Wintermute – Questions for Strategy & Operations role

1. Wintermute has proprietary trading business (trading directly on exchanges) and

customer-facing businesses, such as OTC (trading directly with Wintermute and not on
an exchange) and market making services (liquidity for newly launched tokens).

a. Who do you think should be Wintermute’s primary target customers?

● Proprietary trading business

○ Most DeFi and CeFi projects today could benefit from better liquidity and capital
efficiency, making them potential partners for Wintermute’s proprietary trading
business. Wintermute is already partnered with many CEXs and DEXs. To grow
this segment, Wintermute should continue similar partnerships
○ Strengthen current partnerships by providing liquidity and development support
to dApps and projects being built on top of their partner protocols
○ Work directly with platforms like aggregators, which aggregate liquidity across
hundreds of DeFi protocols
● Customer-facing businesses, such as OTC
○ Wintermute has a competitive advantage on the OTC pricing thanks to its access
to a wide range of exchanges and liquidity pools.
○ Leverage partnerships to offer an increasing number of trading pairs, derivatives
beyond BTC and ETH
○ Crypto quant funds for derivatives; corporations, long only funds and family
offices
○ Alternate and exotic funds like Hedonova can be targeted for OTC trading
● Market making services (liquidity for newly launched tokens)
○ Newly launched tokens that might face a liquidity trap problem can be supported
on all current and future listings on DEXs and CEXs within the Wintermute
ecosystem
○ Early and seed adopters can be targeted for various pairs. Wintermute could look
at creating liquidity trading pools and depending on the use case of the tokens
the target market will be different

b. What do you think should be the most important marketing channels or activities for
Wintermute to consider?

● Reach out to newly launched crypto funds for each of their activities as a separate use
case
● Telegram groups to be connected with the ecosystem. Offer telegram broadcasts to
potential clients for large OTC transactions
● Attend online/offline crypto fund events. Reach out to large hedge funds who have
started crypto currency desks
 ● Integrate with cold storage custodians for their OTC service like copper, fire blocks and
bitgo

c. How do you think we should differentiate from competitors in our marketing activities
and messages?

What makes Wintermute unique is that it is crypto native (unlike Amber) and, operates via
proprietary trading algos and therefore, is not dependent on trades from users to optimize bid-
ask-spreads. Some selling points can be:

● Proprietary trading business

○ Large trading volumes for maximum liquidity
○ Enable listing of new, vetted projects to grow the ecosystem
○ Automated and algorithmic trades at low margins
● Customer-facing businesses, such as OTC
○ Most competitive prices and the widest range of exchanges and liquidity pools
○ Access to exotic financial products, derivatives, etc.
○ For funds, Wintermute can offer ease of liquidity, hedges, custodian services,
etc.
○ For retail investors, Wintermute can offer fiat/real-world assets paired with on-
chain tokens using Oracles
● Market making services (liquidity for newly launched tokens)
○ Largest coverage in ecosystem including CEXs, DEXs, Defi aggregators
○ Additional support on development, strategy and mentorship
○ Additional support to dApps, and projects being built on the networks including
development support, liquidity and support for exchange listings, which could
facilitate a thriving ecosystem

2. Imagine our financials for the year 2021 are given in the excel file “Wintermute dummy
financials”.

a. How would you calculate the monthly growth rate for the period?

● I asI have excluded the first month from the analysis and considered the duration as
Feb-Dec only because there was a significant change in revenue from Jan-Feb, whereas
the capital deployed remained largely constant. Post Feb, the numbers have stabilized.
This could be because of a one-off event like increased leverage leading to more
exposure on the same capital deployed, and therefore I have excluded it from the
analysis.
● In the Feb-Dec period, the trading profit reduced by 1% M-o-m while the capital
deployed increased by 2% M-o-m.
● In the limited observations, the revenue has been decreasing as a ratio of capital
deployed. This could be because
○ For the prop because total trading volume has dipped (lower frequency or trade
size), or because Wintermute has been offering lower margins to attract capital
 ○ Keeping marketing costs and other costs constant, addition of new players and
increased volumes and increased competition may lead to compression of
spread (and margins) across business segments

b. If we were asked to forecast net trading profit for the next three months, what would
you do and what numbers would you get?

● In the Feb-Dec period, the monthly change in net trading profit has been between -17%
to 22%.
● I would take it to account the factors affecting revenue and costs to forecast trading profit
○ Revenue - capital deployed, bid-ask spreads (in case of algo trading and market
making), leverage, pairs/products traded, frequency and size of trades (in case of
OTC), etc.
○ Costs - Transaction costs (gas), trading infrastructure costs

3. Imagine our target for OTC business is to triple its revenue and to generate 300M in
revenue in 2022. OTC revenue comes from trading with multiple counterparties of
various types. Each counterparty makes multiple transactions with Wintermute and
Wintermute makes a certain “margin” on each transaction, i.e. once we onboard one
counterparty, they can make one big trade with us, they can make many small trades, or
any other combination of size, number and timing of trades.

a. “Margin” may differ per counterparty and per transaction depending on a variety of
factors. Could you think of several factors that may influence the “margin”?

● The margin/spread in OTC is a function of primarily liquidity and then size. For example,
in bitcoin which is fairly liquid, size would contribute more to the margin than illiquidity. If
a token or pair is illiquid the margin per transaction is higher but an illiquid token will
have limitations of size.
● The revenue can be looked at as Projected margin per trade * no of trades * average
trade size.
○ Margin per trade can vary depending on risk profile of the token and counterparty
○ No of trades depends on the type of counterparty - if it’s a high frequency trading
fund we could charge low margins for big volumes. Or, if it’s a long only fund, the
size of the trade will govern the margin

b. How would you approach creating a plan to achieve this target? Specifically, how
would you calculate how many counterparties we’d need to onboard and how many
business development people we would need to hire to achieve the revenue target?

● Annual Revenue = Margin (%) * number of trades * avg trade size

● I would create a BD pipeline to get 200 M additional revenue in the year
○ Existing counterparties onboarded
■ I would have an account management team to handle existing clients and
incentivize them to make larger and more frequent transactions
○ New counterparties
 ■ Retail customers - acquire through online marketing/referrals, etc.
■ HNIs and Fund Houses - Pipeline based on ease of onboarding and
revenue potential
■ Corporations, Institutions, Crypto quant funds, alternate investment funds
- longer sales cycle but higher revenue potential
■ I will create a model factoring for the size, frequency of trade,
pairs/products traded and sales cycle
■ In addition to this, I would consider product readiness. For example, a
counterparty with high ticket sizes and frequency might be low priority
because they require integrating with Oracle for real-time feeds of some
off-chain assets.

1. Que tenga
2. Si abres la Ventana
3. Es logico que no aprobes el el examen si hables nada
4. Es increible que pueda / levanter/ 50 veces…
5. Injusto que cobra un 20% menos
6. Es posible que apruebes el examen
7. Es muy raro que se conecte el microondas
8. Importante que hable con la profesora
9. Segura de llegue a tiempo
10. Me parece bien que freguemos los platos en este manera
11. Me parece horrible que hayan tanto soldados en el mundo
12.
He’s tired AF hungover