In this episode, I speak with the Twoquants: Moritz Seibert and Moritz Heiden. There are really two halves to this episode.  In the first, we discuss trend following strategies at length.  We cover the usual topics of signals, speeds, and portfolio construction before diving into some niche views, such as synthetic assets, spread trades, and alternative roll schedules.

In the second half, we pivot to discuss crypto markets, as the Moritzes now serve as CIO and CTO for the Exponential Age Digital Asset Fund.  We discuss their journey into crypto, their explorations of the NFT space, considerations that make crypto unique from traditional markets from an allocators perspective, and advice for emerging managers in the space.

So kick back, relax, and please enjoy my conversation with Moritz Seibert and Moritz Heiden.  


Corey Hoffstein  00:00

All right, gentlemen. Ready to kick it off? Let’s do it. All right. 321 Let’s go. Hello, and welcome, everyone. I’m Corey Hoffstein. And this is flirting with models, the podcast that pulls back the curtain to discover the human factor behind the quantitative strategy.

Narrator  00:22

Corey Hoffstein Is the co founder and chief investment officer of new found research due to industry regulations, he will not discuss any of new found researches funds on this podcast all opinions expressed by podcast participants are solely their own opinion and do not reflect the opinion of newfound research. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of newfound research may maintain positions and securities discussed in this podcast for more information is it think

Corey Hoffstein  00:53

If you enjoy this podcast, we’d greatly appreciate it. If you could leave us a rating or review on your favorite podcast platform and check out our sponsor this season. It’s well it’s me. People ask me all the time Cory, what do you actually do? Well, back in 2008, I co founded newfound research. We’re a quantitative investment and research firm dedicated to helping investors proactively navigate the risks of investing through more holistic diversification. Whether through the funds we manage the Exchange Traded products we power, or the total portfolio solutions we construct like the structural Alfa model portfolio series, we offer a variety of solutions to financial advisors and institutions. Check us out at www dot think And now on with the show. In this episode, I speak with the two quants more at Siebert and more Titan. There are really two halves to this episode. In the first we discuss trend following strategies at length, we cover the usual topics of signals, speeds and portfolio construction before diving into more niche topics like synthetic assets, spread trades and alternative role schedules. In the second half of the episode, we pivot to discuss crypto markets, as the Moritz is now serve as CIO and CTO for the exponential age Digital Asset Fund. We discuss their journey into crypto explorations in NFT markets, considerations that make the crypto space unique from traditional markets, and advice for emerging managers in the space. So kick back, relax, and please enjoy my conversation with Mark Siebert and more retighten. Lords and more, it’s Welcome to the show. I have to say I don’t think I’ve done myself any favors with this one. I actually personally as a host struggle when there’s two guests. To have two guests with the same first name really is not making my job any easier, but worth doing. Because I think this is going to be a fantastic episode. I’m really excited to have you. So welcome to the flirting with models podcast.

Moritz Seibert  03:02

Thank you, Carrie. Thank you for inviting us. It’s great to be on the show. I actually told my wife over lunch today that I’ll be on the flirting with models podcast, she gave me a strange look. I feel like being a shy setup away from dating a supermodel anyway. So I think this is for me. I’m really looking forward to that. So finally a podcast where I don’t have to talk about all that constant trading stuff. So looking forward to it.

Corey Hoffstein  03:24

That’s right. I actually recently looked up the podcast, I think it was on iTunes, and was rather shocked and horrified to see what other podcasts were recommended next to mine. I now understand why compliance departments have an issue with my podcast title. I’ve never really got it before. But recommending it to your clients actually is a bit of a sketchy endeavor, I guess. But, look, let’s start where I love to start every episode, which is with backgrounds. I’m a big believer that where you come from and how you got into this industry has a big influence on the way you manage money today. So walk me through your backgrounds and how you got to where you both are today.

Moritz Heiden  03:58

Of course, thanks Cory. Most of my site as you might have already figured out, we call ourselves the two quants and Moritz is clearly the talking quant. So I’m the mortgage decoding quant. I’m not the one that tells my wife over lunch that I’m dealing with models. She knows that, you know the dumb jokes and everything around that. So basically, how did I get into this? How did it meet the other mods? I think that’s the journey. It all started for me. When I started Math Finance, I did a PhD in statistics afterwards, finished my academic studies around the time when the financial crisis hits are not the best time to get into the market. So decided to do the PhD. Did that on volatility modeling, AI learning models prediction, multi dimensional ball modeling. So everything a quant nowadays does so also not definitely in the direction of portfolio management maybe, but I decided to start out in quant Asset Management joined the asset manager in Germany here as portfolio or manager, and that actually met Moritz than it was not to quants. So we renamed more. It’s more it’s but we didn’t start the coupons back then it was confusing for anyone around, we decided to split up again, get our separate ways. So I went to Munich to scalable capital, which is one of the digital asset managers in Europe, one of the largest ones, manage around 2 billion in 50,000. Accounts. They’re everything highly automated, but straightforward ETF portfolios back in the day, I then reunited with Moritz at Munich reinvestment partners, which is an internal hedge fund or fund at Munich Re, which focuses on sustainable investments. And during that time, exactly in 2020, we decided to launch two coins as a kind of research side block. And we did that since then, even though our waste kind of led us away from unitary investment partners. We are both now working for real vision and for expanding the exponential age asset management company. So that’s where we are reunited again, so our path they separate and they cross back again. You want to hear

Corey Hoffstein  06:08

the same from me. Absolutely. Maybe you can fill us to the gaps where you weren’t united. Yeah, I

Moritz Seibert  06:12

mean, clearly, he is the clever Maritza and I’m so glad to have him by my side today. So he’s going to be doing all the mental gymnastics while I’m strictly focusing on chewing gum as rhythmically as possible, which is what it’s usually like when we are together. My background is in derivatives trading, studied economics, not really heavy on math or anything. I still think that even my trading today, as we will probably speak about later isn’t really heavy in math or stats. I mean, I do understand derivatives markets, I guess, and options trading. And I was on derivatives trading desks with investment banks in London in the US trading, exotics, structural products, these type of things that became a quantitative trader, and it’s something that I’m doing since 20 years. And recently, we got pulled more and more into the crypto space more. It’s alluded to that with exponential age, which is a crypto hedge fund, that we’re running together with rubble pile from real vision. We started trading in the Kryptos. I don’t know 2013 is the first time I got in touch with it, but I wouldn’t really call it trading. It was just buying some bitcoin, but then 2017 With all these ICOs and 2018 with futures becoming listed basis, traits popping up. All of a sudden you realize even as a quant trader, there’s those are fantastic markets to trade. And it’s an exponentially growing space. Not all of which is great. I mean, there’s a lot of things that are just, I think, far more ganas and they aren’t going to work. But a lot of the underpinnings they are I think just great from web three to some of these Metaverse applications. I mean, it sounds and looks amazing, weird and amazing at the same time. So we’re placing a bit of a career bet on that as well. But we can speak about that later. So yeah, my background is derivatives and quant trading.

