Crypto Market Maker GSR Faces Executive Departures Amidst Bear Market Retreat

Crypto Market Maker GSR Faces Executive Departures Amidst Bear Market Retreat

Crypto News – GSR, the crypto industry‘s oldest market maker, is currently undergoing a strategic retreat due to the prevailing bear market conditions. In the midst of this shift, several high-ranking executives, including those at the c-suite level and department heads, have chosen to depart from the company. Insights from five sources shed light on this retrenchment and its implications, particularly within the U.S. market.

Notable Departures, Including CFO Jonathan Hugh

Among the significant departures, Chief Financial Officer Jonathan Hugh stands out. He joined GSR in 2021 to contribute to the company’s financial development, as indicated on his LinkedIn profile. However, Hugh did not respond to inquiries from The Block. Other key figures leaving GSR include Global Head of Product Benoit Bosc and Director of Trading Operations Aman Bhalla. Bosc assumed the sales role previously held by Michael Bressler, a seasoned executive from traditional finance giants JP Morgan and Goldman Sachs, who joined and left GSR in 2021 and last year, respectively.

Additionally, during the spring of this year, Jake Dwyer, who had been leading GSR’s DeFi and venture initiatives, and Romain Bernard, Head of Quantitative Trading, chose to depart. Trader Quentin Dubois and Director of Business Development Jeff Stern also left the company. While Dwyer confirmed his departure, others did not provide comments.

GSR’s Long-standing Presence and Commitment to Adaptation

With a history spanning a decade in the crypto markets, GSR has navigated the challenges of rapid movements and volatility. A GSR spokesperson reiterated the company’s dedication to adapt and evolve in sync with the dynamic crypto landscape. While acknowledging the executive departures, the spokesperson emphasized that the evolution of business operations and strategy was a natural response to shifting market conditions, negating the notion of a significant restructuring. To facilitate a seamless transition, Bosc and Bhalla will remain until August’s end to assist in the transfer of their responsibilities.

Insights from Former Employees

Five former GSR employees, who preferred to remain anonymous, offered insights into the departures and their potential effects on the company’s trajectory.

Growth, Expansion, and Challenges

Founded in 2013, GSR gained prominence as a seasoned market maker in the cryptocurrency sector. It expanded significantly during the recent bullish phase, with Bitcoin soaring to remarkable levels of $67,000. In July 2021, co-founder Rich Rosenblum shared in The Scoop Podcast that GSR’s headcount was projected to surpass 200, a marked increase from the previous year’s 25 employees. However, the headcount peaked above 300 before undergoing reductions due to layoffs towards the end of the preceding year. GSR also expanded its c-suite during this period.

Corporate Ties and Shifting Momentum

A source familiar with GSR’s operations noted that the executive team primarily comprised individuals with corporate affiliations. This composition, according to the source, may have disrupted the momentum GSR had built during the previous market cycle. The recruitment of corporate executives from Wall Street during the bullish period was deemed costly for the company.

Corporate Backgrounds and “Old School” Culture

Many c-suite members had connections either to Winton, the former workplace of CEO Jakob Palmstierna, or Goldman Sachs, where co-founders Cristian Gil and Rich Rosenblum previously worked. This included the Chief Operating Officer, Chief Technology Officer, Chief Risk Officer, former Head of Sales Michael Bressler, former Head of Product Benoit Bosc, and former Director of Trading Operations Aman Bhalla, as per LinkedIn records. Some sources commented that the leadership seemed disconnected from the core essence of the crypto industry, describing it as an “old school Goldman Sachs culture.” Diverse perspectives and experiences were highlighted as vital in a rapidly evolving domain.

GSR’s Perspective on Leadership and Adaptation

GSR’s spokesperson emphasized that the company’s background in both traditional finance and the crypto sector positioned it to navigate market dynamics while maintaining a long-term approach to risk management, portfolio strategy, and operational decisions. The spokesperson refrained from discussing potential replacements for departing executives. Notably, GSR’s LinkedIn and careers page indicated no open positions. GSR’s efforts to streamline operations commenced last year, focusing on core market-making activities. This realignment led to the departure of several DeFi team members as the company aimed to expand its market-making beyond centralized exchanges.

Optimal Scale, Future Prospects, and the U.S. Market

Insights from internal staff and individuals in other trading firms suggested that GSR’s rapid expansion might have surpassed an optimal scale. An ideal size for the company was estimated to range from 100 to 140 employees, compared to the current headcount of around 250. Despite challenges posed by the previous year’s bear market, a GSR spokesperson reaffirmed the company’s unwavering belief in the industry’s potential. They stressed that GSR continued to invest in high-potential areas and had assembled a diverse team spanning both traditional finance and decentralized finance, positioning the company for sustained growth over the coming decade.

Shifting Focus and Regulatory Considerations in the U.S.

GSR’s strategic pivot involved reducing its emphasis on the U.S. market, influenced by a combination of factors. These factors included diminished interest in token listings during the bear market, higher talent costs compared to hubs like Singapore and the U.K., and increased regulatory concerns. A significant reduction in GSR’s presence in the U.S. was observed, with the company relinquishing its New York office for a smaller space in Jersey City.

Regulatory Landscape and Trading Activity

Regulatory actions by the U.S. SEC and CFTC against centralized exchanges, coupled with the classification of certain tokens as securities, contributed to GSR’s decision. Despite regulatory challenges, GSR underscored its commitment to adhering to policies and guidelines across jurisdictions. Regarding reduced trading on U.S. venues, the company expressed dedication to the U.S. crypto ecosystem while adapting to evolving regulatory conditions. Market makers like GSR, along with Jump and Wintermute, scaled down trading on U.S. venues recently, influencing GSR’s choice to trim its U.S. operations.

Regulatory Compliance and Future Prospects

While GSR aimed to comply with regulations, some sources noted the company’s robust legal and compliance efforts. GSR’s significant investments in these areas provided a foundation for navigating the complexities of regulations. Despite the challenges, GSR remained among the few organizations capable of sustaining operations at scale in the crypto industry. This underscored the significance of high-quality talent and prudent risk management in maintaining long-term viability.

Diversification Efforts with GSR Capital

As part of diversification efforts, GSR introduced GSR Capital, offering tailored crypto investment products to institutional investors. Led by Chief Operating Officer Andrew Moss, GSR Capital launched in 2022 with offerings such as a bitcoin fund and a broader market fund. Despite intense competition from traditional finance and crypto entities like Bitwise, Galaxy Digital, and Fidelity Digital Assets, GSR Capital managed to avoid significant reductions compared to other divisions of GSR. The decision to integrate GSR Capital into the core business, rather than keeping it separate, highlighted GSR’s adaptability.

High-Performance Alpha and Future Direction

GSR acknowledged the evolving crypto landscape, especially with the rise of numerous crypto ETF applications awaiting SEC review. In response, GSR shifted its focus towards high-performance alpha, moving away from long-only beta-powered funds. This strategic adjustment reflected GSR’s commitment to maintaining relevance in the evolving market environment.

In conclusion, GSR’s ongoing retreat during the bear market has triggered the departure of multiple executives. Established in 2013, GSR gained recognition as a prominent market maker within the crypto industry. However, rapid expansion, particularly with the recruitment of corporate executives during the bullish phase, may have hindered its momentum. GSR’s strategic shift includes scaling back U.S. operations due to regulatory concerns and concentrating on high-performance alpha in diversification efforts. While facing competition from both traditional finance and crypto entities, GSR’s focus on compliance, prudent risk management, and talent retention positions it for continued growth in the dynamic crypto landscape.