Interviewer: flowie, ChainCatcher
Guest: Ge Yuesheng, Matrixport CEO
Editor: Marco, ChainCatcher
From founding the mining giant Bitmain, to the largest crypto asset management platform in Asia, Matrixport, Wu Jihan and Ge Yuesheng seem to adhere to a basic belief, avoiding reinventing the wheel.
They prefer the blue ocean market, relying on original eye-catching products, and using a high-profile approach to become market leaders.
In 2013, as one of the first manufacturers of Bitcoin mining machines, Bitmain quickly dominated the market, once controlling over 30% of the network's computing power. Founder Wu Jihan was also seen as the only person with the opportunity to control Bitcoin.
In just over 5 years, Bitmain, valued at hundreds of billions of dollars, became the top unicorn in the crypto industry.
At the end of 2018, Wu Jihan and Ge Yuesheng, who had left Bitmain, set their sights on the still undeveloped Asian crypto asset management field and founded Matrixport. They quickly made their mark in the market with an innovative crypto wealth management product, "Dual Currency Wealth Management".
Two years after its establishment, Matrixport also successfully joined the unicorn ranks. Today, with a custody and asset management scale of over $3 billion, Matrixport has become one of the most important leaders in the crypto asset management market.
Avoid Reinventing the Wheel
In 2018, as Bitmain faced a crucial transition and a planned IPO in the US, it found itself in a public dispute over its direction. Amid the extensive media coverage of this century's palace struggle, Ge Yuesheng did not linger in the battle. He and Wu Jihan quickly left Bitmain with about forty to fifty employees to prepare for their next entrepreneurial project.
In February 2019, the new company founded by Wu Jihan and Ge Yuesheng, Matrixport, officially launched. It is an all-in-one crypto financial services platform that integrates off-exchange trading, lending, and custody of digital assets.
Wu Jihan, who had been at the forefront of the Bitcoin mining machine industry, took a backseat this time, while Ge Yuesheng stepped forward as the CEO.
For those familiar with Ge Yuesheng and Wu Jihan, the transition from Bitcoin mining machines to crypto asset management may not come as a surprise.
Before founding Bitmain, Ge Yuesheng and Wu Jihan met at a private equity fund, where they worked as investment analysts. For many in the industry, the founding of Matrixport was seen as their return.
But for Ge Yuesheng, it was more like a new beginning.
Leaving Bitmain was not a long-planned decision. Initially, Matrixport was just a department within Bitmain, focusing on off-exchange trading and asset custody. Ge Yuesheng mentioned in an interview with ChainCatcher that when a group of Bitmain developers followed them out, the future was still unknown to them.
After the regulatory crackdown in 2018, the crypto market was still shrouded in the shadow of the bear market at the beginning of 2019, and confidence in the entire market was at its lowest.
However, Ge Yuesheng and other core members of Matrixport remained optimistic about the crypto market and the trend of Bitcoin, believing that its user base would continue to grow and eventually become a mainstream financial investment.
Ge Yuesheng mentioned that Bitmain's mining business was somewhat distant from ordinary crypto users. The question for this new venture was whether to choose a more inclusive track and provide entry-level financial services for the crypto community, which became their topic of consideration.
At that time, mainstream crypto financial services were still dominated by crypto exchanges. Since the emergence of the first batch of crypto exchanges such as Bitcoin Market and Mt. Gox in 2010, crypto exchanges had always been fiercely competitive. Even in 2019, after nearly a decade of intense competition, the market for crypto exchanges was still highly contested.
FTX had just started in May 2019, and the largest crypto exchange, Binance, had only been established for two years and was still striving to claim the top spot.
At that time, crypto exchanges had become a red ocean for startups, and Ge Yuesheng and others believed it would be difficult to make further breakthroughs. "In terms of the team's consistent style, we also don't like to reinvent the wheel and simply replicate what others have done."
After deep consideration for two to three weeks, Ge Yuesheng and the core team members believed that what the crypto industry lacked relatively was crypto wealth management services. As crypto OGs who had experienced several market cycles, they were well aware that "crypto investments are often a gamble, with most users losing, or even losing everything." Helping users manage assets and avoid impoverishment would likely be the future investment demand for most users.
