We are controversial and proud of it.
Interview: Kean, Foresight News
Interviewed by: Andrei Grachev, DWF Labs
Arrangement & Compilation: Peng SUN, Foresight News
"I have 5 Chinese tattoos on my body." When talking about the non-American market, Andrei Grachev involuntarily showed joy and excitement.
As a Russian, Andrei Grachev embodies the wildness of a fighting nation. But his crypto investment does not have Russia’s identity entanglement between Europe and Asia, but firmly chooses the East. In the crypto world, Asia has always been known for trading, speculation, and hype. The story of Andrei Grachev has also become a part of this narrative. He started from trading and is engaged in market making, high-frequency trading and investment. He believes that the Asian and Middle Eastern markets will lead the new craze.
If we look back in 2022, both DWF Labs and Andrei Grachev will be undeniably the focus of controversy. With tens of millions of dollars invested every month, where does the money come from? Manipulate the secondary market? Are non-traditional market making methods being squeezed out by Wintermute and others? Controversies abounded, but Andrei Grachev never cared. He believed that he was just challenging tradition, neither breaking the law nor doing anything wrong.
In Grachev's view, this is a one-stop solution that can meet all needs, rather than just providing a single market-making service:
Today’s DWF Labs is a large-scale high-frequency trading company, market maker, VC, OTC, incubator, ecosystem, fundraiser, event brand, TVL provider, DeFi Taker, consultant, currency listing agent, HR, PR/marketing Companies, KOLs, RFQ quotation request platforms and more...
Grachev said that in the past 16 months, DWF Labs has provided these services to about 350 Web3 projects in the top 1,000 CoinMarketCap market capitalization. When the founder of Wintermute disdained to be associated with them, the fighting nation would never admit defeat. Grachev openly confronted the line, "We are controversial and proud of it":
It would be a shame for me to fall in line with the "orthodox" market makers who take loans, do nothing, sell or profit from call options. They will just be jealous. We dare to take risks, be unconventional, change the order of the crypto world, and raise the standards required of market makers.
Since Crypto is breaking the narrative order of traditional nation-states, why can’t DWF Labs break the order of traditional crypto market makers? Since encryption is constantly being reconstructed and has not yet given a new set of constructs, why can’t DWF Labs reconstruct the past and construct its own narrative ? What's more, the author has heard more than once that the Web3 project requires "one-stop service".
In this interview, Grachev revealed the basic structure, various businesses, funding sources, risk management methods, investment logic and style, bull market planning, the latest progress of the acquisition of FTX and his views on the global encryption market of DWF Labs. Regardless of its operating model and its controversies, objectively speaking, DWF Labs has given support to many projects in the bear market.
1. The cultivation path of “Internet celebrity” market makers
Andrei Grachev has been working in the logistics industry since August 2010, and started trading in the traditional market in 2014, starting his trading life. Grachev seems to have purchased his first ETH in 2016, which also allowed him to make a lot of money during the 2017 bull market. His experience in founding an encryption trading company and serving as Huobi Russia also allowed him to grow rapidly.
Foresight News: How did you transition from the logistics industry into the encryption field? Are there any key turning points or interesting experiences you would like to share? What impact have these experiences had on your current career?
Andrei Grachev : I entered the logistics industry when I was 18 and worked in logistics for 8 years. Around 2014, I started trading in the traditional market. Later, I transitioned to e-commerce and had more time to learn about financial markets and other aspects. In fact, my experience in the logistics and e-commerce industry did not have much impact on my cryptocurrency trading, but it did have an impact on my management skills and work style. In fact, I've been working remotely with large distributed teams since 2010. Both industries have helped me develop a big-picture perspective.
In 2016, a London friend told me about Ethereum mining, which was my introduction to the crypto world. The great bull run of 2017 was an important turning point, when Ethereum rose from $7 to $350. We sold some ETH and started our crypto journey . At the beginning, I founded Crypsis Blockchain Holding with my friends to try to explore the encryption market. This was a good time for us to accumulate experience and learn how to operate. I also joined RACIB, a community organization, but it was not a job. It intrigued me in part, but I also understood that this organization looked like a self-regulatory agency, but it wasn't, and I would never work in one again. At that time, I also managed funds and provided consulting for friends and family, and eventually became the CEO of Huobi Russia.
