podcasts

Understanding the Crypto Market, with Ambre Soubiran of Kaiko

podcasts

Understanding the Crypto Market, with Ambre Soubiran of Kaiko

Kaiko provides real-time and historical cryptocurrency trade data, order books, and aggregated prices. In this episode of the Metaverse Podcast, Ambre Soubiran shares about the difficulties they have experienced in their early days, their value proposition, and insights to the institutional clients that they are serving.

Posted by Understanding the Crypto Market, with Ambre Soubiran of Kaiko - June 2022

Background

Understanding the Crypto Market, with Ambre Soubiran of Kaiko Outlier Ventures

  • Studied applied mathematics and computer science
  • Was working for HSBC. In charge of structuring equity derivatives
  • Have been reading up on new tech and found out about Bitcoin in 2012
  • When Ethereum came out, she realized that it could be used to program money

Her Startup Experience

  • Kaiko is her first proper startup
  • She always had an entrepreneurial mindset. Have started small businesses while she was a student
  • She met Pascal Gauthier, the original founder of Kaiko
  • The original founder was selling Kaiko as he was offered a position at Ledger. She left HSBC to acquire Kaiko in late 2016

Kaiko

Understanding the Crypto Market, with Ambre Soubiran of Kaiko Outlier Ventures

What They Do

  • Kaiko provides enterprise SaaS infrastructure
  • It allows crypto market participants to access reliable, historical, and real-time market data on cryptocurrencies
  • They have been experiencing fantastic growth rates

Their Early Days

  • Blockchain was originally a retail-driven space
  • Back in 2015, nobody wanted to buy their data

Back in 2015, there was just nobody to buy sophisticated, reliable data, because they were all retail individuals. And when I bought Bitcoin back in 2014, I didn’t run a backtest before I decided to purchase Bitcoin, right?

– Ambre Soubiran

  • When she took over from Pascal, the demand for data was emerging
  • There were 2 types of B2B investors during the ICO bubble:
    • Those looking at exchange data and trying to arbitrage a specific pair such as BTC/USD across different exchanges
    • Investors with a VC approach that’s trying to build pricing models on tokens
  • The ICO bubble created the need for market data in the crypto space
  • In early 2018, they had their pre-seed round which enabled them to hire their full-time employees

Bootstrapping Through Crypto Winter

  • During crypto winter, Bitcoin crashed from 20k to 3k
  • Had to manage their cash very carefully to survive that period and to build the right products for the next wave of adoption
  • The next wave arrived during the 2nd half of 2020
  • Large corporates, capital markets, institutions, and banks have announced that they are launching their digital assets team

Why Do People Need Kaiko?

  • Everyone needs reliable and accurate financial data
  • There are technical challenges to get from both centralized and decentralized exchanges
  • They provide easy access to the data for institutional investors, enterprises, and startups, etc.
  • Their consolidated platform provides data from over 100 different marketplaces

Since The Majority Of Their Data Is Open, How Do They Build A Business Around It?

  • It is difficult to get on-chain historical data
  • For centralized exchanges, their data is not publicly accessible unless you scrape it in real-time from the exchange
  • They deliver clean, standardized data in a single consolidated place

It’s like saying, yeah, but there’s water over there, the lake, and the water is free. But I’m like, yeah, okay, but I can also put it in a pipe, and you just have to open it and brush your teeth. It’s really about making the data easily accessible and that’s where I believe we’re building value.

– Ambre Soubiran

Where Is Demand Coming From?

  • Their initial market consisted of crypto native funds
  • These funds were looking at crypto from a quantitative standpoint — running backtest and applying different trading strategies
  • Another new segment came from traditional capital markets, institutions, asset managers, hedge funds, and banks
  • Different expectations from both groups:
    • In TradFi, a few millisecond latency is barely acceptable
    • However, most exchanges and crypto businesses are cloud-based and have a few seconds latency
    • Have been building the infrastructure to meet the needs of TradFi
  • Will be looking at DeFi next

Are Institutional Buyers From Dedicated Teams Within Those Entities Or Are They Spun Out As Separated Entities?

  • Fidelity has always been interested in digital assets. They have an entity called Fidelity Digital Assets
  • Goldman, JP Morgan, Citi, Blackrock, etc. have all hired a head of Digital Assets Strategy
  • Crypto is now accepted as an area of focus for large institutions

Will Institutions Take Advantage Of Latency?

  • Institutions are focusing more on Exchange Traded Products (ETPs) and crypto derivatives
  • Institutions have synthetics that tracks the price of Bitcoin using leverage
  • They have a bit of an unfair advantage as they have access synthetics and leveraged financial instruments
  • This has created snowball effects on the price of crypto and volatility around the expiry of options

Are We Getting Better At Understanding The Amount Of Leverage In The System?

  • The people that offer leverage are generally educated, are able to hedge themselves, and settle upon delivery of whatever leveraged position they sell
  • However, this creates more money than what actually is
  • In DeFi, people tend to forget the counterparty risk — who’s behind the protocol, what is their reputation, how reliable they are, etc.

Is DeFi Just A Sandbox Or Something That Augments The Traditional Financial System?

  • It augments the traditional financial system
  • An example comes from equity derivatives
  • There are many intermediaries involved that makes the process of issuing an equity derivative inefficient
  • An Ethereum smart contract could be used to make the process efficient

Understanding the Crypto Market, with Ambre Soubiran of Kaiko Outlier Ventures

This podcast summary was prepared by The Reading Ape in collaboration with Outlier Ventures. The Reading Ape is a humble servant of the written word.

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