Welcome Ben! Tell us a little bit about yourself, where did you grow up and what did you do before crypto?

I grew up in Sydney, Australia and spent most of my early life there, aside from a few years living in Melbourne. After completing my Bachelor of Commerce at University of NSW (with Honors), I started as a derivatives trader at Optiver. At the time the firm had a team of 12 people in Sydney and a relatively small footprint outside of Europe. Now, it is one of the largest private trading firms in the world and a market leader in all major derivative markets.

I spent over 7 years at Optiver before moving to Hong Kong and joining a start-up called Eclipse Options, which was founded by a few of my ex-colleagues at Optiver. Prior to joining crypto in 2017 I worked at a couple of hedge funds in New York City, where I managed a Relative Value equity volatility book consisting of over 1,000 US-listed equities and tens of thousands of individual options positions.

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What made you want to enter crypto? And what made you start Auros?

One of my ex-colleagues at Optiver was a co-founder of Kenetic and he urged me to look at the industry in mid-2017 during the initial stages of the ICO boom. The crypto industry had parallels to some of our experiences from the early 2000’s where nascent equity options markets in Asia presented participants with huge inefficiencies that could be heavily monetized by automation, so it offered fertile ground for sophisticated players.

I did some digging and decided that it was worth the risk to exit traditional financial markets and give this new asset class a try…. Best case, crypto would explode and become a huge asset class; worst case, I would go back to finance in 12-18 months. At the time it seemed like a pretty reasonable risk/reward trade to make.

During my time at Kenetic I realized that there was an edge to this asset class and the team we had assembled could become market leaders. There were relatively few synergies between the business I was building and the broader group, so my co-founders and I decided to spin out Auros as a standalone, crypto high frequency trading firm in January 2019.

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Can you give us a short summary of what Auros does - both in terms of trading and services?

Auros is a high frequency trading firm and strategic market maker focusing exclusively on digital assets. We are one of the few genuinely native crypto firms out there. As a growing team of over 60 people spanning 15 different countries around the world, we operate across all major venues and instruments, generating daily notional turnover in the billions of dollars.

Our firm’s history is rooted in trading and engineering experience from a variety of proprietary trading, technology, brokerage and asset management firms, which has enabled us to develop sophisticated infrastructure, pricing models and low latency execution capabilities.  This is then coupled with robust security practices and best-in-class operational processes, allowing Auros to participate continuously and reliably across the entire crypto ecosystem.

Alongside this, our team’s trading experience has led to a deep understanding of liquidity provision, market microstructure and the needs of crypto projects when it comes to ensuring deep, stable liquidity for their tokens.  Auros also works as a key partner to a number of early-stage ventures both in an advisory capacity as well as providing market-making services for tokens to ensure the facilitation of growth. Our Strategic Market Making team analyses the objectives of each project in incredible detail. We want to ensure that the liquidity available for a client’s token meets their long term goals and allows investors of all time-horizons and size to participate in the future prospects for the project – and it is this aspect that we believe differentiates us in the space. In this respect, projects and companies we work with view us a true partner, not just a service provider.

We also invest heavily in the crypto ecosystem and are always looking for dynamic teams to back. We are active investors - choosing to partner with projects and companies holistically by providing advisory, liquidity and domain expertise to aid in their growth. It is genuinely exciting to partner with a group of passionate founders and lend our expertise in their pursuit of success.

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Lets zone in on the trading side, without giving away all your trade secrets, where would you say the largest alpha exists for traders in crypto?

As is typically the case, the largest alpha resides in the areas that are relatively undiscovered (or at least, relatively under-developed). For now we’ve observed this in new DeFi platforms and NFT drops, where speed-to-market and greater market intelligence can deliver significantly outsized returns for as long as it takes the rest of the market to catch up.  

That being said, over the past three years, Auros has developed a variety of trading strategies for our core trading business that we are constantly iterating on to stay ahead of the field.  Whilst we feel that it is important to grow and evolve with some of the new opportunities that spring up, we also remain focused on ensuring that what has made Auros so successful in the past, continues in the future, so that it can support our exploration of new and exciting opportunities.

Trading and hedging of yield curve and duration exposure is one area that we think will be particularly exciting as the market continues to mature. Throughout the past year we have seen an increase in the volume of yield seeking financial products in the crypto ecosystem - a trend we expect will continue. As a consequence of this growing hunt for yield, product issuers and dealers will find themselves warehousing larger duration and curve exposures that need to be hedged. Paradigm’s new Futures spread/roll markets will be instrumental in providing market participants a place to both speculate and hedge on forward rates, across a variety of crypto underlyings. It is our expectation that this marketplace grows significantly in the upcoming 12 months, presenting an attractive area of focus for several of our trading strategies.

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Bigger picture, outside trading, which part of the crypto eco-system are you most excited by right now?

Outside of our core trading businesses, I spend a lot of my time working with the partnerships team here at Auros meeting a variety of projects and founders to discuss the exciting contributions they are making to the growth of the crypto eco-system and explore areas where we can assist in that value creation.