Corey Hoffstein  08:03

I’m definitely excited to get into the crypto stuff with you guys. So I do want to leave that as a bit of a teaser for the latter half of the conversation and maybe start the beginning half more on the traditional finance side of things. I think we’ll find that they actually blend naturally together more than most people expect. Now that we’ve heard who the two quants are, maybe you can tell us what is two quants? Because if people Google two quants, it is out there. It’s sort of a newsletter. It’s education. It’s what was two quants designed to be?

Moritz Heiden  08:33

That’s a very good question. Probably we didn’t have a clear at the end of beginning. When we were working in asset management together, we always thought we are putting out all the research for a very limited group of investors actually, they were getting portfolio updates, stuff like that and our thoughts. So our idea was like, Can we take something from our daily doing which we can actually make kind of available for broader audience. So it started with a lock in the beginning and also as a source where we could collect our appearances on videos and podcasts more at the time was running the top traders unplugged podcast, which is still happening and which is a great outlet. But actually, there’s nothing in writing related to that. So there’s no source where people can look up things. There’s nothing that dives into the details, at least from my side, from the quant side I wanted to have something where I can write about stuff and also kind of put some charts behind it maybe that was the initial idea. So we started doing that. It then formed into something different also, because of our audience we attracted a lot of followers that wanted the monthly newsletter they wanted to have trading signals because we what we thought was like it’s a good idea to put actual our prop trading on there because we did a lot of that stuff as well. So we thought let’s just track it, like open up our account view and track everything we do make an aggregated portfolio out of it, even if it’s not investable just for people to see it. So we got a lot of people actually wanting to subscribe to The not only newsletter or blog part, but also to the signals. And then we quickly found out that there’s an audience for not only systematic trading, but also the discretionary trading part that we were doing, and people wanted to subscribe to it. So we started the monthly newsletter, we then quickly found out that it took quite an effort to actually put out something every month. So I think we wrote stuff that was 2030 pages long. And that was a little bit too big for our taste in terms of effort. So we scaled that back and said, Let’s make everything free, we probably won’t commit to it very regularly. So at the moment, it’s again, back to being a blog. But at least we have something very right about our own trading, where we put out our trade ideas and where people can actually get to know us.

Corey Hoffstein  10:45

Now between the blog, the research, the top traders unplugged podcast, you both have been emphatically adopting, as well as promoting trend following strategies for many years. I’m curious how you both sort of came to converge upon trend following as being a core part of your portfolios?

Moritz Seibert  11:05

Oh, yeah, I can take that. I mean, this is actually now a long time ago, I’m a trend following trader since many, many years and in various flavors. Over the years, I’ve migrated my trend following trading more and more back towards the basic to a very raw and pure form of trend following. I think it is the most protective trading strategy out there, we have small losers, and have occasional large winners. This is a good example for that, by the way, and you let those winners run, and they will sometimes hit the ball out of the park and you have these outlier moves that pay for all the losers. It is protective Exactly. Because the fact that I’m getting out of losing trades quickly. And I just throw them away. There’s a large portfolio a large number of markets that are trade, sometimes some of them work, most of the time, they don’t work, no regrets, throw them away, do the next month 1000 trades. So this is classic trend following trading. And there’s really, I think people know, these days how trend folding works. There’s papers written about it, you can look it up on the internet. But like Richard Dennis allegedly said, you can put all the rules in the newspaper. And still people would find it very difficult to follow those rules, because it’s such an emotionally difficult trading strategy to follow with all these losers and long periods of say, underperformance or sideways performance and draw downs and choppiness and these type of things. So in a way, it’s a double edged sword. We’re speaking about this great system, which I love to trade and double edged sword. I mean, on the margin, I don’t necessarily want people to be trend following traders. Because the more there are trend following traders, the more competition I have, and I love my system, and I want to make money with it. But I guess everybody listening to us, there’s probably only going to be 5% of the people that will actually be able to stick to such a system and follow through with it. And 95% of the people will find it too hard. And they’ll migrate to something else that works for them pure discretionary trading, stock picking long, only 6040, you name it. There’s always this tendency to, which is quite natural as a human being you look at the output of your work, a trend following trading system. In my example, you present that to somebody. And they immediately complain about the choppiness of that equity curve is like, Oh, you can do this better. There must be a better way of doing that. This has too much of a drawdown this has too many down years. This has too many down month in the row. So it’s kind of like let’s put some lipstick on that equity curve and make it look better. It’s like putting a lipstick on my trend following pic. But I don’t want that I like my pic and my pic doesn’t like any lipstick. So it took me at the very beginning, say 15 years or so ago, I was doing all these mistakes myself. Clearly, I was using too many parameters. I was trying to find new systems and different interested for next it’s over optimizing the thing. This is part of the learning journey. This is part of the trading journey. And I’ve essentially gone back to basics, a very brutal raw form of trend following

Corey Hoffstein  14:18

Well, one of the things that I find so very fascinating about trend following as a category is trend followers are very diehard in their beliefs about the trend following process, and yet it is a category that has some of the largest dispersion and returns among managers. Almost all the managers agreed that they liked the properties of trend following have cut your losers let your winners run systematically create that right skew. They love the diversification and the potential portfolio benefits it generates. But the actual implementation details are an area of massive debate and leads to a ton of dispersion and I know from listening to you morons on top traders unplugged. This is something that the hosts have argued about for years as to how trend following should or should not be done. And just to name a couple categories things like the different markets that should or should not be traded? Should you do as many markets as possible? Or they’re just a subset that you should really care about? Should you include financial markets or not? The signals? Are you using a single signal? Is it an ensemble of signals? Should you use different signals in different markets time horizon? Should they be fast, slow different in different markets? portfolio construction? Should you take into account things like covariance or target vol? I’m curious, you said you went through that process of putting the lipstick on the pig, and then you’ve sort of stripped it down to raw form. I’m curious as to your take on this stuff. And then more it’s, ah, I would love maybe from a more quantitative perspective, your view?

