Summary

CMS survived FTX and 2022 by treating counterparty failure as a recurring cost of trading, not an unthinkable tail event. Dan diversified across venues and kept only what the firm could lose without being “obliterated,” accepting that this meant getting clipped whenever a smaller exchange failed. The larger mistake was underestimating correlated credit risk: once one lender died, “they all die,” and every dollar of open-term borrowing was called within roughly four months.
The fund’s best 2022 hedge was partly accidental: taxes forced it to sell roughly half its 2021 P&L before the crash. CMS de-risked late in 2021 to meet pass-through tax obligations, structured some borrowing as term, and entered the decline with enough cash to preserve payroll and keep “bullets on the way down.” Dan rejects any heroic retelling: “History’s always told by the survivors,” and CMS simply “zigged and zagged in a couple of the right spots.”
Dan saw the Bitcoin ETF and halving as sustained tailwinds, while explicitly declining to predict the launch-week trade. Rejection meant the market would go down, but approval could remain noisy because TradFi allocation moves slowly; he wanted several weeks to a month of flows before judging the baseline. His view was that continuing inflows plus the halving would make things wilder toward year-end, while a sharp selloff offered something to grab.
Dan guessed ETH/BTC would drift higher after he thought ETH had likely served as the liquid short against BTC for six months. He invoked the post-CME-futures period when ETH/BTC roughly tripled the following month. Avi saw corroboration when ETH/BTC rose 2.5% without crushing alts, but Dan limited the likely rotation to “a couple months” unless Ethereum activity and burn began feeding on themselves. He also said CMS does not trade the ETH/BTC cross itself.
ETF demand could indirectly fund higher-beta crypto even though ETF shares cannot rotate directly into BONK. Dan’s mechanism was seller-side transmission: a crypto-native holder sells BTC into ETF demand, receives cash, then redeploys those “bullets” into liquid L1s, L2s and eventually the longer tail. More importantly, a marginable ETF could let holders borrow against Bitcoin exposure—potentially to buy a house or more risk—and could help create another credit boom.
CMS trades narratives reactively and hunts laggards rather than pretending to identify every fundamental winner early. If three real-world-asset names have tripled, the firm asks which related names have not; its 2019-20 venture success similarly came from backing tokens when “tokens are worthless” was consensus and the category had suffered massive underinvestment. Dan’s newer blind spot was Asia’s enthusiasm for Ordinals and DeFi primitives on Bitcoin, where projects reached billion-dollar valuations before many US traders had heard of them.
Longevity came from avoiding leverage-induced deadlines, using bear markets to repair ordinary life, and remaining skeptical enough to follow flows. Dan still believes stateless money, sending value to whoever you want and stablecoins matter, but says the ecosystem has increasingly become a casino—and “it is what it is.” His biggest miss captures the trading lesson: while a New York tech fund bought 100,000 ETH lots daily through Circle, he dismissed the buyer as clueless instead of recognizing “the easiest layup” in front of him.

Deep dive

1. Counterparty failure belongs inside the base case

Dan’s operating rule after FTX: diversify venues and leave only an amount whose total loss will not “obliterate” the firm. CMS had exposure and “got popped,” but retained enough capital to continue operating.
The corollary is uncomfortable: broad venue access means “you’re always getting clipped a little bit” when something fails. CMS has lost money on several mid-tier exchanges and treats those write-offs as a cost of doing business.
Dan thinks liquid-fund returns often looked rosier because investors failed to price this counterparty exposure. The 2022 cycle exposed funds whose headline liquidity concealed concentrations on venues that could disappear with their assets.
Dan started experimenting in 2012, traded professionally in 2013 and joined Kraken early, after working at a hedge fund on automated trading for an options book. CMS now has about 11 people, trades actively across liquid markets and DeFi, provides liquidity to newer protocols, runs automated trading and in-house DevOps, and has a separate venture co-investment vehicle; Dan focuses on the liquid side.
That discipline came from 2012-13, when exchanges vanished every six months, payment rails involved Skrill, LocalTill and gray-area processors, and Silk Road represented meaningful volume. Starting when “the money didn’t matter as much” let Dan survive mistakes cheaply.

