Gordon Grant: The Most Interesting Man in Crypto

In this captivating episode of Midcurve Media's podcast, we delve into the world of cryptocurrency, institutional investing, and advanced trading strategies with Gordon Grant, an independent trader and portfolio manager specializing in crypto derivatives. From his early days at Princeton University to his current role advising some of the biggest players in the crypto industry, Gordon shares invaluable insights on the evolving landscape of digital assets.

Gordon Grant's Illustrious Background

Gordon's journey in the world of finance began at Princeton University, where he studied econometrics and quantitative finance. His career path led him to a position as a derivatives portfolio manager at a large multi-strategy macro hedge fund, where he honed his skills in emerging market foreign exchange, fixed income, and commodities trading.

In 2013, Gordon discovered Bitcoin and recognized its potential as a new asset class that shared characteristics with both emerging market currencies and commodities. This realization sparked a new direction in his career, leading him to explore the nascent world of cryptocurrency trading and eventually to a role at Genesis Trading, where he applied his expertise in quantitative volatility modeling to the crypto markets.

The Evolution of Coffee and Commodity Trading

The podcast begins with a fascinating discussion on the history of coffee and its global propagation. Gordon shares an intriguing anecdote:

"Coffee only really grew one place on the planet, which was Ethiopia. When the colonizers found out about this, they started moving it up into Europe. I believe the king of France had the first greenhouse in Europe built to try to grow coffee."

This historical context sets the stage for understanding how commodities like coffee have shaped global trade and economics, drawing parallels to the modern world of cryptocurrency.

Bringing Coffee On-Chain

Gordon's experience extends beyond traditional finance into the world of blockchain technology. He recounts a project where he consulted for an East African coffee board:

"I went and pitched to those guys, 'Listen, the simple solution for that is to create some common denominator. I call it a standardized caffeinated unit. And we have standardized caffeinated units of your coffee that we can basically track from the moment that they're produced, roasted, ultimately ground and distributed at the retail level.'"

While the coffee board didn't fully adopt Gordon's blockchain-based solution, this experience highlights the potential applications of blockchain technology in traditional industries.

Carbon Credits and Blockchain

The conversation shifts to the topic of carbon credits and their potential implementation on blockchain networks. Gordon reveals his deep involvement in this space:

"I actually raised a couple million bucks to do an on-chain carbon credit project in the past. That was also left out too. But I did it. It was called Paris."

He provides a comprehensive overview of various attempts to bring carbon credits on-chain, including projects like Klima DAO and Nori. Gordon emphasizes the importance of solving key issues such as credit quality, fungibility, and transactability for any successful carbon credit blockchain project.

The Multilingual Trader

An intriguing aspect of Gordon's background is his linguistic proficiency. He speaks four languages fluently:

1. English
2. Arabic
3. Persian (Farsi)
4. French

This multilingual ability has undoubtedly contributed to his global perspective and success in international finance.

Institutional Interest in Solana

As the conversation turns to Solana, Gordon provides valuable insights into the institutional perspective on this rapidly growing blockchain platform. He notes that while Solana has seen impressive growth, institutional investors are still cautious due to several factors:

1. Liquidity concerns compared to Bitcoin and Ethereum
2. Recent price volatility and significant appreciation
3. Less familiarity with Solana's underlying technology

Gordon explains:

"For the non-alpha acquired participant, it's a harder buy-in to kind of go, hey, let me do this today."

However, he also points out that as Solana continues to grow and mature, institutional interest is likely to increase, especially if certain catalysts occur, such as Solana flipping Ethereum in market cap or the development of more sophisticated financial products around Solana.

Risk Profile of Institutions

Gordon delves into the different risk profiles of various institutional investors, from family offices to Bitcoin whales. He explains that most institutions feel comfortable with Bitcoin due to its liquidity and established market presence. When considering an investment in Solana, institutions typically analyze:

1. Distributional characteristics of Solana
2. Beta of Solana to Bitcoin
3. Correlation between Solana and Bitcoin
4. Potential for Solana to provide alpha over Bitcoin

Gordon uses technical analysis terminology to explain these concepts:

"Everybody knows what a linear regression is. If you don't plot a bunch of points of returns of Bitcoin on one axis and returns of Solana on the other. And we're going to look at like a scatter plot of those things on a chart. And if we make those that scatter plot of Bitcoin returns here, Solana returns here and we draw a line through them, right? That line is going to tell us alpha."

This detailed analysis helps institutions make informed decisions about allocating capital to newer cryptocurrencies like Solana.

Treasury Management Strategies

Gordon shares insights into treasury management strategies for cryptocurrency holders, particularly focusing on Solana. He discusses the potential for combining staking yields with options strategies to maximize returns:

"Typical kind of treasury management strategy that I look at for an allocator is predicated on a couple of things. One, path dependency of these assets that we're all talking about here, which is to say, yes, you know, Solana over the last five years has had tremendous price appreciation with some incredibly wild swings."

He suggests that by carefully managing a portfolio of staked assets and options positions, investors can potentially generate returns in the upper teens to low 20% range, even in conservative scenarios.

Options Protocols and Overwriting Strategies

The podcast delves into the world of cryptocurrency options, with Gordon explaining the concept of "overwriting" in detail:

"Overwrite is a strategy, not unique to crypto, which means holding an asset, in this case, a cryptocurrency, a digital asset, and selling, i.e. conveying to another person a call option, which is the right to write, but not obligation to buy an asset at a fixed price, at a fixed state in the future."

