. Yeah, and you do a private placement, much easier for larger funds to get involved with larger capital. So they tend to take these down in larger sizes than maybe just one Bitcoin.

It's a different product, awesome profits. Yeah, I mean, it's really amazing for those who had the foresight and I guess access earlier. But that also like the supply side, I think I read yesterday that grayscale is now buying 1.9 times what's being mined so it's not even like they're buying all the bitcoin that's being mined they're buying basically double the bitcoin and yeah i saw also like the the likes

of paypal are doing the same like it's just we you know it's a fundamental shift in supply and demand the demand increased and supply decreased and it's this like shift in supply and demand. The demand increased and supply decreased and it's this like perfect storm of activity. So by the dip, when it goes down 30%. And so as a trader who watches this market and as someone who obviously is building these tools, why do you think we see these 30% drops? Is that miners taking profit?

Is it somebody trying to engineer liquidity for a bigger buy? How do you perceive those moves? So I'd start with, I believe they're natural parts of the move up. In terms of the cause, I can only speculate. I'm interested to hear your thoughts on the whole idea around Tether and their participation and the move up and if that has an impact. So that may be a contributing factor. People do take profits. People take profits on large sizes. And when you go from 8,000 to 40, you want to take something off the table.

And we still have like this core whale community that's holding the majority of Bitcoins, no matter how much Michael Saylor and Paul Tudor Jones buy, the people who are in early and have, you know, and they don't move their coins very much, but miners and those people, they're going to take their profits every once in a while. I think that's what it is.

As for Tether, you know, maybe there was something to it in 2017. At this point, I think they've done an exceptional job of showing that they are backed. And also, what's the Tether market cap? $24 billion or a trillion dollar market cap for crypto. So even an explosion of Tether, I think there's other options. And I think that it would be a road bump. And I don't think that they've printed enough Tether for this move. 2017, I could see it, but we're not at $40,000 ish because of Tether, in my mind. I don't know what you think. Yeah, I tend to agree. I think if it turns out to be, which I don't believe it is, but let's just explore the idea that there was something that

was incorrect there. They're not going to take out a significant portion of the market cap. I mean, it'll be a black eye for the space, but I can't see the argument that it's a systemic risk at this point. I think there's probably other areas that represent some higher systemic risk than talk about that. You know, the I think the interesting part to think about is we, we look at Bitcoin as a supply constrained asset, which it is, at least today, there's only a certain amount of Bitcoin that I will be mined. But we forget that derivatives are like Forex, the Bitcoin market cap. So we're creating these things on top of it as a community that are providing more and more exposure to an underlying asset that's not a whole lot to go around. So those areas are being built with technology that That's not really been proven.

Yet. It's not like you have Nasdaq and NYSE. Who also struggle on their own issues. Of course. You have these technologies. That have been built in the last five years. That haven't really had to deal with. Major blowouts.

The last. I think you guys are talking about this. On your podcast. With Dan. That Bitfinex has been credited to one of the reasons why we had such a huge sell-off in the beginning of the year. They unplugged the system and things balanced out. So those are parts of the system that still need to be fully exercised, and we need to figure out how to work through the challenges that are going to happen. There's a lot of leverage being built up with types of settlement activities. There's a lot of leverage being built up with the borrow lend trades that are going on, a lot of stuff going on in DeFi that's creating these additional

credits and not a great credit monitoring system available. There's really not a great way to underwrite counterparty risk, which is why a lot of the folks are doing these over collateralized loans, which I think is probably the smartest way to do the lend borrow trade if you're going to do it. But I'm a little scared about the people that are just lending and getting no collateral back because eventually when the music stops, there's only a limited amount of chairs and we're getting a larger and larger circle of participants that are dependent on this limited supply. Fractional Reserve Bank. Yeah, you know, that's the question. When there's a bank run and the bank isn't holding it, what happens, right?

I don't know that that's inevitable, but it is interesting that you talk about, you know, we always talk about, obviously you and I have talked about it multiple times already, the supply side and deflationary asset and 21 million Bitcoin and 5 million are lost. And it's even, but the more products you build on top of it, the more like theoretical supply there becomes, right? If there's a way to trade it without exposure to the spot, that supply becomes less relevant. Exactly. I think that's dead on. And right now there's a ton of interest in the raw supply,

the underlying spot supply, or at least perceived. You know, if you're on PayPal, you buy Bitcoin, you hold it, you can't take it out, but you still have some, in theory, and I have a reason to believe that you own the Bitcoin that's there. But when you start to get into the derivative side, even the CME futures product, it's all cash settled. It's cash settled, right. On delivery. So it does become less important. And the derivative instruments are a necessary part of the ecosystem. They're going to be the ways that we draw in much larger capital.