Moritz Seibert  15:51

I can start? I mean, your first question was markets traded, I think you should trade as many markets as possible. But with many, I mean, they have to be liquid. And they don’t have to be the same. You don’t want to have markers that are tied to the hip, and they’re just positively correlated, or correlated by one that doesn’t really help you in any shape, or form. But if you can find uncorrelated independent markets, we have natural gas, and equities and bonds, then those are great. So just look for them. There’s more markets coming up. I think some of these what people call alternative markets, I don’t really like that word, but to me, they’re just markets. But think about the power markets, think about frayed. Think about coal, different gas markets, the commodities are just fantastic. So maximizing the number of markets traded in a trend following system, I think is a good thing to do. It doesn’t cost you anything, it only has upside, you can only gain the diversification benefit. And the computer helps you do it. You don’t necessarily have to do all that stuff manually. You can trade 100 markets or 200 markets or even 300 markets. I don’t trade 300 markets, but the computer wouldn’t have any problem doing that. So that’s a good thing to do. And clearly, if you only traded five, or if you only traded, say five equity indices, and you wanted to do a trend following program, you’re unlikely to have a good time with it. That’s number one, then I think your second question was signals. And this is where I think it’s easy to over optimize the thing. You have moving averages, you have breakouts, you have regression lines, you can have simple type of momentum like is the price today higher than a year ago, these type of things, volatility breakouts, Bollinger Bands, I mean, you name it, you’ll find something I trade breakouts, price breakouts, and those are very raw, they’re not derivative, they only use price, whereas moving average is already a derivative of price. So it’s very clean. And I don’t mind that you have a period of time where I say, a moving average based model or regression based model will outperform a breakup based model. But it’s not really that important, I think over the long run, because when you soom out and you look at the return comparison over a 1015 year period, it kind of ends up in the same spot. When the markets are like this year with commodities going wild energy’s going wild. Everybody is short, all the bonds and all the right futures. We’re all on the same trades, two systems, these signals, they will all get you in eventually. And we’ll all have the same positions. The exits. Yep, another form of you can do a lot of things there. How do you get out of a trade using the initial stop, and I use a trailing exit. That’s it. Of course, you could find different exit points, exit the positions and stages. Do things with that. I don’t know, I don’t get that much benefit out of it. I can tell you some of the spread rates and the options traded that I’m doing what I get benefit out of, but we can probably speak about those in a few minutes. And then if I remember correctly, your third question was time horizons, whether you should do an ensemble or just have one time horizon and AI trade relatively long term, not super, super long term, but relatively long term. And yes, you can mix things. And there’s a benefit of doing that. If you combine a medium term trend following speed with a longer term trend following speed, you will get in and out trends and trades sometimes at exactly the same point in time, but not always. So there’s a little bit of a diversification that you can get from that. I stay away from the super fast stuff like short term trend following trading costs are high, slippage is high. I just have more work to do. And actually over the long run, it doesn’t really perform as well as the long term stuff that I trade. And then lastly, portfolio construction. And again there I’m also really back to the basics. When I take a position, I have a risk budget for that position. And that depends on the market. That depends on that markets, volatility range, Average True Range behavior. So it’s a volatility or risk measure that I’m using. And the riskier the market, the more volatile the market, the smaller my position size, and vice versa. That is the most important input. Really, for my risk, it’s the position sizing. And I decide that ahead of the trade at the point of trade inception, that is being decided on, and I leave it unchanged. I don’t touch that position afterwards, unless it hits my stop or my exit. So there’s no volatility control. There’s no covariance calculations, no value at risk calculations that control the portfolio. Because to me, they’re not really a good form or a good measure of risk, I run with a position, I hope to hit it out of the park. Eventually, it will built up open trade equity, which can be substantial. But that is money that the market has given to me and form a variation margin, and I allow myself to be very liberal with that money, because I’ve kind of like gained it, it’s not yet mine, but I can have it, I’m much more willing to play with that money than with my core capital. And there’s always a chance that an outlier trade that has made many atrs will become an even bigger outlier trade. And the only way to find out is to stick with a position when you do a back tests. And I speak about that with Nils and my friends and cherry and Richard and those guys. It’s kind of like a, all the time on the podcast is like, should we do volatility control? And should we adjust position sizes over time in response to changing volatility environments. And I’m against that, I don’t even know what to do with that trade. And I don’t think that you can just no trade, when you take risk off or you put risk on, it never goes away, it transforms into different parts of your trading system, it may increase your average loss, these type of things that definitely increases trading costs when you engage in these type of volatility control trades. For me, I don’t do it, I don’t see the benefit. I don’t mind the volatility. But I now have some years of experience under my belt so I can live with the daily ups and downs in the system. I do recognize that. If and when you do a back test, and you overlay it’s essentially an overlay volatility controls an overlay strategy, if you turn that on, depending on the markets you’re looking at, but most of these systems would perform better. Still, I don’t care. I’m not going down that rabbit hole anymore. I’m staying away from it. All right,

Corey Hoffstein  22:41

more teach, does the research and the numbers support the experience?

Moritz Heiden  22:49

Coming from an academic side, it was of course, at the beginning of truth shock meeting words. So everything I taught myself and I learned was basically disappearing quickly, maybe touching on the same points, starting with markets. As an academic person, you get what you can in terms of data. So usually you are limited to commodities is something you always touched, but no one has trading experience. So it’s very interesting to see from a trend following perspective, what that opens up not only in terms of what different markets you can trade and what the parameters of these markets are to being physically settled, and stuff like that. But also kind of what you can create, for example, on the spread trading system in terms of seasonality, for example, which adds a complete new, I would say complexity to the thing, because you can create completely synthetic markets out of market, you might have treated simply as one before. I mean, that one was a revelation, I would say and it’s barely used on the academic side. The other thing was signals, I think, coming from mostly a vol perspective, and mostly short world strategies, my own research, it was a completely different kind of distribution. Of course, compared to trend following also, the academic focus was often on predicting returns. So you’re trying to achieve a high hit ratio, whereas trend following has a terrible hit ratio. And the first thought is, of course, like with the hit ratio around 40%. How do you actually make money. And if you have no kind of positioning system, which is basically more akin to, I would say, a gambling system where you kind of set your stake and then take your money off the table. If you’re not winning. Basically, if you don’t have that in place, you will lose with a 40% hit ratio. If you implement something like portfolio optimization, Markowitz you can take anything. You won’t get anything out of that. And that’s the third thing portfolio optimization. I think you don’t have to make it overly complex in that way. Simply, we all know from an academic perspective that the more complex it gets, and the more parameters you use, the more and robust it actually becomes in the end so becomes very sensible to you all well fitting that stuff. And that’s one of the main problems, most of the strategies. So having a simple system, which works is, of course, in the end, creating a rough line in terms of performance, but it’s robust in the end. And kind of that robustness is something where I was surprised seeing that in the system that Marx was trading and also the trend following people were trading because I was not used to this kind of system when I came out of university, at least, you mentioned

Corey Hoffstein  25:27

there, this idea of synthetic assets. And it’s something I see a couple trend followers do it just as an example, instead of trading, short term US Treasury futures, intermediate term US Treasury futures, and long term US Treasury futures, they could actually construct a Delta neutral trade where they’re short, the front and the back end, and they’re long the belly. And now it’s a curvature trade that they can actually trend follow. You guys. I know from our pre call, actually, some of the synthetic sort of markets, you construct his actually through looking at the same market, but rolled on a different schedule, which was actually something I hadn’t heard before. So for example, oil rolled quarterly or monthly or on half year roll cycles, I was hoping you could talk about that a little bit expand on the idea where it came from, and why it makes a difference.