Gordon discusses how these strategies can be applied to Solana and other cryptocurrencies, potentially generating additional yield for holders. He also touches on the complexities of managing these strategies, including considering the relationship between price changes and volatility changes in the underlying asset.

Driving Growth in the Solana Ecosystem

Throughout the conversation, Gordon emphasizes the importance of developing sophisticated financial products and strategies for driving growth in the Solana ecosystem. He believes that as more institutional investors become comfortable with Solana and its derivatives markets, it will lead to increased liquidity and adoption.

Gordon states:

"I think that is part of this exercise, right? I mean, I wouldn't be doing this if I didn't think that there was a brighter, happier future for liquidity, price discovery, you know, data set quality. And again, to use that word, statistical robustness about the decisions we make for the capital that we manage."

This forward-thinking approach highlights the potential for Solana to become a major player in the institutional cryptocurrency market.

The Future of Crypto Education

Towards the end of the podcast, Gordon touches on the importance of education in driving cryptocurrency adoption. He mentions his efforts to explain complex financial concepts to children:

"My kid asked me recently, you know, my son's five years old. I went to his school and I did a little presentation about, you know, like bring your parent into school and they'll tell you about what they do for work. How do I explain what I do?"

This anecdote underscores the need for clear, accessible education about cryptocurrency and financial concepts to foster wider understanding and adoption.

Conclusion: Solana's Bright Future

While the podcast covers a wide range of topics, the underlying theme is the potential for Solana to become a major player in the institutional cryptocurrency market. Gordon's insights into institutional perspectives, advanced trading strategies, and the importance of education all point towards a bright future for Solana.

As more sophisticated financial products are developed and institutional investors become more comfortable with Solana's technology and market dynamics, we can expect to see increased adoption and liquidity in the Solana ecosystem. The combination of Solana's high-performance blockchain with advanced financial strategies like those discussed by Gordon could position Solana as a leading platform for both retail and institutional crypto investors in the years to come.

Facts + Figures

• Gordon Grant studied econometrics and quantitative finance at Princeton University
• Coffee originally only grew in Ethiopia before being spread globally
• Gordon speaks four languages fluently: English, Arabic, Persian (Farsi), and French
• Gordon discovered Bitcoin in 2013 and began trading it independently
• In 2019-2020, Deribit emerged as a significant platform for institutional crypto options trading
• Gordon worked at Genesis Trading, focusing on quantitative volatility modeling for major crypto players
• Solana experienced a 95% price reduction from its 2022 peak
• Institutional investors typically analyze the beta of Solana to Bitcoin and their correlation
• Treasury management strategies for Solana can potentially generate returns in the upper teens to low 20% range
• Overwriting is a strategy that involves holding an asset and selling call options against it
• The Solana options market is growing, with increased OTC activity and observable prices on platforms like Deribit
• Gordon suggests that combining staking yields with options strategies can maximize returns for Solana holders
• The podcast mentions the potential for Solana to flip Ethereum in market cap as a catalyst for increased institutional interest
• Gordon raised several million dollars for an on-chain carbon credit project called Paris
• The history of carbon credit projects on blockchain includes initiatives like Klima DAO and Nori

Questions Answered

What is Gordon Grant's background in finance and cryptocurrency?

Gordon Grant studied econometrics and quantitative finance at Princeton University before working as a derivatives portfolio manager at a large multi-strategy macro hedge fund. He discovered Bitcoin in 2013 and began trading it independently. Later, he worked at Genesis Trading, focusing on quantitative volatility modeling for major crypto players. His experience spans traditional finance, emerging markets, and cryptocurrency trading.

How do institutional investors view Solana compared to Bitcoin and Ethereum?

Institutional investors are still cautious about Solana compared to Bitcoin and Ethereum due to liquidity concerns, recent price volatility, and less familiarity with Solana's underlying technology. However, as Solana continues to grow and mature, institutional interest is likely to increase, especially if certain catalysts occur, such as Solana flipping Ethereum in market cap or the development of more sophisticated financial products around Solana.

What is overwriting in the context of cryptocurrency trading?

Overwriting is a strategy where an investor holds a cryptocurrency and sells call options against it. This involves granting someone else the right to buy the asset at a fixed price in the future in exchange for an option premium. The strategy can potentially generate additional yield for cryptocurrency holders, but it also comes with risks and requires careful management of the relationship between price changes and volatility changes in the underlying asset.

How can treasury management strategies be applied to Solana holdings?

Treasury management strategies for Solana can involve combining staking yields with options strategies to maximize returns. By carefully managing a portfolio of staked assets and options positions, investors can potentially generate returns in the upper teens to low 20% range, even in conservative scenarios. This approach takes into account the path dependency of Solana's price movements and the potential for alpha generation.

What is the current state of the Solana options market?

The Solana options market is growing, with increased over-the-counter (OTC) activity and observable prices on platforms like Deribit. While volumes are still relatively low compared to Bitcoin and Ethereum, there is a developing market where traders can get prices from multiple OTC dealers and benchmark against listed Solana options. This growing liquidity and price discovery process is making it easier for institutional investors to consider Solana as part of their portfolio strategies.