Huobi Russia was my most important experience . I met the partners of Digital Wave Finance (DWF), and we later became good friends. As the fastest growing and largest Huobi Cloud, we also received two awards from Huobi Global, which helped me build a lot of relationships in China and Southeast Asia. Although I resigned as CEO in 2019, I continued to work there as a partner until 2021, and we finally sold the Huobi Russia business back to Huobi and made a lot of money. Before founding DWF Labs, we also created VRM.trade, conducted proprietary high-frequency trading on second-tier CEX, and learned a lot of product and technical details.
Foresight News: It was an interesting experience. So, why did you set up DWF Labs? Did your team come together? Where are the members located, and how do they communicate and coordinate at work?
Andrei Grachev : DWF Labs was founded in 2022. Previously, there was only Digital Wave Finance, which was established in 2018. I started by helping Digital Wave Finance work with exchanges to negotiate better fees, terms, etc. During this period, I met my current partners Zac, Eugene and Hank, who helped me a lot in the Asian market. During the discussion of cooperation with Digital Wave Finance, I proposed to my Asian friends to start a market maker business. This was the starting point for us to establish DWF Labs. We are mainly based in Asia and Switzerland, so remote has always been our normal work environment. We mainly use Telegram, Zoom and Google Meeting for daily communication.
Foresight News: What is the department setup and composition of DWF Labs? What is the relationship between OTC, DWF Ventures, and market makers shown on the official website? How is the team divided?
Andrei Grachev : We have multiple departments and provide a variety of products, such as OTC transactions. Here, we primarily provide seamless transactions for individuals or entities that meet our KYB, KYC and AML requirements to settle their tokens. Generally speaking, handling token settlement is simple, we just provide the option of selling the token or not, simplifying the decision-making process. We currently have a few people working on this and are also enhancing settlement capabilities to allow more users to access online prices from multiple clearing engines.
For projects that initially participate in OTC, our goal is to transition them to other products, such as market makers and DWF Ventures. Of course, we have also established a DWF ecosystem to promote communication between different projects and entrepreneurs, allowing them to explore and participate in new investment projects and increase transaction opportunities.
But these three directions are different. Market makers operate independently as technical trading desks, they have no connection with the sales team and even in different countries, their focus remains on technical trading strategies using dedicated tokens. We are also involved in incubation and cultivation projects. Currently, there are approximately 60 companies in the DWF Ventures portfolio that we support at the angel and seed stages. These projects are not yet listed on exchanges , but we firmly believe that most of them will be successful on exchanges once the time comes. DWF Ventures works closely with the OTC department, and their functions are intertwined, requiring effective communication to ensure successful transactions.
2. Does money come from strong winds?
Perhaps the bull market in 2017 and 2022 has made Grachev a lot of money, but is all the money brought by the strong wind? Money blown by the wind will also be blown away by the wind, so you might as well take a look at Grachev's thinking on making money and risk.
Foresight News: You have been making frequent investments for quite some time, and what’s staggering is the number of large investments. So many people, including me, are curious, what is the source of funding for DWF Labs, and has it ever received financing?
Andrei Grachev : We have never been involved in fundraising and have no current plans. DWF has always been financially sound, especially making a lot of money during the bull market phase from 2020 to 2022. We have leveraged these funds while continuing to be profitable. While I can’t reveal specific numbers, I can assure you that we have the financial capacity to easily invest tens of millions of dollars per month in startups . Our main goal is not to invest 10 million and earn 200,000. We would rather invest 10 million, be patient, and then earn 50 million.
Foresight News: So how do you manage tokens and control risks?