Moritz Seibert  26:13

Yes, I do that. I don’t remember where that came from. I actually think that came from me playing around with CSI and downloading market data from Bloomberg. And I mean, clearly in the commodity markets, when you look at say crude oil, natural gas, I mean, you have monthly explorations, DEC 23, DEC 24, a deck in June and crude for sure. Two years out is liquid. And even further out is liquid enough for my size of trading. I’m just trading pa I’m not running billion dollar fund or anything like that. And the grain markets, some of the softs, you have these structures, the short term interest rate markets, nobody’s forcing you to trade the front contract, there is no rule that says trend following can only work on the front contract. So I thought about started with crude oil, that was the first market I handled that way is like, okay, let’s create 12 Different crude oil markets, the from the second, the third all the way down to the 12. And say, if you’re trading 50 basis points of risks or 25 basis points of risk, then on each of these new markets that you’ve created, you would now trade 112 of that 25 basis point risk budget that you have. So it’s probably one contract or two contracts, maybe just one. But it’s you’re in different points of the curve. And there’s a little bit of diversification potential just there. Think about crude oil. I mean, we had super contango two years ago, when COVID hit, we now have a form of super backwardation two years later. So clearly, they’re curved dynamics at play. And the 12 contract out, reacts very differently, less volatile has less beta, then the front contract, so they’re related, and yet not identical. So trading them all is another form of another way of increasing my diversification benefit. Inside of a system. I can’t do this on the equities. And there are some markets where really only the front contract is liquid, the Hang Seng, for instance, right, it’s kind of like that, you need to trade the front contract, and you need to trade it until kind of like the second or even penultimate day before expiration, and only then will the next contract become liquid. But in some of the markets, you have a very liquid structure. So that’s what I do there. This is not yet a synthetic market. This is just a single outright market, that I roll differently, I point to a different part of the curve.

Corey Hoffstein  28:40

Know that another way in which your system is a bit unique compared to other trend followers is through the introduction of spread trades. So maybe you can walk us through if you remember the genesis of the spread trades, and why you think it’s important to include them in the system.

Moritz Seibert  28:55

I’m not sure if I can generalize whether it’s important or not. And I don’t want to come across as having found something that’s the Holy Grail. I have a limited life track record on the spreads something like two years, it’s been performing very nicely for me, I don’t see any reason to switch it off. But I don’t have like a longterm body of evidence so that I could really say people need to include spread markets, otherwise, the trend following system is incomplete. I don’t think that would be fair to say. But to answer your question on the Genesis, I heard other CTAs speak about synthetic markets and that they are creating markets out of existing time series, which they then treat in a new way and the trend follow these markets. So it got me thinking and actually years of thinking. I was like what do they actually do? They’re are they creating commodity spreads? Are they creating exotic spreads such as DAX versus wheat, like an equity index versus grain? How do they do that? Do they take a difference? You can also add them together. I mean, mathematically that’s possible? Do they take the difference in returns to the tick difference in prices? How do they go about currency conversion? How do they go about different volatility structures and these things? You think about this even deeper and you go like, well, aren’t all the markets that we have in the portfolio already spread markets in the sense that they are ratio spreads versus dollar WTI divided by USD, it’s the barrel price in US dollars. It’s the Euro divided by USD its weight divided by USD. So we already have these, and to what extent is gold for instance, to name just one example, to what extent is the price of gold influenced by it’s denominated, which is the US dollar dollar go strong, gold goes down, rates go up, gold goes down. I mean, you have these dynamics. So okay, anyway, so it gets your head spinning makes you dizzy, I started playing around with things. And I could get nothing to work like all the simple ideas that I had of creating a spread and subtracting one market from another and subtracting returns from another and all of these things. And then I wanted to use the same rules that was written in stone, I’m not going to be trading the spreads in a different way than any of the other things in the portfolio. So it needs to adhere to the core system and then sync with that one. I could nothing to work really. And then I stopped, took like a year break. Didn’t really look at it. And then I looked at cointegration. So this is something that I’m not using for the outright trend following system. Because cointegration doesn’t play a role when you trade a single market. But when you look at two markets together, cointegration is a thing. So cointegration and correlation of different things, maybe just let me explain that very loosely, so it doesn’t get too complex and Moritz can do the other thing then. But say you have crude go up 1% every day and you have natural gas go up 50 basis points every day, that is a linear relationship that would result in perfect positive correlation. But because crude goes up 1% Every day, and that gas only 50 basis points over time, crude will outperform natural gas. And when you look at their time series, there will be a spread. So those markets in this example, they would be positively correlated with a correlation coefficient of one, but they will not be cointegrated, they will only be cointegrated. If the spread in their prices in their time series, now we’re talking prices is stationary, kind of like a horizontal line, if you will. And that is something that I tried out. So I looked at markets create a different combinations. Now computers doing it. And essentially I’m looking for breakouts and correlation of cointegration structures. And that would then signal me to take a spread trade, but I’m using the same rules. And all of a sudden this worked. I can’t really tell you why this works. But it does work. I am confident that because I’m using my same rules, and I have a sample size on it. And I know that I will be keeping losses small and I will let the winners run. It’s trend following. It’s robust. So I’m good with it. And it has helped my performance a lot. It’s a little bit of that lipstick that I was talking about earlier, because it does sometimes say when my trend following programs acts, sometimes it doesn’t. And they go the same direction. But one thing it definitely does do is it gets me on to different parts of the curve. So for instance, in crude just stay with that example. I’m long all the crude contracts, because crude has been going up so much. But most bread system has also signaled me to take certain spread traits. So I’m now long at the front. I’m short June. I’m long November. So different things. And I didn’t have that before. And that helps me. So yeah, that’s what I do. Alright, now

Corey Hoffstein  34:02

let’s turn to mortes. H for the math behind the concept. Any thoughts as to why cointegration unlocked the spreads? Good

Moritz Heiden  34:10

question. I never questioned Morad system. To be honest. I mean, from the cointegration side, it’s mostly used in mean reversion or past trades that naturally comes in but many people use it less so on pure trend following thing. And my idea around wide work tomorrow is that he’s basically introducing some mean reversion feature in a trend following concept. And that actually adds nicely to the trend following experience. I’m not sure if it’s completely right for all of the trades in your system, or it’s but at least that what would explain it is beneficial to