I mean, it's also what makes the market efficient, right? I mean, setting a futures price is how you don't start talking about $1.5 million in Bitcoin in six months. So it is, I mean, it's a necessary, it's a necessary part of the, part of the ecosystem. But, and I think when it comes to owning spot, there's this sort of evolution. First you buy on PayPal, right? And you just want to have some Bitcoin and then you dig into it a little more and you're like, I'm going to buy in a real exchange where I can send the coin or I'm going to hold it on an exchange. And then you get your first hardware wallet, it freaks you out because you don't really know what you're doing and you can lose it. And then all of a sudden you become like a crazy person like me and you go to like full multi-sig

stuff is spread out around the world. And even you can't access your own Bitcoin, you know, but I think you're right that that's not important to most people and probably to the people that's important to, we already have our exposure. Yeah. Yeah. I think the, it's funny that story you just told, it's very quick how it happens too. You kind of outgrow very fast and you become the crazy guy in the corner all of a sudden where you're like, yeah, I got Bitcoin. I'm hoarding gold in my own wallet. And I think that over time, the hardware wallets are going to become less and less common. I think people probably like you and I that are original in here that we're going to hold our own stuff, but it's just going to be easier to work with inside of a usable system. Well, exchanges have become far better. I mean, we all kind of went down that path and I still believe in it. Don't get me wrong. Well, exchanges have become far better. I mean, you know, we all kind of went

down that path and I still believe in it. Don't get me wrong. Security, I think is huge. And if you've ever been SIM swapped or hacked, as I have multiple times, you get a taste for it, but exchanges do such a better job now of protecting your coins, you know, like a better two-factor authorization, multiple steps to go through. If you've got a 2FA on your email and you've got 2FA on your account and you need a separate device or whitelist your address to get the coins off, I think that they're doing a better job. So I agree that as they improve, that's where the buck will stop for 90% of people. Yeah. And a lot of people, I think they don't want to know about some of the risks. I I think they don't want to know about

some of the risks. I mean, they don't want to know about, we live in a similar risk with cash in your bank account. We just don't want to know. You don't perceive it, right? Because that's been the way that that's where you put your money. Yeah. I mean, I don't know that that's necessarily right or wrong. I think we're going down that path because we see it coming and we do the best job we can to make sure that everything is buttoned up and battened down. I think a lot has changed in three years in terms of knowledge and awareness and understanding of how to deal with these assets and put them in more secure. But I think generally the people in general that are engaging, we have a horrible, we're notoriously horrible at assessing risk. And I think I was listening to one of the Winklevoss twins talking about somebody riding a bicycle with no helmet and a mask on.

Like, yeah, you're not going to get COVID, but you're going to still crack your head if you fall. Yeah, it's true. It's true. It's great. That's a great point. So I'm curious, you said that 2020 has been one of the best years for you guys ever. I had a very similar experience in March. I was like,

everything's ending, it's over. Like how was anybody going to make money and then just had this massive year, you know, and looking back, it's, it's, it's really interesting. So on your non crypto side of the business, did you also see that sort of meteoric rise in interest in trading and signups because of the Davy Day Trader and all these people? Basically, I'm asking, was the fact that people were at home and didn't have sports to gamble on stuff, did that only translate in crypto or did you see the stock side absolutely explode as well because people got more interested? Yeah, stock side. It started for us on the stock side. I think if you go back to the beginning of the year, crypto was exciting, but the stock market was much more exciting. It was much more exciting through the summer. And because we offer all those asset classes, we have an interesting story. We see a lot of activity in that stock. And those similar folks, we also see them flip over

and start trading Bitcoin when it's going up. But we did, yeah, definitely the securities business got a lot of renewed interest. We saw a large inflow of new customers, large reactivation of existing customers, and then a lot more activity from the folks that we already had. I think a lot of this though, if you think back to 2008, when everyone got just wiped out, a lot of folks still remember that, and they remember that opportunity that emerged. If you bought Home Depot 2008,

you probably retired right now. It was $4 at one point. I think that's incredible. So there was a lot of opportunity. A lot of people have nothing to do. And it just folks saw that as a place to come in and really engage in the space. Yeah, a lot of people saw the baby thrown out with the bathwater, you know, as they say, which is that why is a fundamentally good company also dropping 30, 40% that, you know, if their business hasn they won't be able to ship. Wrong. Yeah, Amazon. So it's just funny to look back at the narratives in your head when everything's down and bad and how obvious it is in retrospect that it was going to be the easiest trade in the world. It dropped and came back very quick, which drew a lot of excitement.

