The JDB Report is diving deep into crypto market structure to understand why things went haywire on October 10, causing $19 billion in liquidations of positions that should have been solvent. Read our summary here.
One of the mysteries in the crash is why all the market makers vanished, taking liquidity with them. Brian Norman, CFO at digital-asset market maker Auros, and his colleague David Qian of the arbitrage trading desk, help explain why.
Related interviews: Joshua Tobkin of Supra, on oracles.
Timecodes:
0:00 - Brian Norman and David Qian of Auros, and how the crisis began
3:47 - Should we just accept these flaws in crypto market structure? What’s a “typical” crash versus when things spiral out of control
7:40 - What is the role of a market maker, and what it means to provide liquidity - in TradFi versus in crypto
9:50 - Why did order books on Binance go silent?
12:00 - It’s all automated; incentives for market makers in times of stress
15:58 - How to reduce risks for market participants; protections in TradFi don’t exist in crypto; data reconciliations in 24/7 environments
17:57 - Can circuit breakers be introduced to crypto markets?
19:10 - Should there be requirements of liquidity provision for market makers?
21:43 - What did the crash show in terms of resiliency in blockchain finance