Moritz Seibert  34:47

that. I need to correct that. I mean, I appreciate the thought but it’s not a mean reversion feature at all. I’m actually looking for a break in that cointegration structure. So something is cointegrated now and it stops me In cointegrated, which means those times you start to diverge again. And I’m looking to get onto that trend. I’m not looking for a spread to close, I’m looking for a spread to widen. But the signaling is using cointegration as an input measure,

Corey Hoffstein  35:17

or perhaps the marriage of those as you have a large number of market participants who are trading the cointegration assumption. And when it breaks, you end up with a bunch of forced sellers, people that don’t align their positions, and you end up writing the trend of their unwind. It could

Moritz Seibert  35:31

be and maybe as years go by, I’ll find out more talking to people as to you know why that works. But you could be right I mean, there could be a lot of carry traders in the market, that could be a lot of stat ARB and spread traders in the market that are actually looking for a spread to close, because it has widened and optically looks attractive to do a mean reversion trade. And they do that. And I take the opposite side of that trade looking for that spread to become even wider, but I’m probably not doing it at the top, I’m looking for a period of time where it kind of like the spreads have closed. And hopefully they will get wider and the cointegration that I have detected will break,

Corey Hoffstein  36:13

I probably should have just decided this was going to be a podcast wholesale about trend following. Because I feel like I’m doing my listeners a disservice now to take a wholesale pivot into crypto. But I also know you guys have some really interesting stuff to talk about there. So we’re just going to put a hard stop on the trend following it is one of my favorite topics to talk about I sure we can make this a four hour podcast if we really got into it. But let’s talk about crypto because you too now serve as the chief investment officer and the Chief Technology Officer of the real vision exponential age fund. And before we dive sort of directly into what you’re doing there and how you’re thinking about architecting the fund. I know and you’d mentioned this a little bit in your background that you both have been dabbling for many, many years going on close to a decade now in the crypto space, hoping you could walk me through your background and maybe some of the hard lessons learned along the way.

Moritz Heiden  37:06

Yeah, absolutely. Maybe I’ve been a little bit long in the space and more. It’s even simpler because of the fact that when I was still in university, we mostly worked with high frequency data. And we got an allocation of resources on the cluster to compute and use all the data and actually process it. And at the time, I think it was 2011 2012. We also looked into bitcoin found fascinating, and we thought let’s use these resources actually to mine Bitcoin. So we dabbled a little bit in that space. Probably I shouldn’t mention that we misused resources at the university to actually mined Bitcoin. But while that hopefully that kind of forgotten by now, it wasn’t a lot back then for us because the price was no were really significant. So when actually the price increased by some dollars, I think it was an I don’t know even not a lot. We actually spend it on the other only thing where you could spend it that was computer equipment. So we bought keyboards and stuff like that with it. So basically all of it was wasted. I think we kept a little bit and forgot about it. Until 2016 I think when I met Moritz, we rediscovered the space not only Bitcoin but then also Aetherium. And we got involved a little bit and from that point on, have been in the space together,

Moritz Seibert  38:23

kind of different for me at the very beginning. I’m friends with two guys I used to work with and they started a Bitcoin mining business, which is today one of the world’s largest mining operations. And in 2012, one of them approached me a friend said, Look, Morris you have to buy some of that Bitcoin just to get on the boat, and I dismissed it because back then it was like it had the narrative of being illegal and money laundering and only bad things happening circumventing the central bank’s disrupting the system. So I wanted to stay away from it. And then a year later 2013 I meet him again, we have a coffee, and I gave in and I just put a little bit of money it really very little money into Bitcoin. I didn’t know anything about cold wallets or cold storage and all that stuff. So I think I probably bought it on bit FinEx of Bitstamp and it’s in a hot wallet. Then we started mining, so we worked with him and we got some mining capacity from him. Ethereum came in 2015. Then 2016 I met Moritz, there’s some movement in prices. This space is going higher. We’re now approaching this Ico craziness. There’s more tokens and more coins popping up. I mean, remember, like 2013 you had Bitcoin and probably Manero and Litecoin and dash and a few others, but it wasn’t like today where there’s like 1000s and 1000s and 1000s of tokens and coins and it’s impossible to really keep track of the entire space was limited. But when Aetherium happened, that absolutely unlocked the smart contracting and all the applications that you can run On a smart contract platforms such as Aetherium, unlock Defy. And today it’s unlocking web three and Metaverse and play to earn and game to earn and walk to her. And this is an exponentially growing space. And then the CME got in and 2018. With the futures contracts, new exchanges, new trading venues popped up FTX. For instance, one of the largest ones today, Interactive Brokers is now offering crypto trading Coinbase IPO. Look, I mean, this is a fast growing market, and it created a lot of trading opportunities for us, you can trade these markets from a trend following point of view, and I do that, and you can also see other inefficiencies that are exploitable in these prices. And we’ve talked about the basis, the Bitcoin, any theory on future spaces, the funding basis, which is now relatively unattractive, maybe it’ll be a bit more attractive in the future. I don’t know that. But two years ago, that basis was 3040, sometimes even higher than 40%. So you have a cash and carry trade staring you in the eye where you can make 40% per year, it’s kind of like, you have to do it. But figuring out how to best do that trade. That is kind of like the trick, I mean, you can do that trade in several different shapes and forms on several different venues. But they’re all have different risk characteristics. And they all have different funding and efficiencies and these type of things. But that was a great trade, you could do that in Aetherium. And it’s changing so fast. I mean, now you see it in defined yield farming and staking and stable coin lending. It’s a very attractive market. So from a trading perspective, with my trading hat on this is just super interesting. And I enjoy doing it

Corey Hoffstein  41:46

feels to me like that cash and carry trade is sort of where Alice falls down the rabbit hole for many traditional finance people because they see that very traditional finance trade. And it’s very attractive, as you mentioned, two years ago, you’re getting 40% annualized, from what is a pretty low risk trade, at least in theory. I do think the trade highlights a lot of the implementation considerations that are perhaps unique to the crypto space things for example, are you going to implement this with CME futures? Are you going to implement it on a crypto centric, centralized exchange like Kraken or FTX? And understand their liquidation rules? Are you going to keep things in a hot wallet at the exchange as collateral or cold storage and have to manage your collateral? So can you maybe you could talk about some of these things and compare and contrast those choices? And what makes crypto Asset Management a little bit unique?