Matrixport was initially positioned as a crypto wealth management platform. In addition to providing basic trading functions like exchanges, Matrixport had a more specific goal of preventing customer impoverishment.
While 90% of exchange users were retail investors, Matrixport initially targeted rational investors with a certain asset size, striving to provide stable wealth management for these high-net-worth individuals and institutions.
From the perspective of market competition, the crypto asset management field in the Asian market was still a blue ocean at that time.
Choosing the blue ocean market also meant starting from scratch. Although Matrixport had the halo of Bitmain at the beginning, almost everything had to start over, and the future still faced enormous challenges.
One of Ge Yuesheng's major challenges at the time was how to make users reacquainted with them. Crypto asset management is a track with relatively high compliance requirements, and adapting to the trend of crypto regulation was not an easy task.
Either Make a Splash or Sink
In October 2019, Matrixport launched the first dual currency wealth management investment in the crypto field, drawing on the logic of traditional financial structured wealth management products. This marked the first landing of a traditional financial model in the blockchain field.
At that time, most CeFi asset management companies offered single-currency wealth management products. Similar to traditional bank savings products, crypto single-currency wealth management products allowed users to earn returns by holding coins, with both fixed-term and demand deposit options.
For a startup to launch a pioneering product in the market seemed somewhat like gambling.
But for Ge Yuesheng, there was no better choice. In the crypto world, a day is like a year, and in such a fast-paced crypto market, he needed to quickly capture the user market. "If the initial product fails to convince or retain customers, we might sink without a trace."
In hindsight, they made the right bet. The dual currency wealth management product quickly made a splash for Matrixport.
With the arrival of the DeFi Summer in 2020, the crypto market began to transition from bear to bull. The demand for higher returns from crypto users was further stimulated.
The "liquidity mining frenzy" of DeFi saw a surge, with many projects offering returns of hundreds, thousands, or even tens of thousands, attracting a rush of user funds.
While CeFi emphasized stable wealth management, in the frenzy of a raging bull market, more institutions and investors had further demands for wealth management solutions and returns. To retain customers, the returns on crypto wealth management also had to keep up with the pace.
At this time, Matrixport's dual currency wealth management product gained a significant advantage. Compared to single-currency wealth management, dual currency wealth management, as a short-term investment product, could help users achieve higher returns.
Matrixport's dual currency wealth management, in response to market demand, quickly attracted imitation from many financial service institutions, digital asset wallets, and exchanges. For example, Binance Pool launched the Dual Savings product, and many other CeFi institutions such as Huobi also launched dual currency wealth management products.
Ge Yuesheng recalled that to some extent, dual currency wealth management also educated the market. For a group of investors with a certain asset size and maturity, in addition to trading on exchanges or holding coins without trading, they could also use crypto wealth management platforms like Matrixport to pursue higher returns within an acceptable risk range.
After attracting the first batch of users with dual currency wealth management, Matrixport gradually provided users with demand deposits, fixed income, structured products, lending, funds, and other wealth management products based on user risk preferences and other dimensions.
In Ge Yuesheng's view, building a successful crypto asset management platform did not rely on a single product to suddenly become popular. It needed to be tested over time to accumulate a truly loyal user base.
After guiding users through an entire market cycle from a bear market to a bull market, Matrixport finally completed the accumulation from zero to one, and cultivated a group of loyal customers.
"Many users have found that Matrixport can indeed help them protect their assets in a highly volatile market, and also achieve substantial wealth appreciation in line with the growth cycle of Bitcoin."
Ge Yuesheng stated that at the time, Matrixport's asset management scale exceeded $5 billion, and the average asset size per user was also over $10,000. At this time, the Matrixport team had expanded from the initial less than 100 people to 200 people, doubling in size.
After experiencing a full market cycle, the growth potential of Matrixport's own business was more eye-catching than the star-studded founder aura of Ge Yuesheng and Wu Jihan.