And if you're sitting on the sidelines and you're talking to your friends, you got nothing else to do and they're making money in stocks and you hear about the Robinhood rally and there was no late time to get in. I mean, you could have started it. Still, it feels that way, right? Yeah. It's not like they're going to stop printing money. Yeah. I mean, that's a whole nother discussion. The, you know, the, but we printed 25% of all the dollars in circulation last year? That's incredible number. But how, how does that end? Um, I don't see an easy near term solution. I think, um, globally in order to keep the economy moving, um, there's to be a lot more stimulus coming.

I just don't see it. I mean, Europe is on almost total lockdown. They're going to have to bring their economy back to life somehow. The US is printing like crazy. We're trying to keep things moving. I think you've got to get some government lawmaker consensus on a solution more of a longer term and I don't think that regardless where your politics lie neither I don't see any politician that's going to be willing to tighten up the bootstraps and you know who's it's a free money train we're we're paying people money people are liking it no one's going to want to have that uncomfortable conversation about how are we going to deal with this deficit that we're creating this debt and we're we're kind of

on a collision course you know later 20 later 2020 will be very interesting as we have to figure out all the baby boomers are now shifting into retirement we have to figure out all the baby boomers are now shifting into retirement. We have to figure out how we're going to cover those obligations. And there's not easy solutions. And right now, we don't have the political will in the US to really face those conversations. And I don't think even as a population, we're ready to kind of compromise and figure out how we do this together. Yeah, you're so right. I mean, money printing has no party anymore, right? And there's no, and neither party can make the argument of fiscal conservatism or any,

any sort of responsibility over budgets. But if you're you and you're running trade station, numbers go up, right? If they keep printing, stocks go up. Yeah. It's great. I mean, it's great when you see, for us, it's asset inflation. We're kind of seeing all the assets, crypto goes up, equities go up. Eventually there will be more corrections, but the more you pump money into the system, the more it's going to cause the assets to increase. Now, it doesn't seem like a lot of that, well, it's going to cause the assets to increase. Now, it doesn't seem like a lot of that. Well, it seems like a lot of the cash has been printed, has been absorbed by the banks. And we got to figure out how to get that out of the banks and

into the populations. If nobody takes a loan, the money isn't really printed, right? Yeah. And I think people want loans. I'm not sure that they're able to get loans yet. I think the banking sector is still scarred from 2008 and we haven't yet given them the free reign. You've got a bunch of capital, go make loans. We need to make it okay for them to unlock that capital. Maybe that comes to me, that does start to go down that idea that there's potentially going to be negative interest rates. Who knows that's going to happen? A bunch of money being printed, locked in the banking system, needs to get to the people. We don't have a great way to

get it to the people. I don't think that we are in a place in the US that we're just going to jump on to some type of central bank stable coin and send it to people directly. I think not yet, hopefully soon, but there's- It's coming. It's coming for sure, but I think we're not there yet. I don't see it happening in the next year. No, I don't. Yeah. No, I don't, I don't think we see central well in China. We'll see, you know, they're already testing central bank digital currencies, but the United States isn't really compelled to, I don't think do that immediately. So speaking of the United States, you're one of the few companies that is attempting

to run a crypto trading business in the United States with all the crazy regulation that we have here and stuff. You guys are based in Miami. I've had a lot of exchange CEOs on the show and have a lot of them that are friends and most of them blindly say, we don't touch the United States. We can't do it. Don't even try it. The regulatory hurdles are too great. The risk is too high. So what is that like for you guys operating in the United States with a primarily United States customer base? We like punishment. I think that's part of the reason. No, I think in all reality, TradeStation as a brand has operated a regulated broker-dealer for many years. We're used to having to go through the hoops and hurdles and regulation.