Moritz Seibert  42:40

I’m happy to do that. I mean, to us, I mean, as you say, the cash and carry trade, this is not something that is new. I mean, you can see this in the crude oil market. I mean, two years ago with that super contango, you’re buying crude, you put it on floating storage, that’s essentially a cash and carry trade and you sell a futures contract against it. So yes, you can do the cash and carry trade in different ways here as well, with the CME. Okay, you know, that you’re facing the clearinghouse of the CME so that’s a good thing. That is what I’m used to with my trend following trading program anyways, when I trade the s&p Mini or any of these contracts, that clear there, that is the same risk. But not every broker at the beginning offered access to Bitcoin and Aetherium futures. And there’s also a backed CBOE listed future, I’m actually not sure if that still exists today, it was always the smaller one, and the less liquid one, but Okay, so you face the Clearinghouse not every broker gives you access. So you need to find the broker that does trade that market. And then the question is, well, how much margin are they requesting for you to put on that trade, especially on the short position, because you will be short the futures contract. And initially, they were like, look, this thing can jump 100 or 200%, overnight. So essentially, you need to fully collateralize the thing. This means it’s very funding inefficient, very capital inefficient to put it up, because you also have to fund the spot Bitcoin or the spot ether lag on another venue. And so you have to pay for one and you have to pay for the other you have essentially two funded legs, and they don’t know of each other. Usually, in an efficient market, the spot position would be good collateral against the futures position, and there would be some netting not to zero, but there will be some netting that takes place that would improve the capital efficiency, and initially that wasn’t there. So you had to find ways to make that trade better in order to realize as much of the 40% that you can see on the screen and not lose it all because of funding and efficiencies. And one way of doing that was to say and initially you can say look, I have the position in the back warehouse and the future that clears against backed will recognize that position. So you got some netting there. Then the margin rates came down and then you And also do it on a crypto venues such as FTX, or Viners. Or you’ve mentioned Kraken. And here it’s a function of a case of what do they accept as collateral? Will they accept a spot Bitcoin position as collateral? Yeah, you find one that does that, for instance, FTX does do that. And they would recognize the futures position that you have now on their venue, obviously, they don’t recognize the CME position, but you can sell a futures contract or perpetual swap on FTX, they would know of both positions, and you would have netting benefits there. But now the risk of that trade also has a different characteristic, because you’re no longer facing the CME, which is your trusted clearing house, you’re facing FTX, which is now a, I guess, well capitalized and well funded crypto venue. But back then it wasn’t really that large, and you have your position in a hot wallet, not your keys, not your coin. So how much of that yield that you’re seeing in the bases is actually fair yield and how much of it is counterparty risk. So you have to think through these dynamics. And, as always, position size appropriately. With every single trade that you do, it doesn’t really matter whether that’s an options trader, we haven’t spoken about that value, or crypto trade or a trend following trade. Always position size appropriately, as small as you can, but not too small, because you’re also in the business to make money. But you don’t want to put all of your even though that trade looked so appealing, like 40%, I mean, I would not switch off the trend following program and move all the money into that trade just to make 40%. That’s a part of my portfolio, but not everything.

Corey Hoffstein  46:40

I know you’ve both in the last year gotten very active with NF T’s as well, launching your I guess I’ll use the English because I can’t pronounce the German you’re apes with guns series. Maybe you guys can pronounce the German for me. I want to know what drew you to NF T’s and how your views have evolved. I mean, that’s a very rapidly evolving space, and maybe talk about what you guys are hoping to achieve with the project,

Moritz Heiden  47:03

the alpha minibuffer that’s the jump translation. Everyone’s struggling with that. I don’t know why we launched it in German. Actually, that might have been a mistake. But at least people remember it has a strange name. We started actually with NFT is a little bit earlier already beginning of 21, I think when we launched one NFT that was commemorating actually the race between gold and Bitcoin because, like at that time, there was a lot of talk about digital gold and Bitcoin is the new gold and stuff like that. So we thought let’s basically commemorate that with a piece that we put out there which shows roll from revision, and highlighted slogan responsibly long. I think he put it out like in a video I said that two months ago and became famous. And we basically sold a physical artwork together with a little bar of gold, and some bitcoin on an open dime stick. And then people ask us, Why is it not an NF T. And that was basically we have identity market before but we’d never mended an NFT. So I from a technical side of just wanted to know, how is it actually done? How does it work? What are the benefits? So the first NFT really made it because people just asked us why not an NF T and who kind of wanted to own that. And that was sold out quickly. It was also a limited edition, very low number. So there was no utility attached pure art and the Fund for it. And these pieces now hang kind of all around the world. So one is in London at a hedge fund office, which we know and some are in Asia and Australia. So we send them all around the world. That was a pain of course, like sending physical pieces also sending gold and yeah, they open time sticks and stuff like that. So this was terrible. So definitely want to went on into NFT only space, I would say. And I think that is kind of the idea, or where we found interesting was basically for our community because we discontinued that newsletter also for the reason that it just was too much effort to bring people together. We always thought about like, we’re getting the same questions from 20 people, for example, how do we answer them and more efficiently, we thought about like, let’s make a Slack channel. But if you make a Slack channel, you have to kind of invite everyone they have to Doc’s themselves, they all know and kind of every subscribers in there, it’s getting terrible. There are a lot of integrations that can help the slack. I mean, there are some but from a technical point of view, it’s definitely not made for streaming information. So I found the concept of discord servers actually, which you know, back from my gaming days, quite interesting. So kind of having that and seeing that adopted in NFT space upon that ideal for the user base. And there are a lot of API integrations you can streamline different price theories, you can streamline signals you can basically ask for or let people have commands and basically input them trade ideas, input them, every kind of stuff, which you can collect. So it’s very interactive for both the users as the providers and the We thought about that. And at the same time, we launched the NF TS Alpha minibuffer. Just for fun. Again, that was a coincidence, basically bringing the two areas together, we had this AI, the real vision board programmed, because of, I would say, also just a loose idea. And we wanted to create some art that based on artificial intelligence, because I’m also a little bit into generative art. So I thought, how can I use the data that I’m getting from that thing, so put out the first aid to the gun, which is basically a picture of an ape holding a gun, which is processed by an AI. And then based on the emotions in the revision interviews, which are processed by natural language processing, it kind of created colors and filters around that. So every day, we’re doing that for two and 50 days, it’s always a unique thing. Back then, it was only the first one, and someone wanted to buy it. Actually, I wanted to do that only for myself having the NFT and printing the physical piece. And then people from the community actually approached us and we’re like, what are you doing here? Are you creating NFT community and I mean, the first one was sold for $10, I think, now we are in a range of probably 10,000 to $15,000 per piece. And we structured our membership around that. So we are creating basically a community of people who are interested in investing, who have an overlap in investing, most of them have experience around that, and who are now using this discord, to exchange trade ideas, to organize meetups to also get input from ourselves around all the topics of systematic trading trend following but also a big area has become NFT trading itself. So this is one of the things where I would say like we got interested. So we looked into that as well. And there have been a lot of people who have been providing us with great input. And we are basically I would say we are profiting from that community in that sense that we learn from them. What is important about NFT project and we now put it to use by actually trading NF T’s ourselves, you guys

Corey Hoffstein  51:58

really went from an initial interest and experimentation and playing around and an evolution to really a strong career switch for both of you. Now with your the exponential age fund that you are actively involved with in managing, can you tell me a little bit about what the fund is the structure of the fund what you’re hoping to achieve with it.

