Derivatives Decoded

Michael Harvey runs franchise trading at Galaxy, and he says the horse is out of the barn on perpetual futures. A billion dollars of daily notional already trades on Kalshi's bitcoin perp, even as the CME challenges the CFTC's ruling that reclassified the product as a future.

He takes Ash through Galaxy's OTC prediction-markets business, why compute markets need their own Libor-to-SOFR moment, and his call that within five to ten years crypto and TradFi merge back into plain finance.

Topics discussed:
Why the CFTC reclassified Kalshi's bitcoin perp as a future

The CME turf war over perpetuals and futures

Building an OTC prediction-markets business on venue oracles

Galaxy's no-sports, no-death rule for event contracts

Why compute markets need a Libor-to-SOFR observability fix

Financializing compute before derivatives can sit on top

The convergence thesis and three pillars of future finance

Tokenized equities and self-custody demand outside the US

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Adam Guren built Hunting Hill Global Capital from a $10M friends-and-family fund in 2012 to $650M in AUM today, with 90% of risk now in crypto derivatives. Starting as an ETF arbitrage trader at a prop shop in 2005, he spotted GBTC's closed-end fund premium in 2016 and never looked back. As one of the few SEC-registered, New York-based managers trading crypto derivatives since the early days, Adam breaks down the infrastructure gaps that still prevent institutional capital from flowing freely between TradFi and crypto—and why those barriers are finally starting to crack.
Topics Discussed:

Why Bank of New York's custody only supports Bitcoin and Ethereum, creating operational friction for active trading strategies

The missing prime brokerage infrastructure: why true cross-margining and balance sheet don't exist without top-five US banks

Digital asset treasury companies trading at 100%+ premiums: yield generation mechanics that ETFs and brokerages can't replicate

Cash-and-carry trades in perpetuals and futures as the primary yield generation mechanism across market-neutral strategies

Stablecoin yield shifting from illegal to standard practice in twelve months due to regulatory clarity post-election

Asset management consolidation accelerating: reverse solicitation from both crypto natives seeking scale and TradFi entering the space

Running eight-person team across five strategies: two market-neutral alpha, active index long-only, over-collateralized BTC/ETH credit, and strategic venture

The tokenization question: will Deribit and Coinbase overtake traditional exchanges, or will NYSE acquire crypto-native venues

T+0 settlement and 24/7 operations as structural advantages that TradFi infrastructure cannot replicate without years of rebuilding

Operating lean with senior talent through three crypto cycles using TradFi risk management discipline

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Two Prime built one of the largest bitcoin-backed lending operations in the US by doing what collapsed lenders didn't: lending exclusively to institutions with provable bitcoin reserves. CEO Alexander Blume and CIO Nathan Cox explain their credit framework that's processed $3.5 billion in loans with zero liquidations across 40 margin calls, how they structured products using derivatives to eliminate margin call requirements entirely, and why their systematic trading strategies generating 8-10% bitcoin-denominated yields became the second pillar of their $2.5 billion business. Their approach reveals what institutional-grade infrastructure actually requires when managing other people's bitcoin.

Topics Discussed:

Credit infrastructure scaling $100M to $1.5B in loan origination within nine months using over-collateralization and institutional-only underwriting

Structured loan products engineered with derivatives overlays to eliminate margin call requirements while maintaining LTV discipline

Institutional borrower selection criteria: public companies with transparent bitcoin holdings versus retail credit risk vectors

Systematic strategy architecture combining CTA-style trend following, mean reversion, and volatility positioning for bitcoin yield generation

Custom OMS/EMS/PMS build requirements for simultaneous execution across 30-40 separately managed accounts with randomized order routing

Why separately managed account structure became product-market fit for public companies avoiding pooled investment vehicle tax events

Digital Asset Treasury categorization framework separating legitimate businesses from desperate pivots based on operational track record

Bitcoin-only collateral thesis rejecting ethereum and altcoins despite demand based on institutional volatility profile analysis

Institutional DeFi barriers that higher yields cannot overcome: custody gaps, AML/KYC requirements, and SOC compliance failures

Deribit liquidity concentration at 87% options flow and why competitive threats haven't materialized despite predictions

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Institutional traders need infrastructure that works across both traditional and digital asset markets. Michael Higgins explains how Hidden Road built pension fund-backed prime brokerage that processes $15 billion daily across CME futures and crypto venues, proving sophisticated cross-asset infrastructure can serve institutional flow regardless of market type.

With regulatory capital requirements making crypto unviable for traditional banks, Hidden Road created an alternative model that positions counterparty credit risk as an investable asset class for institutional capital. When FTX collapsed, their exchange risk spread protection made clients whole immediately, demonstrating that properly structured institutional infrastructure works in digital assets.

Topics Discussed:

Alternative funding models for institutional digital asset infrastructure

Cross-margining opportunities between traditional and crypto derivatives

Real-time risk management across fragmented institutional trading venues

Evolution of counterparty relationships from unregulated entities to institutional-grade operations

Integration challenges and opportunities between 24/7 digital markets and traditional business-hour settlement

Institutional adoption patterns and infrastructure requirements for sophisticated trading operations

Strategic rationale behind major infrastructure acquisitions in digital asset prime brokerage

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The absence of primary listing exchanges in crypto creates challenges that most institutional players underestimate until they attempt to build derivative products at scale. Director of Digital Asset Research & Strategy Martin Leinweber’s transition from traditional bond portfolio management to crypto indexing at MarketVector gives us unique insights into how institutional infrastructure must evolve to support sophisticated crypto derivatives trading. 

His experience developing the Coin 50 index for Coinbase International highlights the complex technical and regulatory considerations required to create settlement-grade pricing data across fragmented crypto markets.

Martin discusses how the technical infrastructure required to maintain real-time index calculations across hundreds of exchanges operating 24/7 presents challenges not found in traditional markets, particularly when exchanges experience outages or flash crashes that can corrupt settlement prices.

Martin and Ash explore how consolidation pressures from traditional finance players entering crypto will compete with the natural decentralization tendencies of DeFi protocols, potentially creating parallel ecosystems with different liquidity profiles and regulatory frameworks. Martin's vision of tokenized traditional assets converging with native crypto assets in decentralized wallets represents a shift in how institutional portfolio management may operate within the next decade.

 

Topics discussed:

The technical challenges of aggregating reliable pricing data from fragmented crypto exchanges without standardized listing protocols or API specifications.

Exchange vetting methodologies that apply traditional finance risk assessment frameworks to evaluate crypto venues for institutional-grade index construction.

How the Coin 50 index achieves 90% crypto market coverage with just 50 components while maintaining Bitcoin at a 50% weight cap for institutional risk management.

The convergence of centralized exchange consolidation with DeFi protocol proliferation and its implications for future liquidity distribution.

Real-time index calculation infrastructure requirements for 24/7 crypto markets, including outlier detection and exchange outage contingency protocols.

Regulatory framework evolution across jurisdictions and the shift from case-by-case token approvals to quantitative rule-based approaches for crypto basket products.

The integration of tokenized traditional assets with native crypto assets in decentralized wallet environments and its impact on institutional portfolio construction.

Market structure bill implications for US crypto derivatives markets and the potential expansion beyond single-token products to institutional basket strategies.

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