Client Spotlight: Dunamis Trading
Introducing the first installment of our Client Spotlight: An interview series where we feature some of the incredible clients we work with and share their unique stories. Our Client Spotlights will provide insights into leaders in crypto today and we hope you’ll enjoy hearing from them as much as we do!
For our first Client Spotlight, we had the pleasure of chatting with Delfos Machado Neto, Managing Partner at Dunamis Trading. Based in São Paulo, Brazil, Dunamis Trading provides market liquidity and is a leader in the digital assets industry.
Without further ado, let’s dive in!
Why Crypto?
Delfos Machado Neto: It was a trading ecosystem, when I first saw it back in 2017. It was clear to me that it was just starting out, and from everything that I’ve read and talked to people about, it really seemed to make sense: Why it existed, and what its purposes were, and all that. And how global it was — or is. It really kind of excited me.
Being in the beginning, crypto has a lot of things that look and feel like emerging markets in the 90’s. And the characteristics I always say: it’s under used, under traded, hard to settle, hard to trade, and no one really understands it. It was a massive decade for emerging markets. Everything rallied multiple hundred percents. And nowadays, it’s just like another asset class: it’s pretty developed, it’s stable, it’s incorporated. If you want to trade Taiwan, it’s not so complicated. Thirty years ago it was super complicated. It really felt the same way for crypto.
Also, the exchanges were like: you know the owner and it was very personal. So there’s that: the familiarity. And the ease to trade, the lack of over regulation. Traditional markets are very over regulated. I think no one has a problem with regulation but it’s like, there’s a point where you have to be a huge firm to be competitive. You don’t have that in crypto. Everyone is a start-up and lots of people started up with their own money…a lot of people started off on their own, which was our case. Those are the things that appealed to me when I got into crypto.
As you said, all the companies that are getting into crypto are just starting out, and especially now that it is a little more mainstream, there are a lot of different players. When you are thinking about collaborations or partnerships, how do you navigate the space?
DMN: Things definitely change. A year and a half ago, or a year ago, I think everybody was really looking for clients. We were reaching out to clients. We were trying to get investors. And now it’s the other way around. Now we’re in the position to say, “okay, not now, thank you,” “maybe you’re a good fit, let’s develop a strategic relationship with you,” and things like that. And that’s the road we’ve taken, we’re building strategic relationships with people who come from traditional markets. [Entities] who are not in crypto, want to get into crypto, realize that crypto is way more complicated than it looks. And also, don’t know who the best brokers are, don’t know who the custodians are, don’t know who the best routing systems are and all that kind of stuff. So there’s a steep learning curve, granted everyone can do it, it’ll take a little bit of time, but us being in it for a while, I think we’re at the forefront. So it really makes sense for us to have those kinds of partnerships.
What’s it like having conversations with those who are unfamiliar with crypto?
DMN: We talk to extremely professional traders. It’s actually an easy conversation, it’s not a short conversation, but it’s an easy conversation. It’s a conversation that flows. It’s people who end up really understanding what we do.
I’m assuming you have a traditional banking background? I’m curious what similarities and differences you see between the traditional banking industry and crypto?
DMN: I was in equity trading for 20+ years. So before setting up Dunamis, I was head of equity trading in the Americas at a big global bank. So very much in the traditional finance sphere.
The way that it’s different, in a good way, is that this is definitely global. Look at Binance, Binance has a presence in, I don’t know how many gazillion countries…Binance has a bigger footprint than [traditional banks]. So I think a lot of traditional finance has been retrenching into its regions because of regulatory oversight… as traditional finance was leaving the global space, I think crypto has kind of filled that.
One of the differences in crypto is you have owners of businesses. There are people driving the business, and creating the business. They are the owners. Which is different from a manager, who has to answer to a board who has this and that and… there’s so much more energy and enthusiasm [in crypto] in building things out, which is definitely something not in traditional finance…it’s so political, so regulated, so complicated. And in crypto, you do the same things, but without all the politics of having to be in a big firm, the heavy oversight and all that kind of stuff.
Those small teams allow companies, within the crypto world, to be much more agile. Obviously, crypto is changing every single day. Since you’ve been in the industry since 2017, can you talk a little bit about how the industry has changed so far and tie it into how Dunamis has been agile and addressed those different changes?
DMN: The best changes that have come in are things around custody, coin storage, coin movement, security…the major [exchanges] are so stable, which was definitely not the case back then. You couldn’t even get an insurance company to talk to you about insuring anything. And now–it’s not that easy– but it happens with quite some frequency. And then you’ve got better tools to manage your coin inventory, how you store it, there’s just so much infrastructure that’s been built out to deal with the individualities of crypto. And, I think, there’s still a long way to go.
And how would you say Dunamis has grown with the industry?
DMN: One of the things that I really like is that we always try out new things. When things come out, if it’s a new system for something, we try it out. We’ll have a look, we’ll spend some time with it. Sometimes we get some complaints from within the firm that we spend too much time looking at things we don’t use. But the reality is when we do use something, it goes mainstream within a few months or a semester. We’re definitely always one for the early adopters. SoI really like that about us, we’ve managed to keep at the forefront of things.
And what do you see for the future of the industry?
DMN: We’re a trading firm, so I think the things we hope for the most is that more money flows into the system. So, I think one of the things that needs to come in a little bit is the cost of leverage in the crypto space, it’s still very expensive. People lend money vs 120% collateral at 18% a year, that’s almost pawn shop kind of [rates]. I think everyone is making money, but that’s not a kind of recurring income flow that will survive.
What do you think about regulation?
DMN: I think it’s never going to be over regulated because it’s so global. Out of most industries that I saw during the pandemic, at least us in the crypto environment, we had no issues adapting for work.…everybody was used to working from home at a certain point. Everybody has a global team, even the small firms have people who work in different countries. So that said, I think it’s very hard to regulate something global. One of the things people in crypto like is lighter regulation.
Speaking of global teams, Dunamis is based in Brazil. I’m curious how you specialize in a Brazilian market, what that looks like, and how does that scale when you become more global?
DMN: I know an extremely good fund manager, he’s based in the US but he is of Latin American origin. There’s a guy who works at a bank who has huge trading volumes… also Brazilian. And we’ve got pretty good volumes and good chunks of open interest in a lot of the exchanges. I think what we have in common is we have this emerging market trading background. And that emerging markets trading background, Brazil has a huge financial market and it really has bred good traders. Especially for the ones who went out on a limb and went into crypto.
What would you say your differentiating factor is?
DMN: We use traditional finance know how and bring that expertise. Bringing bank level professionalism into the crypto space was our advantage. We got a bunch of guys who were really good at writing trading systems, and managing risk, and trading coming into the space, in a space that was really not populated by professional traders. That was our advantage.
What was a hardship or something you faced that you didn’t expect and how did you deal with it?
DMN: I think things took a lot longer to mature. We were alway self funded and the self funding aspect has its burden; not wanting to give up control, which I didn’t. Good thing we made it. I remember there was a semester here where I told everybody: “Hey, everybody is going to have a 40% pay cut, want to stay in? “ At the end of the day, things turned around and nobody had a pay-cut. But it was good to see that everybody was very responsive and said “yeah, we’re in!”
Any advice for clients/firms/entities who are looking to get into crypto?
DMN: Business side? Get into it. It’s way harder than you think, but it pays off. If you persist, I think crypto still has a long way to go. For people who are trying to trade? Buy bitcoin.
