Interviewer: flowie, ChainCatcher
Guest: Ge Yuesheng, CEO of Matrixport
Editor: Marco, ChainCatcher
From founding the mining giant Bitmain to Asia's largest crypto asset management platform Matrixport, Wu Jihan and Ge Yuesheng seem to follow a basic creed to avoid reinventing the wheel.
They prefer to focus on the blue ocean market, rely on original eye-catching products, and conquer the market in a high-profile manner to become the market leader.
In 2013, Bitmain, as one of the first manufacturers of Bitcoin mining machines, quickly dominated the market and at one point controlled more than 30% of the computing power of the entire network. Its founder Jihan Wu was also seen as the only person with the opportunity to control Bitcoin.
In just over five years, Bitmain has become the top crypto unicorn with a valuation of tens of billions of dollars.
At the end of 2018, Wu Jihan and Ge Yuesheng, who left Bitmain, set their sights on the still-developing field of Asian crypto asset management and founded Matrixport. They quickly made their first breakthrough in the market with a pioneering crypto wealth management product called “dual-currency wealth management.”
Two years after its establishment, Matrixport has successfully joined the ranks of unicorns. Today, with custody and asset management scale exceeding US$3 billion each, Matrixport has become one of the most important leaders in the crypto asset management market.
Avoid reinventing the wheel
In 2018, when Bitmain was facing a critical period of transformation and IPO in the United States, the founders were caught in a situation where their differences became public due to a dispute over the direction. While various media outlets were reporting on this century-long palace fight, Ge Yuesheng did not linger on. He and Wu Jihan soon left Bitmain and started preparing for the next entrepreneurial project with 40 to 50 employees.
In February 2019, Matrixport, a new company founded by Wu Jihan and Ge Yuesheng, was officially launched. It is a one-stop crypto financial service platform integrating over-the-counter trading, lending and custody of digital assets.
Wu Jihan, who once fought at the forefront of Bitmain, is now behind the scenes, while Ge Yuesheng has come to the front as CEO.
The leap from Bitcoin mining machines to crypto asset management may not be surprising to people who are familiar with Ge Yuesheng and Wu Jihan.
Before founding Bitmain, Ge Yuesheng and Wu Jihan met at a private equity fund where they did investment analysis. In the eyes of many people in the industry, founding Matrixport is a return for them.
But for Ge Yuesheng, it was more like starting over.
Leaving Bitmain was not a long-planned decision. Matrixport was originally just a department within Bitmain, focusing on over-the-counter trading and asset custody. In an interview with ChainCatcher, Ge Yuesheng mentioned that when a group of Bitmain developers followed them to leave, the future was still unknown to them.
After experiencing the year of regulatory cleanup in 2018, the crypto market was still shrouded in the shadow of a crypto bear market in early 2019, and confidence in the entire market was at its lowest point.
However, Ge Yuesheng and other core team members of Matrixport are still optimistic about the crypto market and the trend of Bitcoin, and believe that it will reach a wider and wider group of people and will eventually become a mainstream financial investment product.
Ge Yuesheng mentioned that Bitmain’s mining machine business is a bit far away from ordinary crypto users. Whether this startup should choose a more inclusive track and provide entry-level financial services to the crypto population has become a topic for their consideration.
At that time, the mainstream crypto financial services were still crypto exchanges. Since the birth of the first crypto exchanges such as Bitcoin Market and Mentougou in 2010, crypto exchanges have always been a battleground. After nearly 10 years of fierce competition, the entire crypto exchange market structure is still evenly matched in 2019.
FTX had just started in May 2019, and Binance, the largest cryptocurrency exchange today, was only two years old at the time and was still striving to take the top spot.
At that time, crypto exchanges had become a hot market for startups, and Ge Yuesheng and others thought it was difficult to make more breakthroughs than their predecessors. "From the team's consistent style, we don't like to reinvent the wheel and completely copy what our predecessors have done."
After two or three weeks of deep thinking, Ge Yuesheng and other core members believed that what the crypto industry lacks more is crypto financial management services. As crypto OGs, after going through several cycles, they are very clear that "crypto investment is a nine-out-of-ten gamble, or even ten-out-of-ten gambles are losses." How to help users manage their assets and avoid falling back into poverty will definitely be the future investment demand of most users.