Moritz Seibert  52:19

It’s a relatively young business, Cory. So we have one fun today, it’s called the exponential age Digital Asset Fund. And that fund started in November of last year, I can’t really give you the specifics and returns but it’s been a very successful start. Just believe that that like that. An exponential age is a digital asset investment management firm. We’re looking forward to launching more funds this year. With different objectives. There’s one that is going to do more like market neutral yield type of trading. Remember the basis trade that we just discussed, even though that is today not as attractive, but there is a bunch of other trading strategies in D fi or market making these type of things that you can trade there and make money. There’s the theme of NF Ts. There’s the metaverse, there’s virtual property. Look, we don’t know where that’s going. It’s kind of like a trend following trade. It has tremendous upside. I think there’s a digital world that’s being built in front of our eyes right now by a younger generation, not by me, maybe by you guys, but definitely not by me. But I think those guys will figure something out that works for them. I have the feeling that they’re a little bit fed up with web two and the inequalities of the current system and central bank, large classes and all the problems. I mean, look at the news today. I mean, where are the good news? Everything’s terrible. There’s war, there’s inflation. I mean, how do you get out of the thing, fourth turning type of style. And it’s really, if you place a bed, place it on the younger generation, they have the longest life expectancy, and they want to build something that works for them. I love my family. But it’s kind of pointless to place a bet on my grandparents when it comes to digital assets, because they’re not going to be using it, nor are they going to be making any developments on GitHub. So that’s essentially the bat. And also I find it usually exciting from a trading point of view, like going back to trend following when you unleash some of these trend following systems on tokens. I mean, this is actually it looks very nice. There’s a lot of trending behavior in these markets. And I’ve been on the record saying that I think the crypto markets are both the most efficient, and also the most inefficient markets in the world. It’s an oxymoron when I say it like that, but when you let me explain I mean, the reason I say it is they’re the most efficient because they’re open 24/7 365 And everybody can participate. You carry human rights, you can open a wallet, you don’t necessarily have to be 21 or 18. You can do that when you’re 16 You can open a futures account with RTL when you’re 16. You can trade in very small quantities, a few sets, you can trade in Australia, you can trade in Germany, you can trade in the US. The world is open, it’s very inclusive. There is no central clearinghouse it is siloed trading operations in different parts of the world. FTX by Nance, Kraken, they all trade Bitcoin, they all trade Aetherium. So there’s no longer a central point of liquidity. There’s no longer a central clearing house where essentially all of the s&p 500 volume would go through the CME, that’s not true. It’s arbitrage across different venues 365 days of the year, without any interruption. There’s no limit up, there’s no limit down, there’s no volatility breaks, there’s no stuff like the LME canceling nickel trades, no, that stuff happens. There’s no payment for the flow. There’s no dark pools, this makes it very fair, very efficient. But it also means that you have these meltdowns, because participation in the market is largely retail driven, where institutions are coming into the space, we know that we see that we talk to them, but the big institutional adoption wave is probably still ahead of us. And so sometimes, because people trade with leverage on these exchanges, and previously, the leverage was 100 to one now it’s no longer 100 to one. But when you have one of these bad days, the markets just need to exhaust themselves Otherwise, they wouldn’t stop going down, there is no limit down where there’s like a trading halt. So that makes them efficient. And they’re inefficient. And you can see patterns and structure and all these things like trend following working really great, because they’re not yet populated by all these PhDs like Moritz, who would otherwise be arbitraging the s&p 500 volts surface for half a basis point. And they’re coming, we see them coming from Goldman’s and they’re leaving Trad fi, they’re going into crypto, so that space will become more competitive going forward. But today, you have a lot of leverage retail trading. And that creates these patterns, which from a trading point of view is just a great thing. So we’re building a business around that with exponential ah, on the one hand, we’re looking to provide access to the space efficient access to the space where a lot of people they have concerns about accessing the markets because they Yes, you can DIY do it yourself and buy some Bitcoin or whatever token you like, or a basket of tokens on an exchange. But then, if it’s hot, get concerned about custody, taking it into cold storage opens and other cans of worms. How do you actually manage your key? Is it you and your wife? Is it just you what if something happens to you or you and your wife at the same time? What’s the backstop? So it’s very difficult for say a family office or an institutional investor or a high net worth individual even to scale into crypto. And the only way that was available to them was essentially through venture capital funds. And then this is where most of the investment money is still concentrated. Probably my guess is that the overall space the overall investment, hedge fund crypto space is just 30 billion, of which 25 billion is Vc, we have a bunch of VC funds that are north of a few billion in capital, but you’re locked up for 10 years. It’s a liquid, it’s transparent. The outcome is hopefully very positive for those involved. But that was something that you could do because no other infrastructure existed. The third party custody solutions didn’t exist. The administrators the fund administrators didn’t want to touch crypto, the banks didn’t want to touch crypto that didn’t allow you to onboard. So but that has changed. And now you have hedge funds trading, some of them systematic multi strategy, some of them thesis driven fundamental directional long only, but they can work inside a fund infrastructure with an administrator with a bank with liquidity. I mean, none of that stuff has daily liquidity. It will go there, Cory, I mean, these markets are 24/7 365. There will be daily liquidity. There will be liquidity on a Sunday. I also think that the traditional markets, even the futures markets will eventually become tokenized. I mean, crude oil trades on the Sunday. It’s just not printed to the tape. It opens with a gap on the Monday but it’s essentially trading on the Sunday. This is all coming and the infrastructures and the frameworks continue to develop they have now developed to a point where you can have a hedge fund and trade. That’s what we do. And now it’s scalable. It is in an organized regulated structure. It is liquid and it’s an easy way in for institutional investors to get on the boat.

Corey Hoffstein  59:59

So many push you on that last point a little bit on the structure element, because I have a lot of peers of mine who have tried to go from sort of informal prop shops to more structured hedge funds within the crypto space. And they do run up against issues around custody, daily accounting, auditors that are friendly to crypto, just general administrative issues that most people don’t think about when they think about investment management. But that’s the business of asset management, you need all those things to be able to operate a fund, you obviously are having success in that space. I’m curious as to your thoughts of sort of the state of best practices. Obviously, it’s a rapidly evolving space for those who are running into maybe some headwinds there. Who should they be working with? What should they be thinking about?