Two years after its establishment, on August 2, 2021, Matrixport announced a $1 billion funding at a $10 billion valuation, making it 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 native crypto funds such as Dragonfly, Foresight Ventures, Polychain, and A&T Capital.
Crisis and Turning Point
In 2022, to the surprise of many, after the frenzy of the DeFi Summer and NFT Summer bull markets, the crypto industry experienced the most severe wave of crashes in history, with CeFi asset management being hit the hardest.
At the beginning of 2022, the market value of the cryptocurrency ecosystem reached nearly $3 trillion, but by the end of the year, it had evaporated by $2 trillion, along with the disappearance of major players such as Luna, 3AC, Celsius, Voyager Digital, FTX, and BlockFi.
The collapse of the crypto trading platform FTX, in particular, affected a large number of crypto financial institutions. Despite concerns from the outside world about CeFi asset management platforms represented by Matrixport, Ge Yuesheng remained calm.
On the one hand, he saw it as a necessary stage in historical development. Whether in traditional finance or crypto finance, there will always be some aggressive institutions blindly pursuing high returns, leading to distorted actions and underestimating risks.
On the other hand, since its inception, Matrixport has always prioritized risk control and compliance as top and long-term priorities. Although affected by industry-wide risks, there was no need to worry about being crippled.
From the beginning, Matrixport independently developed a crypto asset custody system called 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 was also one of the earliest platforms in Asia to provide institutional-grade crypto custody services.
With multiple security mechanisms such as bank vault-level security and cold-hot storage separation, Cactus Custody had zero incidents since its inception. Currently, Matrixport and Cactus Custody have continuously safeguarded the security of assets worth nearly $10 billion.
Every financial crisis also triggers a crisis of trust. After a batch of CeFi asset management platforms collapsed, users began to view the entire crypto asset management industry with more skepticism. They were no longer concerned about returns, but rather the safety of their principal.
The crypto industry also began to advocate "Not Your Keys Not Your Coins". Requests from customers on the Matrixport platform to withdraw funds to their own wallets also began to appear.
For users, no amount of explanation or reassurance was as reassuring as a smooth withdrawal experience. At this stage, Matrixport's smooth and secure withdrawal experience alleviated users' concerns.
For Ge Yuesheng, the industry's crisis of trust would take time to repair, and all Matrixport could do was to continue optimizing compliance and risk control.
Matrixport had made multiple upgrades to its risk control services. For example, it disclosed more fully and maintained good traceable records.
In terms of decision-making in risk control, Ge Yuesheng explained that unlike many asset management companies where decisions were made by a single individual, Matrixport had established a complete mechanism that required various relevant departments to balance power, and even introduced an external committee to participate in major decisions.
At the technical level of risk control, a stable operation mechanism had also been established. For all kinds of extreme unexpected events, Matrixport needed to ensure the fastest response time.
Most importantly, Matrixport tried to minimize counterparty risk and avoid involving too many counterparties in terms of funds.
For the vast majority of on-chain contracts, Matrixport chose not to participate. For the few contracts used, Matrixport optimized their permissions and daily monitoring.
Ge Yuesheng had great confidence in Matrixport's risk control system and stated, "This is one of the most mature and complete risk control systems in the industry."
The crypto crash to some extent also forced countries or regions paying attention to crypto financial services to accelerate their pace in crypto compliance and regulation. Countries or regions and organizations led by the United States, Hong Kong, South Korea, Japan, Singapore, and the European Union have set industry regulatory standards.
For CeFi, the crisis also presented an opportunity. In October 2022, the Financial Secretary of Hong Kong officially issued the "Policy Statement on the Development of Virtual Assets in Hong Kong," actively embracing virtual assets such as crypto. This provided a more promising development environment for service providers focusing on Asia.
In June 2024, the transition period for the licensing system for virtual asset trading platforms in Hong Kong officially ended. The Securities and Futures Commission of Hong Kong also disclosed the list of "applicants to be treated as licensed" (now the list of virtual asset trading platform applicants), which included Matrixport's subsidiary, Matrixport HK.