Matrixport is initially positioned as a crypto financial management platform. In addition to the basic trading functions provided by exchanges, Matrixport has a clearer goal, which is to prevent customers from falling back into poverty.
90% of the exchange's users are retail investors, and Matrixport first targets rational investors with a certain asset scale, striving to help these high-net-worth individuals and institutions resist market fluctuations and manage their finances in a stable manner.
From the perspective of market competition, the field of cryptocurrency asset management was still a blue ocean in the Asian market at that time.
Choosing a blue ocean market also means starting from scratch. Although Matrixport enjoyed a halo at the beginning of its establishment due to its relationship with Bitmain, it still faces huge challenges in the future as it has to start almost from scratch.
How to make users recognize them again was a big challenge for Ge Yuesheng at the time. Crypto asset management is a track with high compliance requirements, and how to adapt to the regulatory trend of cryptocurrencies is not an easy task.
Either you make a splash or you fall into obscurity
In October 2019, Matrixport borrowed the logic of structured wealth management products from traditional finance and launched the first dual-currency wealth management investment in cryptocurrencies. This is also the first dual-currency wealth management product in the crypto field, marking the first time that the traditional financial model has been implemented on the blockchain.
At that time, most CeFi asset management companies provided single-currency financial products. Similar to traditional bank savings products, encrypted single-currency financial products allow coin holders to earn returns by depositing coins, which are divided into two categories: fixed deposits and demand deposits.
For a startup to launch a product that is the first to market, it seems a bit like gambling.
But for Ge Yuesheng, there is no better choice. A day in the cryptocurrency world is like a year in the real world. In such a fast-paced crypto market, he needs to seize the user market as soon as possible. "If the initial product fails to convince or retain customers, we may be lost."
It turned out that their bet was right. Dual-currency financial management soon fired the first shot for Matrixport to expand its market.
With the arrival of DeFi Summer in 2020, the crypto market began to turn from bearish to bullish, and the demand of crypto users for higher returns was further stimulated.
DeFi's "liquidity mining craze" has ushered in a blowout, with many projects offering yields of hundreds, thousands, or even tens of thousands, attracting a flood of user funds.
Although CeFi emphasizes stable financial management, in the raging bull market where everyone is chasing the rise, more institutions and investors have further demands for the configuration and returns of financial management plans. In order to retain customers, the yield of crypto financial management must also keep up with the pace.
At this time, Matrixport's dual-currency financial products have gained a unique advantage. Compared with single-currency financial management, dual-currency financial management, as a short-term investment product, can help users obtain higher returns.
Matrixport's dual-currency financial management, which complies with market demand, quickly attracted many financial service institutions, digital asset wallets and exchanges to follow suit. For example, Binance Pool launched the Dual Currency Treasure financial management product, and many CeFi institutions such as Huobi also launched dual-currency financial management products.
Ge Yuesheng recalled that dual-currency financial management has also educated the market to a certain extent. For a group of relatively mature investors with a certain asset size, in addition to gambling on exchanges or hoarding coins without trading, they can also use crypto financial management platforms such as Matrixport to pursue higher returns within an acceptable risk range.
After dual-currency financial management attracted the first batch of users for Matrixport, it gradually provided users with a matrix of financial products such as current accounts, fixed income, structured products, loans, funds, etc. based on multiple dimensions such as user risk preferences.
In Ge Yuesheng's view, crypto asset management cannot become popular suddenly by relying on just one product. It needs to stand the test of time before it can accumulate real users.
After leading users through the entire cycle from the bear market to the bull market, Matrixport can be said to have officially completed the accumulation from zero to one and accumulated a group of loyal customers.
“Many users have found that Matrixport can indeed help them protect their assets from being swallowed up in a highly volatile market, and can also follow the growth cycle of Bitcoin and achieve a significant appreciation of wealth.”
Ge Yuesheng said that at that time, Matrixport's asset management scale reached more than 5 billion US dollars, and the average asset scale of a single user exceeded 10,000 US dollars. At this time, the size of the Matrixport team also doubled from less than 100 people at the beginning to 200 people.
After experiencing the verification of a bull and bear cycle, what is more eye-catching than the halo of star founders Ge Yuesheng and Wu Jihan is the growth potential of Matrixport's own business.
Two years after the establishment of Matrixport, on August 2, 2021, Matrixport announced that it had completed a US$100 million financing with a valuation of US$1 billion, becoming a unicorn.