I think we believe it's really a necessary function to be able to provide some clarity for the crypto markets. It is definitely, it's not been easy to operate in the US. When we started, there really wasn't a clear path. A lot of the things we had to deal with, I mean, for us setting up a trading business, we've done it for many asset classes and it's straightforward for us. But when we got into crypto, it seemed like everything looked familiar, but along every step of the way, you just hit a different hurdle and challenge. We have all the big consulting firms, Deloitte, KPMG, within themselves, when you ask them for advice, they're arguing amongst themselves.

Simple one, how do you solve tax? What's our obligation for tax supports? Well, IRS hasn't published any guidance yet. There's a blog post, which is being cited all over the place. God, that blog post, which changed magically changes like one word at a time. Yeah. And, and so then you go to like, one of the auditors, the kind of phone, you go to the light, and you get them on the phone, and they're supposed to kind of give you some clarity or even some cover on the decision you make, but then they can't agree. Then you engage the outside, you engage the outside counsel that are experts in the space and they change their mind every other day. As I mean, the space is moving,

but so you get some guidance and you start to run with it. Then the next week you find out that the opinion has changed. So I think that was probably the hardest part for us was not really having a clear roadmap to execute this. I think fortunately, we had a good construct coming from the regulated side of, you know, no matter where the rules are or don't exist now, if we apply this similar type of framework for how we approach the space, eventually the rules will fall in place and we'll be able to adapt to whatever rules come out. Although, while most of the exchanges you mentioned are not here in the US today, I believe that Coinbase, like a jillion IPO and backed is going to change the perception. I agree.

I agree. I think maybe it's more for, you know, a lot of people I'm talking about are leverage products and they're trying to offer altcoins and you see the path that Ripple's going down and, you know, making sure. I'm assuming that's why you guys list

four, you know, five things and don't touch 500 right yeah it helps i think we started with a narrow subset that we felt comfortable with uh we will eventually expand that but it's um it's super important for us for us we have brand reputation across all the asset classes. If we blow up crypto or make a misstep on crypto, it damages the core business. So our decisions come from a different place. And we are not the most aggressive and the most out there in the forefront. But we tend to kind of take this slow, steady path. Now, when you compare us against some of the other brokers, we're kind of way out in front of most of the other brokers in terms of our view on crypto and making it accessible. But we're still, I think, fairly slow compared to a lot of the more nimble crypto

startups. A lot of that is we have teams and teams of lawyers, compliance people, there's a lot of discussion. And it's not like you can point to a rule and say, hey, that's the way. It's how do you get to the best understanding and make the most educated decision? That's probably been the trickiest for us. Yeah, I had Sam Bankman freed on not long ago, the CEO of FTX. And we were talking about that. I kind of joked they probably had more lawyers than employees. And he said, yeah, and every single one of them gives you a different opinion and actually

makes everything harder, just like you sort of said. I guess his take, which was a great quote, I think he said, you know, I'd rather stay up late than lose sleep, basically do the work and give the best faith effort, you know, in advance and then hope for the best. But it sounds like that's all you can do if you don't have clarity, right? You just comply as much as you possibly can and hope that they respect that effort and don't come after you for some loophole that didn't even exist at the time. Yeah. I mean, I think you prepare yourself. You don't take unnecessary risks and operate under frameworks that you can defend.

And those are really kind of the best ways to move about it. And a lot of our industry knowledge and kind of intellectual capital, the firm comes from that securities broker dealer side. So when you start looking at problems, that's sort of the first place they go, okay, well, that's the natural direction of the regulation. Where do we sit today? Okay, well, let's not veer too far from where we think this is ultimately going to end up. Makes sense. As I touched on before, you're in

Miami, and Miami is all over the press right now for crypto, right? Suarez is kind of saying that he wants it to be the fintech capital of the United States. No state taxes in Florida, so it's not like hedge funds and wealthy people haven't been looking to Florida in the past. I know my friend Benjamin Minku is the CEO of Elrond, flew in from Romania to meet with him. And my friend Wit, who runs a miner in Eastern Europe as well, talked to him. A Winklevire down there. What are you seeing on the ground? And is it really exciting for you? I mean, do you think that this is happening down there? Because I was a Miami resident for like five years. I just left