2. CMS’s 2022 defense combined preparation, structure and luck

Dan resisted the survivor mythology immediately: “We got lucky too.” CMS threaded 2022 partly because it had “zigged and zagged in a couple of the right spots,” not because management foresaw every failure.
As a pass-through firm in high-tax jurisdictions with mostly short-term gains, CMS may need to sell roughly half a good year’s P&L for taxes. The extraordinary 2021 result therefore forced de-risking before Q1 2022 payments.
Dan had watched traders get “obliterated” in 2018 after failing to reserve taxes on 2017 gains. CMS sold enough for taxes and bonuses, reduced larger positions, and used term loans that were not callable in the open market; its book was “smushed,” but payroll continued and most of the team stayed.
The 2021 top acquired a physical marker: Dan and colleagues paid a few hundred thousand euros to participate in a dinosaur auction in France, lost the auction, then burned the deposit on random fossils, including a 10-foot, 800-pound prehistoric fish. It remains boxed because no wall can hold it. Avi used the episode as a vivid example of bull-market froth and spending.

3. The real 2022 contagion was a system-wide credit call

CMS was active with Celsius, Grayscale and BlockFi, including an equity investment in BlockFi, yet Dan failed to model the shared failure mode: “If one lender dies, like, they all die.” He knew perhaps 10 people represented 90% of borrowing but underestimated the unwind.
Each lender failure forced CMS to close open-term loans with that lender; before one repayment finished, the next market leg was falling and another loan was being called.
Within roughly four months, essentially every dollar of open-term borrowing was called while much of the money had already been wired into venture investments. Participants assumed they could refinance from another desk, but once counterparties were impaired, nobody wanted to face anybody.
Credit went “to zero” over three or four months and, in Dan’s assessment, still had not meaningfully returned.

4. The ETF was a durable tailwind, not an easy launch trade

Dan’s honest non-answer: “I don’t have a great insight” into the next several weeks. Rejection would send the market down, but approval did not mean every allocator would buy on day one because “TradFi moves at a speed that’s a little bit slower.”
His plan was to observe several weeks to a month of baseline flows. If the market got “smushed,” he would try to grab some, but he did not have a broader launch-week plan. Beyond the noise, sustained net cash entering crypto plus the halving looked like a major tailwind, with conditions likely getting wilder toward year-end.
ETH/BTC offered Dan a directional reversion guess after ETH had been “shellacked.” He thought ETH was probably the easiest liquid asset to sell against BTC for the prior six months and recalled ETH/BTC roughly tripling in the month after CME futures launched.
Avi’s positioning read is worth keeping: prior ETH/BTC rallies had crushed alts because traders were long alts against short ETH, whereas a 2.5% ETH/BTC move now left alts intact. Dan still expected only a couple months of rotation absent exploding Ethereum activity and burn. He later clarified that CMS does not trade the ETH/BTC spread itself.

5. Marginable Bitcoin can carry ETF demand further out the risk curve

CMS’s usual cycle map begins with BTC and ETH rallying, then flatlining as capital sprays into liquid higher beta: major alternative L1s and L2s such as ARB and OP. This cycle disrupted the template because ETH did not follow the usual pattern.
Jonah’s pushback: BlackRock ETF shares cannot be moved onto a crypto exchange and diversified into BONK, so BTC might retain the inflow rather than feeding alts. Dan shifted the lens to the seller: ETF buying gives a crypto-native BTC holder cash that can be redeployed.
Capacity shapes the sequence. CMS looks first to roughly the top five other L1s and liquid L2s; the longer tail can rally harder, but position size becomes increasingly difficult outside those markets.
The ETF’s deeper utility is collateral. Unlike GBTC, marginable shares could support brokerage loans, though Dan said only a couple of people currently lend against them. Someone holding exposure equivalent to 100 BTC might borrow against it to buy a house, and the discussion raised the possibility of another leveraged credit boom.