Naturally, as a result of our firm’s pedigree and expertise in a variety of financial verticals, the areas of the ecosystem that excite me mostly centre mainly around the explosive growth of DeFi.  For Auros this comes in two expressions. Firstly, our DeFi Optimisation team, which has grown substantially in the last 12 months, increasing our participation across a growing number of protocols and executing strategies across a variety of time horizons. Secondly, our interest in this space has led us to partner with a number of DeFi projects at various stages of their life-cycle and explore ways we can help to facilitate the sort of long-term sustainable growth that historically has underpinned some of the most successful protocols.  

For Auros, there truly isn’t a more exciting approach to our involvement in the crypto ecosystem than learning how we can leverage our firm’s skills and expertise to foster an environment for growth and value creation for our partners.

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In terms of your investment portfolio, which are the tokens/projects you think have the most upside?

At Auros, we tend to look at the firms and projects that we work with more as partners than pure investments.  Whilst it's true that we are often investors in early-stage ventures, we tend to focus on the verticals where we think our firm and our people can make a difference to the overall success of a venture and thus tend to end up working with broad sectors rather than trying to identify specific projects. In this case, as I mentioned earlier, this usually falls into various financial verticals, typically focused on decentralized exchange, borrowing/lending and complex derivatives.

Most recently, we have worked extensively with a variety of projects in the Options and Structured Product space.  Considering where some of our staff have forged their careers, this is an area that we feel we can provide the sort of deep understanding and expertise that our partners require during the early stages of their build.  Moreover, we are generally excited as a business about some of the innovations in the crypto derivatives space as more institutional money flows in and solutions continue to be created to address varying levels of risk appetite.  This includes all things from Decentralized Option Vaults (DOVs), to decentralized RFQ systems, institutional liquidity provision and various structured product offerings, all of which are pushing the boundaries of what is possible in crypto.

Whilst some of these innovations have helped to advance the market in their own right, it is often when two organizations create highly synergistic products that the biggest leaps are made. For example, with the expansion of DOV offerings, Paradigm’s introduction of their RFQ system, specifically tailored for this space, has allowed DeFi structured product clients to access and benefit from an existing and alternate liquidity network, serving to further advance the development of on-chain yield and liquidity solutions. As the crypto derivatives market continues to innovate and mature, we expect that our best performing investments will be those that are able to leverage from the growth and achievements of their partners.

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Where do you see BTC by Dec 2022? And what do you think the risks are to this?

First and foremost, I think this year will be dominated by the macro landscape. The current inflation, growth and rates relationship is somewhat complex and something most of us have not experienced in our entire careers (even dinosaurs like me have never seen persistently high single digit, much less double digit inflation).

How global risk markets react to rising rates and generationally high levels of inflation is hard to predict - on the one hand there are fears of stagflation with rising rates, persistently high inflation, falling growth and increased levels of unemployment creating enormous headwinds for risk assets. On the other hand there is a view that a few chunky rate hikes in 2022/23 (and a consequential lowering of inflation expectations) will act to dramatically reduce current inflationary pressures and thereby provide the soft landing that risk assets (and Central Banks) are so desperately hoping for.

Forced to choose between the two, I’d probably place myself in the latter camp, albeit without a huge amount of confidence. My prediction for BTC (and the crypto asset class as a whole) is entirely dependent on which macro eventuality we experience over the coming 6-12 months. I do not think crypto experiences a prolonged decoupling from global macro forces this year - risk assets tend to correlate highly during interest rate turning points and despite what many people will tell you, crypto is still a high beta asset, well out to the RHS of the risk curve - so crypto will go the way of other risk assets. One thing I do expect is a market that is characterized by significant chop as participants continually reassess and position for which macro outcome they expect to experience.

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Finally, for those budding entrepreneurs out there, tell me a bit about the lessons from starting your own business and the challenges you need to be prepared to weather? 

I’d say there are 3 keys to being a successful entrepreneur:

1. Love what you do. If you don't absolutely love what you do every day then there is zero chance you will have the fortitude to push through all the obstacles that inevitably get in your way when you are building a business.
2. Be comfortable being wrong. You will have to make so many decisions along the way, and whilst you can put in the work to reduce the likelihood of error on any one decision, it is inevitable that there will be mistakes made, plenty of them. Develop the ability to accept failure and learn from it, and you will be well placed to push through these failures and find success on the other side.
3. Surround yourself with the right people. Building a business is hard work and there will be plenty of difficult times. You need a group of like-minded people in the trenches with you to weather the storms and keep pushing forward - you can’t do it alone, so make sure the folks you have next to you are made of the right stuff.

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Ok one final question - all employees of Paradigm have to answer this on their first day - tell us one fun fact about yourself that hardly anyone knows?

During university, I made a living as a card counter on the blackjack tables at Sydney Harbour Casino. I used to go there during breaks between classes and was actually making a decent amount of money until the casino finally decided they had seen enough and put a stop to it. Amusingly, rather than issuing me with an outright ban (which is often seen as being discriminatory), they instead limited me to a maximum bet size of $1! Unsurprisingly, I did not take them up on this offer and this represented the end of my card counting career.

Article by

Benjamin Roth

Co-Founder and Head of Trading at Auros