not long ago and it makes me kind of want to go back. Yeah, it's without a doubt. It's 2020 opened up a lot of possibilities for folks. When you don't have to be in an office, you can be anywhere. And then you start to see your checks come in and they're still 30, 40% taxes. And you start looking at it's sunny in Miami and we're talking about, Hey, it's beautiful. I'm going to the beach. And you have a mayor, Suarez has been really good about this. He's been focused around a financial initiative. I think he calls it wall street South, probably for the last two, three years, they're, they're building up a financial hub in Miami. Not many people know this. Miami is the second largest banking center in the US. Yeah, because it's servicing South America. I mean, it is the

point of entry to the United States for all of South America. Yeah. And so it's a great spot. And we've, TradeChase has been down here for many years, and it's been difficult to find talent, a lot of like finance, service of talent. We get, there's a ton of talent, but it's not necessarily what we need on the finance side. And it's becoming easier. A lot of times we import folks that are more than willing to move here. But the stuff that Suarez is doing is really becoming a champion for Miami. And I think he's done a great job of positioning, at least around the headlines of, you know,

engaging with the community like the Wink of Oz, Pomp, a variety of other people that will draw the attention and more awareness of Miami. I think Goldman Sachs is talking about setting up here, JP Morgan. Who is it? Paul Singer. There's a variety of other folks that are already down here that are growing their footprint. And Suarez is making it attractive. He's making them good offers. And we've got phenomenal universities. I mean, University of Miami is what, 15 minutes from downtown. So it's a great university. You can pull talent here.

You can't beat the weather. And it's great. I mean, that's, you know, that's what led me there. I woke up one morning in New York City and it was cold and dinged, dark outside. And my wife and I said, you know, our rent here is double what a mortgage for like a penthouse apartment in Miami would be. What are we doing here? Yeah. I move in. And, you know, it's funny, though, when we were in Miami at the time,

the joke was that nobody in Miami had a job at all. Like everyone you meet, you can't tell you what they do. And they're just sort of on permanent vacation. So it seems that there's a change in that ethos down there a bit that people actually coming down there to do things other than sit on the beach. We see I mean, a number of our trading partners are either located down here now or are planning to locate down here. Another firm that's pretty interesting is MyAx, the Miami Exchange. They're right down the road. They've been a financial kind of center here. So it's just growing and the level of talent that we're starting to get in the area, it's expanding beyond just sales for banking, which is nice to see. That's like super interesting and there's lots to offer.

It's been interesting to watch. I mean, even just the housing prices have blasted up. You're mentioning about the apartment. A buddy of mine moved down and they took a one bedroom for $4,500. I'm like, you're out of your mind. I paid seven in New York. He thinks he's saved and he's on the beach. Yeah. I mean, yeah, Miami is finally going again. It was the best financial decision I ever made was buying a condo in Miami in like 2011, 2012 know I mean it was free money luckily but the people who bought it as you taught we talk about the fear in 2008 I mean the people who had the foresight to buy in Miami or anywhere but specifically in Miami maybe Las Vegas but really Miami

made incalculable by anything. Yeah. I look outside. I counted in the last year, 16 new buildings going up around me. We're talking massive buildings. There's one that's around 8,000 people just across the road from us. So the capacity is here. Interesting when we just did the, when we did the early lockdown, the entire place was empty because most people don't live here. So this is everyone's second home. That's one. Yeah. And it's starting to shift.

And we started to see many more people that are here more full time instead of just that Thanksgiving to Easter. Some people that are here working here trying to make money and grow. And I'd argue there's not very many places in the world that's tropical and you can make good living. Miami is one of them. It certainly is. So, you know, I know we're getting up against it here with time. I'm curious, the broader vision for 2021 and beyond, what do you think will happen in the crypto market?

And then obviously, what are your plans, you know, personally and at TradeStation? Broadly crypto, I think we continue to see an enormous amount of interest in Bitcoin. Some of the price forecasts are crazy, but I don't think they're that crazy. I don't either. If you consider it as multiples, I mean, you know, it's a 3x, you're in the six figures now, and we just did that. Yeah. So I think that 2020 becomes a great year. Bitcoin has a lot of the attention now. I suspect sometime shortly, Ethereum will take over on some of that interest and has potentially higher multiples. But we'll see if that plays out.

Overall, the amount of access to the crypto markets will continue to grow and will continue to draw more interest in the space. For sure, in the U.S., more B2B2C players are coming in, more opportunities for customers are coming in. The ability for customers to use this as part of their investment portfolio is expanding. We also see a lot of stuff happening around interest bearing accounts. So people can hold crypto assets and earn interest. And we have something that we're doing, or we actually offer that now. Incidentally, it's the number one reason people leave brokerages is to find higher interest. And so yield yield.