The approval process of the Hong Kong Securities and Futures Commission was strict and involved various aspects of safety compliance, including the platform's technology and security measures, anti-money laundering and counter-terrorism financing compliance, trading mechanisms and risk management, and investor protection measures.
Being included in this list was also the result of Matrixport's efforts in safety compliance. Since its inception, Matrixport had been promoting the application for licenses in multiple regions. It had obtained a trust company license in Hong Kong, a money lender license, a US money service license, a UK FCA compliance authorized representative company, and was a member of the Swiss FINMA SRO-VFQ.
The Next 5 Years: Building a Super Account to Bridge Traditional Finance and Crypto Finance
In 2024, on the occasion of Matrixport's 5th anniversary, it was valued at $15 billion and made it onto the 2024 Hurun Global Unicorn List.
After almost two market cycles, Matrixport had also accumulated a large number of loyal users and had a huge product matrix.
Around different levels of risk, Matrixport provided digital asset trading, lending, custody, and payment services for institutions and qualified individual users, covering almost all the financial needs of crypto users.
The business boundaries of Matrixport were also constantly expanding. From the beginning, it independently developed an institutional-grade third-party custody solution called Cactus Custody. Matrixport also strategically positioned itself through the crypto exchange BIT, the on-chain real-world asset platform Matrixdock, and the investment institution Matrixport Ventures.
This placed high demands on a company in terms of exploring real market needs and human efficiency management, as every startup company might have launched products that did not meet market demands and eventually had to be discontinued.
Now, Ge Yuesheng had his own principles about what to do and what not to do.
First, closely following the mainstream narrative was the basic logic. Based on this, if something was not necessary, it could be avoided. For example, if a customer demand was not widespread, it could be skipped. "Pursuing simplicity will help better control risks."
After the first 5 years of exploration, Matrixport's asset management and custody amounts had reached around $3 billion each, placing it among the largest crypto asset management scales in Asia.
In the next 5 years, what were the goals for Matrixport?
Ge Yuesheng stated that on the one hand, the mission of Matrixport remained to help users navigate through market fluctuations, withstand market volatility, and earn money in line with industry growth.
"The space for crypto wealth management will continue to grow." Earlier this year, after the approval of a Bitcoin spot ETF, Bitcoin briefly surpassed the $70,000 mark, and its market value briefly exceeded that of silver.
Ge Yuesheng stated that this meant that the future appreciation multiples of Bitcoin and even Ethereum would not be as large and rapid as in previous cycles.
"It may be easy to go from a few thousand dollars to tens of thousands of dollars, but going from tens of thousands to hundreds of thousands of dollars, the total market value of Bitcoin may surpass that of gold, and this growth difficulty will be very high."
In Ge Yuesheng's view, as investment opportunities with returns of hundreds or even thousands of times become rare, users' investment psychology has shifted from seeking speculative wealth to asset management. Some users who used to make profits and losses on exchanges will start looking for more professional wealth management platforms to help them preserve 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, after the rationalization of the crypto financial industry following the crash and reshuffling, there was a trend towards seeking integration with traditional finance.
Efforts to bridge traditional finance and crypto finance, such as the tokenization of real-world assets (RWA), attracted traditional financial institutions such as Goldman Sachs, Hamilton Lane, Siemens, as well as CeFi platforms like Binance and Matrixport, and DeFi protocols like MakerDAO and Aave.
In particular, the tokenization of US Treasury bonds was the main driver of RWA development. Matrixport's asset management platform, Matrixdock, introduced the "Short-term Treasury Bill Token" (STBT), which brings traditional finance's risk-free interest rates to crypto users. In addition to reducing credit risk, STBT creates stable interest for holders.
Following RWA, the integration of mature crypto finance and traditional finance is expected to accelerate.
Today, Matrixport has completed a one-stop crypto asset management ecosystem from deposits, trading, custody, wealth management, to withdrawals, serving as an important entry point that can benefit the majority of crypto finance users and even traditional finance users.
The next 5 years of development for Matrixport will focus on continuously expanding its boundaries and becoming a super account that bridges traditional finance and crypto finance.
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