This is an interview as part of an ongoing series by Etienne, who has a newsletter every week on the European crypto ecosystem. To subscribe on Substack, click here. You can also find him at https://twitter.com/etiennexyz
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Background: Ask who do I think is the most impressive founder in crypto capital markets in London and I will say Max at B2C2. In a few years, he has built from the ground up one of the largest liquidity providers in the world, expanded to Japan and the US and built a world-class infrastructure.
Hi Max, B2C2 was founded in 2015 and has quickly become a leading crypto currency market maker and one of the largest liquidity providers in crypto assets; can you share a bit about your background?
Prior to B2C2, I was a trader at Goldman Sachs in London, where I covered interest rates: mainly repo, FX swaps and cross-currency. I found my time there fascinating. For anyone contemplating different career options, I recommend working with people who will teach you skills you cannot learn on the internet or at school. Such was my time in investment banking.
How did you get into the bitcoin and blockchain industry?
I dipped my toes in electronic trading at Google, of all places, during the internship that was my very first job at age 19. Google ran an internal prediction market that I managed to dominate thanks to a simplistic trading bot. In 2012, I was introduced to Bitcoin and started work on market-making algorithms for MtGox. It was a rocky start, with some good lessons learned in the April 2013 bubble when a crazy rally (crazy at the time) topped out at around $260 and I bought the ding-dong high. The term “bags” hadn’t become popular yet, but bags they were, my bitcoins. In 2015 I felt that this experimental market was going to stay and I resigned from Goldman. In hindsight, I should have quit earlier.
Tell us a bit more about who is behind B2C2? How big is your team? Are you hiring?
We are hiring!
I started the business with my partner Flavio Molendini and for a long time it was just the two of us in a garage. We only started hiring in 2017 and were just a team of eight at the top of the 2017 bubble. We are conservative and gradual in our hiring — it is difficult to find the right people and quality beats quantity.
It took us two years to find Rob Catalanello, a Wall Street veteran who now runs B2C2 USA. Today, we have just under 40 employees globally in London, Tokyo and New Jersey. We are currently looking to make immediate new hires on the quant front and in middle office, and we’re always on the lookout for brilliant individuals.
What is the vision of B2C2? How are you bridging the gap between the crypto and traditional investment space?
We believe that crypto trading should be simple, inexpensive and safe. The way we accomplish that mission is by crafting our trading products to the highest level of specification. Bitcoin is that once-in-a-generation brilliant idea of a feedback loop between value and decentralized verification, yet our mission is not to evangelize: we are simply a service provider to institutions.
Many people don’t like to hear it, but the design of conventional markets is not accidental and there’s more to bring from financial markets to the crypto market in the way of best practices than the other way around.
We endeavor to do so every day, having launched the first single dealer platform in the industry in 2016, set up the first OTC FIX server and executable streaming price feed, crafted the first ISDA agreement for crypto and hopefully more firsts to come.
Can you talk more about the technology behind your trading infrastructure? What sets B2C2 apart from its peers?
Today, trading technology is commoditized so your edge cannot rely solely on technology: at a minimum, it’s the cost of sitting at the table. That said, connectivity is unusual in crypto since most exchanges are just big websites. It’s a unique feature and I believe it will remain so (I wrote two articles for CoinDesk on that topic this month).
On top of a strong tech baseline, we have clever tweaks tied to the specificities of the crypto market. For instance, we have been trading 24/7 with zero human intervention since 2015. How does one achieve that? Our clients expect uninterrupted pricing no matter that it’s midnight on a Saturday or that the market is moving violently. Some clients even have an obligation to report to their regulator when our pricing feed is down. That stuff is hard, and it’s part of the secret sauce.
For that reason, I have tremendous respect for Bitstamp, who don’t seem to have had more than an hour of unexpected downtime in their entire history.
Today I was on a panel with the man behind the CME’s bitcoin futures, and they can’t run 24/7 because the CME platform, as great as it is, requires that they shut down over weekends to perform maintenance.
What’s your business model?
B2C2 started out purely as a market maker on the exchange, with no client business. We were early movers; for instance, we had API key #5 on Bitfinex. That’s a competitive business where we wrestle with big conventional HFTs as well as smaller upstarts, many of them in Asia.
Our footprint quickly reached a maximum — once you’re a top trading firm, you can’t grow 10x from there. We then added an electronic OTC platform to our offering that is now our main focus. Our two businesses complement one another. You can’t be a competitive OTC market maker without a significant exchange presence, and OTC flows gives you an edge in terms of price discovery. Here’s what our platform looks like on mobile for our clients:
Who is your target audience?
If you trade large volumes and run a legitimate business, you should speak to us. If you trade on any major exchange, you are already trading with B2C2. It’s much cheaper to go direct. B2C2 is a wholesaler that deals in large volumes on tight spreads.
For the majority of institutions, it is also natural to trade OTC; the fact there are so many exchanges in crypto is a historical accident more than the direction of travel.
As a result, the majority of our OTC volume comes from institutions that either have a big client base or trade algorithmically and need to act frequently on their quantitative signals.
Can you share a bit more information on your traction, whether it be clients or partnerships?
We are the #1 liquidity provider in Japan and coming up very strongly in the US since we entered the country in March. The European market is more difficult to read, but I believe we are #1 or #2.
Every verifiable piece of data that I have come across recently about our OTC competitors points to them being smaller in terms of volumes. I obviously can’t name clients, but a handful of very large ones have disclosed our relationship, for instance in regulatory filings. When it comes to partnerships, beyond our work with exchanges, we are integrated with several connectivity vendors such as Caspian.
Any recent news in your industry you want to highlight?
I am watching Switzerland closely, with the banking licenses that have been awarded to a handful of firms recently.
What are you thoughts on the crypto European ecosystem?
Christophe de la Celle from HedgeGuard wrote a very good piece. Europe is small, still, but surely there is further upside!
Is there anything you’ve read recently that you think is interesting?
Please have a look at my article on latency arbitrage on CoinDesk!