The list of investors includes traditional well-known venture capital funds such as K3 Ventures, C Capital, DST Global, IDG Capital, and Qiming Venture Partners, as well as crypto-native funds such as Dragonfly, Foresight Ventures, Polychain, and A&T Capital.
Crisis and Turnaround
In 2022, what many people did not expect was that after experiencing the violent bull market of DeFi Summer and NFT Summer, cryptocurrencies in 2022 ushered in the most ferocious wave of crashes in history, and CeFi asset management was the hardest hit area.
At the beginning of 2022, the market value of the cryptocurrency ecosystem reached nearly 3 trillion US dollars, but by the end of the year, 2 trillion US dollars had evaporated, and leading participants such as Luna, 3AC, Celsius, Voyager Digital, FTX, BlockFi, etc. also disappeared.
In particular, the sudden collapse of the crypto trading platform FTX has affected a large number of crypto financial institutions. Compared with the outside world's concerns about CeFi asset management platforms represented by Matrixport, Ge Yuesheng is very calm.
On the one hand, in his view, this is an inevitable path of historical development. Whether it is traditional finance or crypto finance, there will always be some radical institutions that blindly pursue high returns, resulting in distorted actions and underestimation of risks.
On the other hand, Matrixport has always regarded risk control and compliance as top priority and long-term issues since its establishment. Although it is affected by industry systemic risks, it does not have to worry about being seriously hurt.
Since its inception, Matrixport has independently developed a crypto asset custody system, Cactus Custody, which is an enterprise-level compliant cryptocurrency financial system and secure custody platform created from internal needs and improved to meet the needs of institutional clients. It is also one of the earliest platforms in Asia to provide institutional-level crypto custody services.
Cactus Custody has had zero accidents since its establishment through multiple security mechanisms such as bank vault-level security and hot and cold storage separation. Currently, Matrixport and Cactus Custody have continuously protected the security of assets worth more than nearly US$10 billion.
After every financial crash, there is also a crisis of trust. After a number of CeFi asset management companies collapsed, users began to view the entire crypto asset management industry with a more skeptical attitude. They were no longer worried about returns, but the safety of their capital.
The crypto industry has also begun to call for “Not Your Keys Not Your Coins”. Customers on the Matrixport platform have also been asking to withdraw their coins to their own wallets.
For users, no amount of explanation or reassurance can compare to a smooth withdrawal experience. At this stage, Matrixport has eliminated users' concerns with its smooth and secure withdrawal experience.
For Ge Yuesheng, the industry's trust crisis will take time to repair, and what Matrixport can do is to continue to optimize compliance and risk control.
Matrixport has made several upgrades in risk control services, such as more comprehensive disclosure and maintaining a good track record.
Specifically speaking about the company's risk control decision-making, Ge Yuesheng introduced that compared with many asset management companies, where a single individual makes the final decision on what to do and what not to do, Matrixport has established a complete mechanism that requires relevant departments to exercise checks and balances, and even introduces external committees to participate in major decision-making.
At the risk control technology level, a stable operation mechanism has also been established. For various extreme unexpected events, Matrixport needs to ensure the fastest response speed.
Most importantly, Matrixport eliminates counterparty risk as much as possible and tries not to involve too many counterparties at the financial level.
Matrixport chooses not to participate in the vast majority of on-chain contracts. For the few contracts that are used, Matrixport has optimized their permissions and daily monitoring.
Ge Yuesheng is very confident in Matrixport's risk control system and said that "this is one of the most mature and complete risk control systems in the industry."
The crypto crash has also forced countries or regions around the world that pay attention to crypto financial services to accelerate their compliance supervision. Countries or regions and organizations, mainly the United States, Hong Kong, South Korea, Japan, Singapore, and the European Union, have taken the lead in formulating industry regulatory standards.
For CeFi, there are opportunities in the crisis. In October 2022, the Financial Secretary of Hong Kong officially issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong", and began to actively embrace virtual assets such as encryption. Since then, asset management service providers focusing on Asia have had a more promising development soil.
In June 2024, the transition period of the licensing system for virtual asset trading platforms in Hong Kong officially ended. The Hong Kong Securities and Futures Commission also disclosed the list of 11 platforms that were "deemed to be licensed" (now the list of applicants for virtual asset trading platforms), and Matrixport's subsidiary Matrixport HK was one of them.
