Flowdesk CEO Guilhem Chaumont details crypto's structural shift—how institutional capital and tokenization are replacing retail cycles, creating a new, potentially less volatile, growth phase demanding robust infrastructure.
Flowdesk's Origin and Founding Thesis
- Kevin introduces Guilhem Chaumont, co-founder and CEO of Flowdesk, described as a full-service digital asset trading and technology firm.
- Guilhem elaborates, positioning Flowdesk as evolving from a market-making background (known for "Market Making as a Service") into a comprehensive financial services firm for crypto, serving projects, institutions, ETF providers, and banks.
- Services span market making, custody, brokerage (spot, derivatives), and upcoming credit offerings, all underpinned by sophisticated proprietary technology and connectivity.
- Flowdesk's initial focus, starting in 2020, was a contrarian bet: providing institutional-grade services specifically to crypto-native teams, anticipating their increasing sophistication and the eventual rise of tokenization (including security tokens and RWAs). Guilhem notes, "our deep conviction was that it [the institutional wave] would not happen for a wide number of reasons... this is going to be remaining like a crypto thing."
Early Challenges and Market Making as a Service (MMaaS)
- Guilhem highlights the inherent complexity of aiming for broad counterparty and product coverage from day one, especially serving a wide spectrum of token issuers (from billion-dollar protocols to $2M market cap projects).
- Addressing the needs of smaller projects, who couldn't afford traditional market making fees or large token loans, led to the creation of Market Making as a Service (MMaaS).
- MMaaS Explained: A transparent, cost-effective model where token issuers utilize Flowdesk's technology infrastructure but provide their own capital and assume the associated market and counterparty risks, effectively acting as their own market maker with professional tooling.
- This approach provided affordability and high coverage, meeting a critical need for transparency and control, features now also sought by larger players.
- Guilhem emphasizes that despite the crypto context, the core challenges mirror traditional finance: regulation, balance sheet management, global 24/7 operations, and robust monitoring (including on-chain), creating increasingly high barriers to entry.
Current Crypto Market Analysis
- Guilhem provides a candid assessment of the current market: trading volumes are "anemic," down 60-70% from peaks (around $1T/month vs. nearly $3T), resembling levels before the late 2023 surge.
- "The Bitcoin price... is kind of hiding a forest of not much is happening," Guilhem observes, noting significant value loss in many altcoins despite Bitcoin's relative stability.
- Despite the slowdown, Flowdesk remains long-term bullish and continues heavy investment, citing improving regulatory clarity (especially US) and tangible institutional inflows as key positive fundamentals.
Shift in Market Structure: The Institutional Influence
- A core thesis presented by Guilhem is that the crypto market structure is fundamentally changing, moving away from predictable four-year bull/bear cycles dominated by retail sentiment.
- He argues institutional capital, particularly flowing into Bitcoin ETFs, operates on much longer time horizons (multi-decade) compared to the previous retail-driven cycles focused on shorter-term gains. "The people who invest most of the flow... do not have an 18 months horizon anymore," he states.
- This shift implies a market potentially becoming "more boring" and more correlated with traditional macroeconomic factors and events (e.g., US tariffs, political announcements).
- Strategic Implication: Investors should anticipate a less cyclical, potentially less volatile market where deep drawdowns (like 80% on Bitcoin) are less likely due to the "stickier," long-term nature of institutional capital anchoring the market.
Future Growth Areas: Beyond Speculation
- Guilhem identifies three primary pillars for future crypto market growth:
- Store of Value: Primarily Bitcoin, fulfilling a "digital gold" role.
- Network Value: Key blockchain networks (like Ethereum) deriving value from transaction fees and network activity, unlike Web 2.0 models.
- Tokenization: The largest long-term growth driver, encompassing the digitization of various assets onto blockchains.
- He believes the next major growth wave won't come from existing tokens exponentially increasing market cap, but from new tokenized assets entering the ecosystem. This might be perceived as bearish for purely speculative altcoin holdings.
- Research Focus: Researchers should analyze network revenue models and the economics of tokenization, particularly how value accrues in Layer 1s/Layer 2s versus the assets being tokenized.
Tokenization Deep Dive: RWAs and Beyond
- Tokenization is viewed as a 10-20 year process, starting with simpler assets like stablecoins (tokenized fiat/money market funds) and government/corporate bonds – areas already seeing success.
- The key current evolution is passing yield from underlying assets (like T-bills via money market funds) directly to on-chain holders. Guilhem sees bringing yield on-chain as the immediate major use case.
- The ultimate vision includes tokenizing previously illiquid assets (from pre-IPO shares down to local businesses), but Guilhem realistically places this further out (10-15 years).
- Near-term (2-5 years), the focus will be tokenizing existing liquid assets (e.g., stocks like Tesla, Apple) to leverage crypto's benefits (collateralization, easy transfer). He even posits a future where salaries are paid in yield-bearing tokenized assets, potentially diminishing the role of traditional fiat.
- Real-World Assets (RWAs): Digital representations of tangible or traditional financial assets on a blockchain (e.g., tokenized bonds, real estate, commodities).
Institutional Adoption: Hurdles and Incentives
- Guilhem acknowledges institutional caution stems from regulatory ambiguity (e.g., Basel requirements imposing high capital charges for crypto holdings) and operational/PR risks associated with crypto (hacks, volatility).
- Institutions are grappling with how to capture value (e.g., fee revenue) in a potentially disintermediating, permissionless ecosystem. They weigh efficiency gains against the risk of losing control or existing revenue streams.
- However, Guilhem argues that as adoption grows (driven by retail and buy-side demand), the risk will eventually shift: "at some point, it's going to be a losing [proposition] for everyone to just not go into crypto." The opportunity cost of not participating will outweigh the risks of participating.