Moritz Seibert  1:00:45

Custody is a very important point, just to maybe provide a little bit of a breakdown. And I’m guessing here, and this is no guarantee that my information is accurate. But what I’ve just mentioned, about 30,000,000,020 5 billion of which is venture capital, so that leaves 5 billion for hedge funds. There’s some prop traders in that 5 billion, there’s some double counting in that 5 billion because of fund of funds. But let’s just say it’s 5 billion, it’s very top heavy. I would say that there’s and this is my guess from what I’ve seen, there is between 20 and 40, depending on your risk preferences, investable, crypto hedge funds out there, where we think, well, they would meet our thresholds in terms of operational risk in terms of custody, and so on. There’s a total of about 500, though. And every day, there’s another one because this space is growing so fast. So you have, let’s say 450 funds, or managed accounts, prop traders, some of them are looking to set up a fund, but they’re not really investable, because when you speak to them, it turns out, say their yield farming in Defy. And you ask them, Well, how do you get on chain? How do you get off chain? And it’s kind of like, yeah, through a meta mask? And who controls the keys? And the answer is, well, it’s just me because it’s my money and run the thing. I can’t allocate capital to you, because you might not be around tomorrow, and we’ve lost our investment. So but there are now I’ve said it before the infrastructure continues to develop. But it has now developed to a point where you can have a setup that is professional, where there is a backstop, on key management, where you can have multi SIG key management, maybe there’s a notary, or there’s a third party that would have access to that key. If something happened to the management team, these type of things. Custody is super important. But when you speak to these managers, a lot of the questions that you would ask, say a CTA, or a long short equity hedge fund, a macro hedge fund are the same in terms of like, how do you trade? How do you position size? How do you look at your risk, how to get in and out of trades? Same thinking really. But then there’s also things that are clearly different, because you don’t clear the stuff on the CME. And we’re all used to variation margin and initial margin of these types of things and putting the money that we don’t need to Treasury bills. That just doesn’t work here, because it’s all crypto. And some of it is on centralized exchanges, and some of it is on chain. So you have to ask different questions like, how do you get off off a chain? Have you analyzed the protocol risks there? I mean, we’re not demanding a perfect eight plus answer to all of these questions, because we realize it’s impossible to give them because that space is so heterogeneous, there’s so many chains, so many tokens, so many trading strategies that it is really impossible to have an A plus answer to all of these questions. But what you want to at least hear is that the management team has very soberly thought about these risks and thought them through and try to find ways to optimize and reduce these risks to the lowest extent possible. And so therefore, that leaves I would say, 20, to 40 funds where you could say, okay, they figure that out, or they’re thinking in the right directions, they’re risk aware, they’re conscious of things that could go wrong, and they’re trying to mitigate these risks.

Corey Hoffstein  1:04:17

One of the things that I’ve noticed in talking to people in this space is that a lot of the interesting prop shops, at least in my opinion, are coming from what I’m going to people listening can’t see me do air quotes, but crypto native investors who don’t come from the traditional finance world are running really interesting. For example, MeV type strategies, and have never set up a fund before. Curious as to your take, you’re talking about a space where track records are not long. And there’s a lot of emerging managers, many of which who have never worked in traditional finance. What would your advice be to them?

Moritz Seibert  1:04:53

We have quite a few of these examples. I can’t mention the name, but we’ve helped one of these managers to actually get up running, and they have non traditional finance backgrounds, they have completely different but when they were younger, 10 years ago, 11 years ago, they got in touch with crypto. They’ve never traded a futures contract because they were too young to have an Interactive Brokers account even back then. But they traded Bitcoin, and they help Bitcoin and then Aetherium, and obviously made a lot of money. Now they’re at a point in their career where they would like to start a fund. But they’ve never talked to an administrator, they don’t even know what Bank of New York Mellon is, or State Street or ssmc, they’ve never heard of any of these names, they will need to look it up with that team, we help them to kind of like get the setup, right, get the legal structures, right, make the introductions to people so that they could get started in a proper setup. Yes, I mean, you have to do the work. This is what an institutional investor will require. They want a crypto hedge fund to send to look like the long short hedge fund than they combined.

Corey Hoffstein  1:06:00

The last question I’m asking everyone this season is about, I’m asking you to reflect on your career, I guess and think through what was the luckiest break you had in your career,

Moritz Heiden  1:06:13

clearly meeting the other markets, I would say, because it gave me a completely different perspective on the things that before someone or the quant stuff. And who knows, I probably would have stayed with a very complex modeling and derivatives pricing or whatever this pricing model in some investment bank, in the end was a lucky thing to see that something else out there. And then the second one was, I would say, getting back into crypto. I don’t know why I ever forget about it. Because it was so young, probably in the beginning. But really kind of the availability of data and of smart people in that space and the things that are out there from a technical perspective that can be done without all the things about in your way, in traditional finance, I think that makes it extremely attractive from a quantum perspective, because it’s so much things that I can play around with. I mean, if I want in 20 minutes, I can deploy some kind of market maker on one of the side chains and just get going and even make money. And it’s kind of it’s a dream, because you would never be able to do that in traditional finance as someone kind of sitting at home, just programming by yourself.

Moritz Seibert  1:07:19

It’s very kind of you to say, maybe I asked that from a different perspective, my lifelong dream, I think at the end of the day, you’ll see me as a trend following trader in my 70s, hopefully 80s and 90s. And that’s what I’ll do, it’s a lifelong dream of mine, by the way to, at some point in time, start up a fund there as well. I’m actually working on that right now together with a friend it’ll probably start small and with track record then hopefully convert into a fund but where I trade the spreads and the outright markets and some of the options and I just think this is my calling, this is what I enjoyed doing absolutely love that and I cannot for the world. See me stop doing that. So a lucky break was really for me to go back to the basics of trend following and Stop fiddling around with it. Just love that system, loves losing trades, accept it for what it is, and change my brain, my mindset, my emotions, into a trend following mindset, in a way, by the way, that shines through with what Maritza and I are doing as well, when you look at our careers now, I mean, like a trend following portfolio, it’s all of a sudden, a diverse set of things. We have a few balls in the air, there’s two key ones. There’s an NFT project, which a year and a half ago, had you mentioned that I would have probably laughed and said this is just too crazy. And all of a sudden we have this community and so many amazing things happening there like a gin being produced in Australia that has our ape skateboards being produced surfboards being produced. There’s a trend following community and our HQ. People want to hang out with us and do stuff with us because they’re like minded and they have so this is donations to grain you name it. It’s those people that initiate that it’s not Maritza, and I really telling anybody to do that. They by themselves get together and kickstart these things. I find that amazing to see. And they’re obviously their friends. They’re our MFT community. But then we have crypto, we have our own trading. So let’s see. This is a super interesting, super busy time for both m&ms for both more races. And I’m really happy about it the way it all plays out. Now,

Corey Hoffstein  1:09:40

I can’t believe I didn’t think of calling you guys the m&ms. That’s going on the podcast cover. There we go. Gentlemen. It has been an absolute pleasure. Thank you so much for joining me. Thank you, Cory. Thank you so much.