So crypto is kind of put us in a place where we can offer that to the customer. So that's a huge area of growth for us. I think the, the new administration that comes in will be interesting to see how they respond to the different rules that are being proposed right now. I don't think what we're seeing right now and hearing from our folks is it doesn't seem that it's going to be detrimental. I think overall, I mean, crypto folks, we're always going to complain when new rules come in, but it's happening. They're going to happen. Yeah. They're going to happen,

but you hope that it's smart regulation and not dumb regulation. I would say that the inability to basically send funds to or from an on-ramp, off-ramp from any private custodial wallet would be pretty damaging. That would be pretty stupid now. Yeah, and makes no sense. But that's obviously on the table. But like you said, we just saw Gary Gensler was hired,

or likely will be the head of the SEC and this guy is teaching blockchain at Cornell, right? I think that, yeah, you're right. It's the interest is there. I think we're in a space now where there's enough people participating that it's going to be hard to take it away, like extremely ways to make it more accessible, but also more controlled. I think that you're going to see a lot of push around these China central bank coins. If you just read some of the interesting articles coming out, like South China Sees, the South China Times, where they're discussing around how this new Chinese token is going to work and how it's an alternative for the dollar, the sort of the rhetoric and the perception is really interesting as this being positioned against the anti-dollar. So I think that you're going to see more Western countries have a response or at least becoming much more vocal, whether we get our act together and do something

sooner than later, that'll be, that remains to be seen. We're still, we still see kind of over time, probably in the next two to three years that these two entities, like at the spot markets and the securities market become much more fused together and not so different as they are today. If you can look like Coinbase, Kraken, those guys are all driving towards getting their broker dealers up. They want to have other asset classes in there. And it's like, yeah, they're expanding.

Kraken's a bank. I think you're going to see more retail brokers participate. I think you're going to see now that Ameritrade and Schwab, they're working through their integration. They'll start to focus on this asset class. There's just so much excitement that they're going to have to get in the game somehow, whether it's through spot or through otherwise. I think Fidelity continues to really grow their institutional space.

Maybe they make it open up for the larger audience, but I think they're really trying to carve out themselves as the place to be for institutions. And I think they continue down that path. For us, for TraceStation, we've got a lot of good plans in place. We definitely are looking towards opening up access to more account types, things like retirement accounts, things that are going to make it much easier for the people to interact with crypto, make it just a natural part of their overall portfolio, not a thing you do on the side, something that's much more together.

We're seeing a lot more good, reliable sources of information. And your podcast is awesome. I've been listening to it for a while. It's not just crazy guys that are fanatical about the religion of Bitcoin and crypto. It's actually people that are coming in with finance backgrounds that have an understanding and can talk more directly to the people at large. I like the nuts and bolts of blockchain, but most people just want to know, is it safe? Can I use it? Is it going to work for me? Yeah, I agree. want to know is it safe can i use it is it going to work for me yeah i i agree so the forecast for 2021 is that there's going to be a lot more building a lot more interest and likely will

contribute to a lot more price appreciation regardless of what those ludicrous targets are or are not yeah i think explosive on price uh and then sometime in the next two years we'll actually get back to doing like real building again. I'll be doing nothing in two years. You can build. I'll be the guy in Miami that I was just criticizing. The one who buys it and just sits on the beach and does nothing. We'll have margaritas down at one of the beach bars.

I'm absolutely ready. So where can everybody follow you after this? Keep up with what you guys are doing and you personally. Yeah. So check us out. It's www.tradestation.com. You'll see all the offerings we have. There's a bunch of different education pieces. If you're just looking to get started, you can get involved and open up an account if you like. But you'll just see the different things we do and see if it fits for what your needs are. You can follow me on Twitter. I'm at James R. Putra. Love to engage and talk more with the community and super, super thankful that you let me on the show. Hopefully,

it was at least entertaining and useful for the audience. I think it's great. I don't often get to talk to someone who has a long history in trading and then is on the other side, actually completely in tune with the market, you know, and what people need to make that happen. So you kind of have both perspectives. It's really valuable and I really appreciate it.

So thank you so much for taking the time. Awesome. Thanks again, Scott. All right, James.