Greg Magadini, is the Co-Founder of Genesis Volatility and DeGen Data. Founded in January 2020, Genesis Volatility is a crypto options analytics platform used by traders in order to find edge and capture alpha.
How did you initially discover blockchain and cryptocurrency?
In 2012, for a senior research paper, myself and Linda Xie (Scalar Capital) discovered BTC and wrote a research paper about it. We went on the Dark Web, explored the Silk Road, and analyzed prices via Mt.Gox.
Could you share the genesis story behind Genesis Volatility?
In 2015, I introduced Pat Doyle to Ethereum (this is also when we met for the first time).
Since then, we both continued to work on various trading ideas, research reports, and coding projects in the ETH space. Pat was a developer and Data scientist by background, I was Proprietary trader.
In late 2019 we discovered the need for options analytics in the space and decided to analyze the crypto options market.
What type of data is Genesis Volatility analyzing?
We are analyzing option data from various exchanges such as Deribit, Bit.com, LedgerX, Binance, etc.
We analyze implied volatility and realized volatility as well as open interest, volume, block-trades, etc.
Could you elaborate on what specifically is open interest in crypto and why it matters?
Open interest is the amount of contracts (aka “positions”) currently open. For example every option contract has a buyer and seller. Every existing contract position is represented by open interest. Monitoring open interest is a great way for traders to estimate the market participation and enthusiasm.
If the market rallies a lot and open interest is at all time highs, we know that those looking to buy, have already bought. Where does the incremental buyer now come from?
What do you look for in data that implies volatility?
Asymmetries in volatility pricing, deviations between implied volatility/ realized volatility and changes in spot price to volatility correlations are some of the common areas of opportunity.
Traders can’t necessarily predict the future but they can find trades that have positive expected value over the long-term.
What are some of the macro-trends that have been identified over the past year?
Some of the structural trends in the crypto volatility space is the concentration of “call option” buying in this space. This structural demand creates volatility surfaces that are quite different from traditional stocks, where Put options tend to have higher implied volatility.
This past year has been one of exceptionally high volatility both realized and implied. Yet recently, despite realized volatility making annual lows, the implied volatility of options has remained stubbornly high.
What type of hidden trading opportunities is the platform able to discover?
The platform offers tools to discover relatively cheap and expensive option instruments that can be traded together to capture statistical advantage.
We also offer tools to analyze what large institutional traders are doing in the option market.
Finally, we offer tools to analyze how traders are positioned in different option instruments allowing users to understand the current “gamma” profile.
Could you elaborate specifically on what is a “gamma” profile?
Options increase/decrease in value in a non-linear fashion. One can think of “gamma” as the curvature of the rate of change for value. When prices are near large gamma inflection points, traders can deduce that heavy rebalancing will become necessary, this rebalancing will cause the price to react.
Spotting these inflection points can help traders find profitable trading opportunities.
What do you see as the future for institutional or retail traders?
Right now, crypto options have a notional open interest equal to ~1.5% of the underlying market cap.
Traditional finance has notional open interest between 100%-200% of the underlying market cap.
We expect to see continued rapid growth for crypto option space and these markets will become liquid and more efficient over time.
You’ve dived deep into the NFT world, what’s your vision for the future of NFTs?
As NFT’s become more mainstream, we expect a need for collateralized loans and appraisal services to unlock liquidity from these unique assets.
Overall, we are extremely bullish on the NFT space and believe there’s a lot of opportunity for a good analytics company to facilitate trading in these novel assets.
Is there anything else that you would like to share about Genesis Volatility?”
Genesis Volatility aims to become a Web3 company in the long-term.
We currently view GVol as a web2.5 company, straddling the CeFi, TradFi and DeFi markets.
Thank you for the interview, readers who wish to learn more should visit Genesis Volatility.