The Hong Kong Securities Regulatory Commission has a strict approval process, involving many aspects of security and compliance issues, including the platform's technology and security measures, anti-money laundering and anti-terrorist financing compliance, trading mechanisms and risk management, and investor protection measures.
Being included in the list is also inseparable from Matrixport's efforts in security and compliance. Since its inception, Matrixport has been promoting the application of compliance licenses in multiple regions. It has currently obtained a Hong Kong trust company license, a money lender license, a US money service license, a UK FCA compliance authorized representative company, and is a member of the Swiss FINMA SRO-VFQ.
In the next five years, we will create a super account that bridges traditional finance and crypto finance.
In 2024, on the fifth anniversary of its establishment, Matrixport was selected into the 2024 Hurun Global Unicorn List with a valuation of US$1.5 billion.
After almost going through two bull and bear cycles, Matrixport has accumulated a large number of loyal users and has a huge product matrix.
Focusing on low, medium and high risk levels, Matrixport provides digital asset trading, lending, custody and payment services to institutions and qualified individual users. Its business and product lines cover almost all the financial management needs of crypto users.
Matrixport's business boundaries are also constantly expanding. Not only did it independently develop the institutional-grade third-party custody solution Cactus Custody at the beginning of its establishment, Matrixport also has strategic layout through the crypto exchange BIT, the on-chain real-world asset platform Matrixdock, and the investment institution Matrixport Ventures.
This places high demands on a company in terms of exploring the real needs of the market and managing human efficiency. As every startup may experience, Matrixport has also launched some products that do not meet market demand, and eventually discontinued them after they did not meet expectations after going online.
Now, Ge Yuesheng has his own principles on what should be done and what should not be done.
First of all, it is basic logic to follow the mainstream narrative. On this basis, we should not do anything that can be avoided. For example, if the customer demand is not common, we can not do it. "Pursuing simplicity will make risks better controlled."
After the first five years of exploration, Matrixport's asset management and custody amounts have now reached approximately US$3 billion, respectively, making it one of the largest crypto asset management companies in Asia.
What are Matrixport’s goals for the next five years?
Ge Yuesheng said that on the one hand, Matrixport’s purpose is still to help users navigate the bull and bear markets, withstand market fluctuations, and earn money in sync with industry growth.
"The market space for crypto financial management will become larger and larger." At the beginning of this year, after the Bitcoin spot ETF was approved, Bitcoin once rose above the 70,000 US dollar mark, and its market value once surpassed silver.
Ge Yuesheng said that this means that the future appreciation multiples of Bitcoin and even Ethereum will not be as large and rapid as in previous cycles.
“It may be easy to increase from a few thousand dollars to tens of thousands of dollars, but it is very difficult to increase from tens of thousands to hundreds of thousands of dollars. The total market value of Bitcoin may exceed that of gold.”
In Ge Yuesheng's view, after investment opportunities with 100-fold or even 10,000-fold returns became rare, users' investment psychology also changed from pursuing speculation to asset management. Some users who originally made money and lost money on the exchange will start looking for more professional financial management platforms to help them keep their assets, reduce risks and earn more rational returns.
On the other hand, Matrixport needs to embrace traditional finance and serve a larger user base.
At the beginning of 2023, crypto finance, which had experienced a financial crisis, began to return to rationality and seek integration with traditional finance.
The RWA track, which attempts to connect traditional finance and crypto finance, has attracted large traditional financial institutions such as Goldman Sachs, Hamilton Lane, and Siemens, CeFi such as Binance and Matrixport, and DeFi protocols such as MakerDAO and Aave to compete for layout.
Among them, the tokenization of US Treasury bonds is the main route to promote the development of RWA. Matrixport's asset management platform Matrixdock launched the "Short-term Treasury Bill Token" (STBT) to introduce the risk-free interest rate of traditional finance to crypto users. In addition to reducing credit risk, STBT creates stable interest for holders.
Following RWA, the integration of maturing crypto finance and traditional finance is expected to accelerate.
Today, Matrixport has completed a one-stop crypto asset management closed loop from deposit, trading, custody, wealth management to withdrawal. It is an important entry point that can benefit most crypto financial users and even traditional financial users.
How to continuously expand boundaries and become a super account that bridges traditional finance and crypto finance is Matrixport’s development goal for the next five years.