From: thepipeline_xyz
CMS Holdings is a venture capital firm co-founded by Dan Matuszewski, specializing in financial services, big data, fintech, and particularly, blockchain and cryptocurrency [00:00:13]. Dan Matuszewski is the “M” in CMS [00:00:11]. The firm’s name can sometimes be confused with a large government agency handling Medicare services or other bankrupt entities [00:00:46][00:01:17].
Early Days and Market Navigation
Dan’s journey into cryptocurrency began around late 2012 and early 2013, when he was working at a hedge fund with Julian, the “S” in CMS [00:09:24][00:09:30]. Bitcoin was known in the trading community but largely viewed as a payment system, not primarily as a store of value yet [00:09:43][00:10:07].
Dan started engaging in automated trading on exchanges like Mount Gox, which at the time dominated 80% of the volume [00:10:21][00:10:49]. The market was inefficient, with low aggregate trading volume [00:10:40][00:10:44]. Many early exchanges, such as Bitfloor and some in Canada, eventually failed due to hacks or banking issues [00:11:13][00:11:27]. The collapse of Mount Gox in 2014-2015 led to a significant lull in the market [00:11:31][00:12:24].
During this quiet period, daily trading volume on top exchanges like Bitfinex could be less than a million dollars [00:12:37][00:12:48]. This market inactivity led companies like Circle to temporarily pivot away from cryptocurrency [00:12:54]. The shift occurred when Ethereum gained popularity with the ICO boom, leading to an explosion of information and the necessity to trade other assets beyond Bitcoin [00:13:00][00:15:53].
Evolution of the Crypto Market: Then vs. Now
In 2015, it was possible to conceptualize everything happening in cryptocurrency, knowing almost all relevant information and key traders [00:14:17][00:15:00]. The primary information asymmetry was related to Asian markets [00:14:27]. Altcoins existed but were largely immaterial, often carbon copies of Bitcoin’s codebase [00:15:10][00:15:17].
The market fundamentally changed with Ethereum’s rise and the ICO boom around 2017 [00:15:46][00:15:53]. This made it impossible to keep up with all information and necessitated trading other assets [00:15:56][00:16:01]. Today, the cryptocurrency market has grown “massively horizontal,” encompassing more things and an overwhelming amount of information [00:16:59][00:17:03].
Investment Philosophy and Market Outlook
On Market Movements and Narratives
Dan believes that much of the discussion about specific chains fixing problems or shifting flows is “bullshit” [00:20:03][00:20:11]. He argues that assets generally trade with their beta, meaning those that experienced harder declines in a bear market tend to rise faster and higher in a bull market [00:20:14][00:20:28]. This is seen as a normal function of bull markets, not a new regime [00:21:13][00:21:16].
Hot Takes and Maxims
Dan often refers to concepts like the “hot ball of money phenomenon” and the question, “Do you want to make money or do you want to be right?” [00:34:41][00:34:45].
- Hot Ball of Money: This concept, historically applied to markets like China, describes capital moving rapidly between different asset classes (equities, real estate, commodities) [00:35:00].
- Making Money vs. Being Right: This maxim advises against fighting the market based on fundamental beliefs if the market is moving in an “irrational” direction [00:35:24][00:35:33]. This phenomenon is particularly prevalent in cryptocurrency, where assets can fly for “no reason” leading to short positions getting “toasted” [00:35:37][00:35:50].
Views on Cryptocurrency ETFs
The approval of a Bitcoin ETF is considered “big” due to its potential to tap into passive flows from traditional finance (tradi-fi) products, similar to US equities [00:23:14][00:23:34]. It opens up a new pool of potential buyers who were previously excluded or slowed down from owning the asset class [00:23:38][00:23:47].
However, Dan cautions against extrapolating too much from initial inflow figures in the first few weeks, as it takes time for funds to be adopted by advisors and other institutions [00:23:50][00:24:25]. He views the ETF as a significant long-term positive for the asset class and the industry, providing a passive flow of additional money into the ecosystem over time [00:24:27][00:24:35].
There is no clear winner among the ETF providers yet, leading to significant competition and advertising, which is ultimately good for overall exposure to the asset [00:26:19][00:26:47]. The credibility of traditional finance figures like Larry Fink endorsing Bitcoin significantly impacts older, more traditional investors [00:27:46][00:28:01].
Regarding an Ethereum ETF, Dan believes there is a high probability (75-80%) of its approval within a year, especially if the Bitcoin ETF is successful [00:28:57][00:29:48]. However, he is skeptical about ETFs for other altcoins like Solana, predicting that the cadence will likely be CME futures for a year or two, followed by an ETF [00:28:38][00:29:17]. The complexities of staking with Ethereum might pose a challenge for its ETF structure [00:29:21].
Institutional Adoption of Cryptocurrency
Institutions view cryptocurrency, particularly Bitcoin, as an uncorrelated asset that can provide alpha (excess returns) [00:30:17][00:30:57]. For large asset managers aiming to beat benchmarks like the S&P 500, crypto offers a way to add sources of alpha without simply increasing exposure to existing correlated assets [00:30:31][00:30:52]. It’s expected to be shoehorned into portfolios as a minority position, enhancing overall returns [00:31:16][00:31:27].
Notable Trading Experiences
Dan recalls the COVID-19 crash as the “craziest period of trading” in his life, where venues like Bitfinex and FTX experienced severe issues [00:32:05][00:32:17]. Ethereum basis went from +20% to -20% in half an hour [00:32:21][00:32:40]. The major challenge was the uncertainty of counterparty solvency, as many entities were in distress or faking stability [00:32:50][00:33:09].
Another “weirdest period” was the 48 hours after FTX’s collapse, where CMS tried to strategically lose money in their FTX account to offset gains elsewhere and extract funds [00:33:53][00:34:03].
A memorable period for the firm was when Bitcoin broke through $20,000, and CMS actively managed positions by predicting where the “hot ball of money” would flow next [00:36:57][00:37:32]. This often involved identifying assets that hadn’t recently gone up and buying them, as money dispersed from Bitcoin and Ethereum into other promising corners of the market [00:37:38][00:37:58]. The key challenge is staying abreast of which assets truly matter in each cycle [00:38:00].
Company Culture: The “CMS Intern” Saga and Hiring in Crypto
The firm gained community recognition partly through the “CMS Intern” Twitter account, run by Kevin, who later became a co-host of the podcast [00:01:47][00:04:08]. Kevin started as an intern during the early days of COVID-19 when CMS was a small team drowning in information [00:02:32][00:02:58]. He “hit the ground running” and quickly acclimated to the industry, eventually joining full-time [00:03:49][00:04:04]. Dan gave Kevin freedom with the account, advising only to avoid controversial non-crypto topics [00:04:54][00:05:04]. The videos posted by the account went viral, boosting its popularity [00:05:06][00:05:16].
Dan notes that having no Limited Partners (LPs) allows him the liberty to express his opinions freely on social media without worrying about offending anyone [00:35:57][00:36:02].
Final Advice
Dan offers two key pieces of advice for those involved in cryptocurrency:
- Avoid Excessive Leverage: Using too much leverage is a common pitfall in crypto. CMS itself was hurt when lenders failed, forcing them to unwind positions at unfavorable levels [00:48:26][00:48:55].
- Trade Less: If you have a thesis, don’t overtrade. People often undo their own good decisions by trading too frequently, especially in an industry where there’s a perceived need to constantly be in the market [00:49:15][00:50:00]. While some succeed with leverage, hundreds or thousands fail, creating a selection bias where only success stories are highlighted [00:50:16][00:50:29].