6. Endurance comes from removing the clock

Dan’s bear-market advice to younger traders is practical: repair friendships, family relationships and health while prices are dead. During 2022, someone could leave and return to effectively the same market; “you’re not gonna get it when it turns.”
When conditions are worst and everyone is getting blown out, opportunity is highest—but “you don’t have to do anything.” CMS tries to avoid leverage because leverage adds a clock, forcing a thesis to work within someone else’s timetable.
His broader diagnosis is overactivity: crypto moves so quickly that everyone feels compelled to act constantly. Preserving the ability to “just chill” is both risk management and protection against burnout.

7. Stateless money and casino economics now coexist

Dan still believes stateless money, sending value to anyone and stablecoins are major advances. He initially dismissed Tether—“Why wouldn’t you use dollars?”—then changed his mind as he came to understand its usefulness.
At the same time, crypto has become progressively more casino-like since the 2017 ICO boom. Dan does not feel strongly either way; the conversation linked the shift to entertainment, community and an addictive information flow that keeps people engaged.
He remains “irrationally pessimistic” toward new use cases because successive themes—STOs, remittances and others—usually became fades. Avi endorsed the trading-first approach: useful things may have tailwinds, but excessive focus on fundamentals can distract from the trade.

8. Reactive narrative trading can still find underinvestment

Dan cannot yet square real-world assets with crypto, but CMS would still trade the theme: after three names triple, the question becomes which related assets have not moved and why they should catch up. “We’re just reactive.”
The 2019-20 venture strategy exploited a larger dislocation. With tokens declared worthless and equity considered the only respectable claim, CMS kept financing token projects using excess trading profits and landed in a period of “massive under-investment.”
A newer overlooked pocket was Bitcoin primitives in Asia. A CMS colleague spent a month in Hong Kong and found Ordinals and DeFi on Bitcoin were “the only thing people are talking about,” even as associated tokens reached billion-dollar valuations largely unnoticed in the US.
Avi saw higher fees benefiting miners; Dan called mining a business he “perennially” hates after saying 90% of the bad investments he had seen were miners. Jonah cited Marathon, and Dan conceded public miners may have changed the setup, though the historical scar still governs his instinct.

9. The best lessons came from missed flows and absurd trades

One of Dan’s biggest misses was visible in his own Circle OTC book: a New York tech fund bought 100,000 ETH units every day, and he called the buyers clowns. He was moving the market yet “fading myself” instead of getting “balls long ETH.”
CMS also invested in a Luna round in January and saw the money effectively gone by February. Jonah recounted a later rescue pitch in which Do Kwon sought $1 billion against a stated $2-3 billion hole, arguing that clearing visible offers would scare away further selling; when Jonah raised the possibility of iceberg liquidity, the pitch simply asked for $100 million instead.
Dan still ranks 2017 above 2021 for mania. Venture-backed companies appended “we’re gonna launch a token” to existing equity decks, while the SNT/Status ICO coincided with ETH stopping for roughly two days. Dan could only ask, “How is this okay?” as everyone accepted the dysfunction.
The era also produced genuine structural trades. CMS shorted the back of the OKX coin-margined futures curve while posting spot collateral that still received the BCH fork; the curve collapsed into the event while BTC and BCH both rallied, and Dan concluded the only loophole was OKX taking the money. “This is free.”
On ETHW, CMS’s DevOps operator had an ETH node running from the first block and drained imbalanced pools, taking about 100 free ETH proof-of-work. Avi described a less sophisticated version in which his team bought near-zero-priced ETHW meme coins, eventually owning 10% of some supplies.

Bitcoin ETF Inflows Continue | 1000x Dylan Field - Designing The Future - [Invest Like the Best, EP.407]