Flowdesk's Strategic Focus: Building the Rails
- Flowdesk's core strategy is built around the thesis that tokenized assets (securities, RWAs) will trade using similar infrastructure as current utility tokens (ERC-20s, AMMs, RFQs, CEXs/DEXs), albeit likely in permissioned environments requiring KYC/KYB.
- "Essentially what we're building at [Flowdesk] is the technology for that," Guilhem states, believing the core technical infrastructure (especially with L2 scaling) is largely sufficient.
- Flowdesk is investing heavily in building a comprehensive, compliant technology stack and operational framework to handle this future flow, expanding services like credit and structured products to meet current client needs while preparing for tomorrow.
- They observe strong current demand from stablecoin issuers and increasing activity in security tokens, while infrastructure layer innovation seems to be slowing relatively.
Stablecoin Demand and Market Dynamics
- Guilhem notes a significant surge in demand related to stablecoins, driven partly by genuine retail adoption (especially in emerging markets and for daily use) and partly by a supply-side push as numerous entities launch their own stablecoins.
- He sees retail adoption moving beyond crypto-savvy users towards mainstream use via simple smartphone wallets for daily transactions.
- The next phase involves banks using stablecoins for inter-bank settlement, collateralization, and derivatives margining, representing a massive potential market expansion (from ~$150B to trillions).
Flowdesk's Neutral Stance: No Proprietary Tokens
- Despite having the technical capability, distribution, and regulatory setup, Guilhem firmly states Flowdesk will not issue its own stablecoin, utility token, or tokenized fund.
- The rationale is to maintain neutrality, trust, and avoid conflicts of interest with their clients. "Are you really being fair [if you issue your own token]? And that fairness, that trustability has a lot of importance for us," he emphasizes. They prioritize being a trusted, transparent infrastructure provider across the ecosystem.
Market Making: Misconceptions and Value
- The biggest misconception, according to Guilhem, is that market makers inherently work against a project's interest. Legitimate market makers aim to be delta neutral (not betting on price direction) and profit from the bid-ask spread over very short timeframes (milliseconds/microseconds).
- Market makers are crucial for providing liquidity, which reduces volatility and attracts investors (especially institutions with liquidity mandates). Poor liquidity translates to high slippage (execution cost), deterring investment.
- Key metrics projects should monitor: order book depth, bid-ask spread (aiming for 10-20 bps for legit tokens), uptime (95%+), and overall cost-effectiveness. Projects need transparency and alignment of interests.
The Importance of Market Makers
- Without dedicated market makers, Guilhem explains markets wouldn't collapse entirely (proprietary traders and even retail limit orders would provide some liquidity) but would suffer significantly higher volatility.
- Assets outside the top few (like BTC/ETH) would see much higher realized volatility (e.g., 200% vs. 80-100%). Market makers are especially vital during extreme volatility to prevent catastrophic price cascades ("going through the full order book.")
- Academic literature supports a "liquidity premium," where assets with better liquidity tend to trade at higher valuations.
Competitive Landscape and Building Moats
- Guilhem stresses the rapidly increasing barriers to entry in crypto trading/market making: regulation, talent acquisition, and significant balance sheet requirements are now essential. Launching a firm like Flowdesk today would be much harder.
- He believes it will be very difficult for traditional financial institutions (TradFi) to build competitive crypto trading infrastructure in-house due to the unique complexities (fragmented venues, 24/7 operations, specific tech/security needs) compared to TradFi.
- The likely path for TradFi entry is partnering with, acquiring technology from, or acquiring existing crypto-native firms. Flowdesk positions itself as a potential partner or technology provider.
- While acknowledging the possibility of crypto-native firms displacing incumbents, he sees it as a lower probability outcome given the scale and regulatory entrenchment of large banks.
Starting a Crypto Trading Firm Today
- While tooling (crypto infrastructure, custody, AI development tools) is vastly better than 5 years ago, launching a global, regulated trading firm now requires substantial capital (high tens of millions for balance sheet), a sizable team (40-50+ people), and navigating lengthy regulatory processes (years, not months).
- Smaller, less compliant operations are possible but likely unsustainable and lower quality.
- Guilhem encourages new entrants, hoping their "naivety" (similar to Flowdesk's early days) will drive innovation benefiting the entire ecosystem.
Flowdesk's Investment Priorities (Post-Funding)
- Following their recent financing (which included debt managed by funds associated with BlackRock), Flowdesk is doubling down on:
- Technology Infrastructure: Building the full suite to trade any asset, anywhere, efficiently.
- People: Scaling the team with talent deeply committed to crypto's long-term vision, beyond short-term speculation.
- Balance Sheet: Strategically growing their balance sheet (aiming for 100x growth eventually) via profits and further funding rounds to support scaled operations and client needs, particularly in areas like credit.
- Their focus remains on facilitating the tokenization trend while serving the existing crypto ecosystem.
Biggest Challenges Facing Flowdesk
- Guilhem identifies key challenges:
- People & Scaling: Managing organizational growth and maintaining culture as the firm expands. "It's a people battle... fundamentally everything that it is."
- Regulation: Navigating the complex and evolving global regulatory landscape, particularly as a European firm dealing with MiCA implementation (e.g., stablecoin compliance impacting exchange listings).
- Technology Scaling: Keeping their tech stack robust and performant as market complexity and volumes grow.
- Cybersecurity: Managing the ever-increasing threat landscape targeting crypto firms.
Conclusion
Guilhem Chaumont paints a picture of crypto maturing via institutional adoption and tokenization, demanding robust, compliant infrastructure. Investors and researchers must track this structural shift, focusing on infrastructure providers enabling RWA integration and navigating the evolving regulatory landscape for long-term opportunities.
