Amber AI’s Michael Wu: Bitcoin Might Make A New High At End Of 2018
Michael Wu, founder and CEO of Amber AI, a fintech firm that focuses on applying machine learning/AI into trading, speaks to CoinBlock.Asia, a service of China Money Network, on his views of the future of cryptocurrency investment.
In 2017, Amber AI started trading crypto assets and quickly developed its crypto trading business into monthly turnover of over US$1 billion. By combining machine learning with sophisticated quantitative research, Amber AI aims to continuously identify and deploy best-in-class scalable systematic strategies across all asset classes. Wu graduated Magna Cum Laude with an Economics degree from Dartmouth College.
Here is a Q&A of the interview.
Q: Hi, Michael, welcome, firstly give us a brief introduction for Amber AI?
A: Sure. Amber AI is a quantitative trading shop. We trade in traditional assets as well as crypto currencies. Right now, because we are high-frequency traders in the crypto market, we trade about between US$1 billion to US$2 billion in volume (monthly). Besides trading our own capital and our investors’ capital, with our asset management products, we also provide second market trading services to different counter-parties in the industry.
Q: When you say “high frequency trading”, I know what that means for traditional stock-trading. But in crypto’s perspective, how is it different?
A: I think high-frequency trading is really a relative term. In traditional markets, the infrastructures are very developed and mature, trades are (done in) millisecond. But in the very young and up-and-coming market like crypto currencies, the infrastructure is yet to be fully developed. So the trading speed is limited by things like exchanged APIs and of our web base. For us, every second we send about hundreds of orders, which is probably as fast as we can go in this market right now.
Q: How quickly do they get cleared?
A: Usually the trades are done within seconds. And then, in terms of clearing, I guess it’s tricky because in crypto market, the concept of clearing is very different from traditional market where you actually set out all the assets from one account to the other. In the crypto market, different exchanges does it differently, so there is no accurate time or method or no consistent method for clearing.
Q: Let’s talk about the broader crypto market. From your perspective, what happened in the past six months with the prices dropped so much? What do you think were the drivers behind these market moves?
A: I think first, this market changes so fast. And when you said just six months ago, it feels like…
Q: Centuries ago?
A: Yes, centuries ago, exactly. Because I think 2017 was a remarkable year for the asset class. You have the massive rally not only in Bitcoin and in Ethereum, but also in what we call the “Alts”, or alternative tokens. And there is a big wave of ICOs and all that. People made a lot of money from the market. But since the beginning of this year, I think there is a little bit of return to the mean. And market started to come down. People realized “maybe we went a little bit too crazy last year”.
Probably market rally a little too much ahead of itself, especially when you consider a lot of those ICOs are raising really a lot of money at very crazy valuations, with a lot of them just in white paper or at very preliminary stage of development.
So this year I think it might be more irrational, so price corrected quite a lot from the peak. I think another good thing is because last year was such a bull market, everyone was rushing into it, some are professional, some are non-professional, a lot of retail investors. But this year, because the market was more bearish, so you really see in this year, some of the smaller institutions or some of the institutions that did not have too much skills stop to access the market. While professional and institutional player start to enter the market. I see that as a big change.
Q: Going forward this year, what are some of your predictions?
A: For the market, it’s always difficult to really predict where the market can go. But in the really long run, I think crypto is here to stay. It’s already a standard asset class, it will only grow from here. But the exact time is difficult to say. But the good thing is I think in the crypto market, the market cycle is really really short. So usually a bull-bear cycle in a traditional market can take a few years. In crypto, it could be a year or even shorter. Maybe before we know it, we return to a bull market again.
Q: You think that’s going to happen this year?
A: Hard to say.
Q: It depends on how you define “bull market”, right?
A: Yeah exactly. And also different kind of bull market will have different impacts. I actually think if we really take a step back in the long run, the bear market is good for the asset class and good for the industry. Because it forces us to calm down, even kind of forces some of bad players out, encourages the institutions to come in at more reasonable levels. The next bull market, if it returns, it can return in a more steady-fashioned way. The good projects start to show their true value and true growth. I think that would be really good for the market.
Q: What are the main drivers for market movements in this year? What are the two or three things you watch most closely?
A: In a macro level, number one is always the regulation, what we call the macro-environment, how different government solve different regulators, treat this asset class and how they plan to regulate it. For example, one big change is China. Last year Chinese regulators had a very harsh stance on the asset class, they pretty much banned a lot of things. But this year we start to hear things like the new PBoC (People’s Bank of China) governor Yi Gang in a recent interview, actually said, this asset class needs to be cautiously regulated.
To us, that is already a huge improvement. You might set the tone for what’s to come and for the market to become more regulated and standard. So that’s one: regulation and the macro-environment. Number two is always positioning. So I think the beginning of the year why prices fell so fast, especially for what we call the ALTS is because people really have too much position and too much leverage in the market.
That, I think, has mostly been cleared out. So that’s good. I think that protects the downside from here. The third thing I will see is fundamental development of the blockchain industry in the applications. Because if you think about last year, despite all the ICOs raising so much money, we have yet to see real solid decentralized applications.
Q: Lastly, what do you think Bitcoin would be trading at the end of 2018? Just give a wild guess?
A: That will be a wild guess. My guess is, I think by the end of the year, we’ll probably make a new high.
Q: Really? Higher than December 2017?
A: December 2017 was almost US$20,000, right? I think by the end of the year, we might go into US40,000 or US$50,000 (for Bitcoin).
Q: Wow, thanks.
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