Greg Magadini is the co-founder of Genesis, a platform that uses machine learning to create accurate predictions based on statistical data.
He discusses with Crypto Disrupt this week how blockchain will usher in new levels of disruption and innovation for industries like financial services, insurance and beyond.
Genesis Volatility and DeGen Data are co-founded by Greg Magadini. Genesis Volatility is a crypto options analytics tool used by traders to locate edge and capture alpha. It was founded in January 2020.
What led you to learn about blockchain and cryptocurrencies in the first place?
In 2012, I found BTC and prepared a research paper on it with Linda Xie (Scalar Capital) for a senior research paper. We went on the Dark Web, examined the Silk Road, and used Mt.Gox to evaluate pricing.
Could you tell us about the origins of Genesis Volatility?
Pat Doyle was introduced to Ethereum by me in 2015. (this is also when we met for the first time).
Since then, we’ve both been working on different ETH trading ideas, research papers, and coding projects. Pat had a history as a developer and data scientist, whereas I worked as a proprietary trader.
We found a demand for options analytics in the area in late 2019 and began to investigate the crypto options market.
What kind of data does Genesis Volatility look at?
We’re looking at option data from a variety of exchanges, including Deribit, Bit.com, LedgerX, Binance, and others.
We look at implied and realized volatility, as well as open interest, volume, and block trades, among other things.
Could you explain what open interest in cryptocurrency is and why it matters?
The number of contracts (also known as “positions”) that are now open is known as open interest. Every option contract, for example, has a buyer and a seller. Open interest represents every current contract job. Traders may evaluate market involvement and excitement by keeping track of open interest.
If the market rallies significantly and open interest is at all-time highs, we may assume that those who wanted to purchase have already done so. Where is the new incremental customer coming from now?
What do you look for in data that indicates a high level of volatility?
Some typical areas of opportunity include asymmetries in volatility pricing, variances between implied and realized volatility, and changes in spot price to volatility correlations.
Traders cannot always forecast the future, but they may identify deals with a positive expected value over time.
What are some of the macro-trends that have emerged in the last 12 months?
The concentration of “call option” purchasing in the crypto volatility area is one of the structural patterns in this space. In contrast to typical equities, where Put options have greater implied volatility, this structural demand produces volatility surfaces that are significantly different from traditional stocks.
This year has seen an unusually high level of realized and implied volatility. Despite recent yearly lows in actual volatility, implied volatility of options has remained persistently high.
What kinds of hidden trade opportunities can the platform find?
The platform includes algorithms for identifying relatively inexpensive and costly option instruments that may be traded together to gain a statistical advantage.
We also provide tools for analyzing the activities of major institutional traders in the option market.
Finally, we provide tools that enable users to comprehend the current “gamma” profile by analyzing how traders are positioned in various option products.
Could you explain what a “gamma” profile is in more detail?
Options have a non-linear increase/decrease in value. The curvature of the rate of change for value may be thought of as “gamma.” Traders may extrapolate that when prices are approaching significant gamma inflection points, considerable rebalancing will be required, and that this rebalancing will cause the price to respond.
Traders might identify successful trading opportunities by spotting these inflection moments.
What do you think the future of institutional and retail trading will be like?
Crypto options now have a notional open interest of 1.5 percent of the underlying market capitalization.
Notional open interest in traditional financing ranges from 100% to 200 percent of the underlying market valuation.
We anticipate the crypto option sector to continue to develop rapidly, and these markets will become more liquid and efficient over time.
What is your vision for the future of NFTs now that you’ve delved into the field of NFTs?
We predict a need for collateralized loans and evaluation services as NFTs become more common, allowing these unique assets to be liquidated.
Overall, we’re positive on the NFT industry and feel there’s a lot of room for a competent analytics firm to help traders trade these unique assets.
Is there anything more regarding Genesis Volatility that you’d want to share?”
In the long run, Genesis Volatility wants to be a Web3 firm.
GVol is now classified as a web2.5 firm that operates in the CeFi, TradFi, and DeFi markets.
Thank you for taking the time to do this interview; readers interested in learning more may go to Genesis Volatility.