00:00So what does the creation of an OTC swaps desk actually mean for institutional investors who want to trade prediction
00:06markets?
00:07So the key problem at the moment with prediction markets is that they're actually quite thin.
00:11Outside of the world of sports, there aren't huge volumes on these markets.
00:15Everyone needs to remember that, okay?
00:17Because these, you know, the prediction markets say over and over again, you know, this is like, everyone can bet
00:22on the, you know, you can hedge against the weather if you're a farmer.
00:24Except people aren't.
00:25No, they're betting on, you know, the Knicks and Spurs.
00:27Exactly, which is great, but for institutions, for hedge funds, that's not really what they want to be doing.
00:32So the beauty of a swaps desk is you can just go to a single counterparty and say, I want
00:36to do, in this case, it was $10 million bet on whether or not the Clarity Act would pass.
00:41And that's important for this crypto fund, which is long crypto, effectively.
00:45So they went into a transaction where they would get, it's almost like an insurance contract against a political event
00:50going the wrong way.
00:52And the reason that it's important that they did it over the counter is that they wanted discretion, they wanted
00:58execution certainty, and you can do that with the swap deal alike, like Galaxy Digital.
01:04Okay, so this just kind of greases the wheel a little bit for these transactions to happen more seamlessly.
01:09Do you think overall, when you look at prediction markets and where things are headed, that they're going to go
01:14on a similar journey to the one that crypto has been on,
01:16which is retail traders kind of led the way and institutional investors followed along a few steps behind?
01:22Yeah, definitely. This is an area that's been really pushed by the retail investors.
01:26But one important thing to remember about the prediction markets and what maybe differentiates them from other journeys that things
01:33like crypto have been on,
01:34is that market makers like Susquehanna have been there right from the start with this.
01:40So really, it's been kind of built from the ground up. And almost every trade you do is going to
01:45be with a market maker.
01:46So in that sense, there's a similarity with the traditional kind of financial system that doesn't necessarily exist in crypto.
01:54So where does this leave the upstarts, the poly markets and the Colshies, if increasingly we're seeing institutional adoption or
02:02other prediction markets launch on different platforms?
02:05It's actually good news for them, I would say. I think they will be very keen for banks, for institutional
02:11investors to be doing stuff over the counter
02:13because those people then need to hedge their risk. And where do they do that? They can do that on
02:17poly market.
02:18They can do that on Calci. And it should spur more volumes. So if you're if you're one of these
02:24platforms, you're not too worried about people doing this stuff over the counter
02:27because ultimately the price discovery is still going to be happening on these exchanges. So it's kind of a rising
02:32tide lifts all boats.
02:32Exactly.
02:33Exactly.
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