Andrei Grachev : We distribute tokens through CEX and adhere to strict risk protocols. Our requirements for risk management are very high, and it makes sense to do so. Making money is one thing, but protecting those earnings is equally crucial. All the time, exchanges get hacked, protocols get hacked, market makers get hacked, and we don’t want to be one of them. Therefore, we need to adopt risk-reducing solutions.
In accordance with our risk strategy, we have a portion of our funds stored in CEX and are also using custody services such as Fireblocks, which according to our assessment can provide a robust solution. We also have an on-chain multi-signature wallet and will use it when necessary. As for BTC, most are still stored in cold wallets, mainly because BTC does not need to be transferred to exchanges frequently.
3. The “Nokia Era” of market makers is fading away
DWF Labs has chosen a unique path, as long as it is compliant, let the doubts go to hell. "DWF Labs is a one-stop solution that meets all needs." This is Andrei Grachev's positioning of DWF Labs. In the past 16 months, they have provided these services to approximately 350 Web3 projects in the top 1,000 CoinMarketCap market capitalization. He wants to compete with "iPhone", not "Nokia". As Grachev said, DWF Labs supports portfolio companies in the Korean market, which is tricky for a lot of people, but they can do it in a compliant way. "Be creative and don't be biased."
Currently, DWF Labs has invested in 470 projects, 70% of which are DeFi, decentralized derivatives, GameFi and SocialFi, and the rest include some currencies and memecoins with high market shares.
Foresight News: Since this year, you have been in the vortex of public opinion because of your compound operation model of "investment + market making". Since March, traditional crypto market makers such as Wintermute have been extremely disdainful of your investment methods, thinking that you are just "trading" and cannot be called "investment." So, what relationship do you currently maintain with these traditional market makers? Are there any business connections?
Andrei Grachev : I think there are not many ways to cooperate with them. Maybe the only thing I can come up with is to hire some of their talent for DWF. But in the business world, it's like a media person like you. If you were a trailblazer in the media world and another media outlet started complaining about your interviewing style, saying it wasn't traditional enough, would you care? I don't think so. You may be happy because you are innovative and you can attract more attention.
For us, the focus is on legality. As long as we operate within correct and legal boundaries, if a certain method is proven to be effective, we will adopt it without worrying about what others say or fear of criticism or complaints from competitors.
Foresight News: The secondary market also thinks that you are a banker. Data companies and media are reporting on your on-chain capital flows. Your capital flows have become a direction light for institutions and retail investors to make market judgments. What do you think of it?
Andrei Grachev : I come across this type of discussion quite often. In terms of transaction volume, we process billions of dollars of transactions every day. However, our trading volumes are relatively small compared to overall trading volumes and importantly, we do not engage in hedging transactions. While the media and people may speculate and comment, we do make an impact. When people observe our actions, they may buy or sell, but these are their own decisions and we have no control over them. We play the long term, not the short term.
We are in the business of trading and investing in cryptocurrencies, so it is vital that deposits and withdrawals of cryptocurrencies to exchanges are an integral part of our business. We do not engage in transactions conditioned on market manipulation; our approach remains unique.
Manipulating markets does not appeal to us. As the industry moves toward more regulation and legality, our focus is on the long-term game rather than short-term gains. In the end, whether their trading choices follow us or go the other way varies from person to person, but our purpose is to conduct strategic long-term games in the ever-changing market environment.
Foresight News: I noticed that you responded to Coin98 Analytics on Twitter, and you said that the 174 projects they compiled accounted for 40% of DWF Labs’ entire portfolio, which is 435 projects. So, what types of projects do you generally invest in, and what different strategies do you choose for different projects?
Andrei Grachev : Our portfolio is mainly centered around long-term narratives, which accounts for about 70% of our investments. This includes our focus on DeFi, decentralized derivatives (such as perpetual options or options), and significant investments in emerging areas such as GameFi and SocialFi.
The rest of our portfolio is also allocated to certain coins that maybe have a higher market share or maybe people like it. In addition, we also retain a small portion of investments for short-term narratives, such as certain memecoins. The beauty of memecoins is not that they have any groundbreaking technology, but the culture they embody. They represent a cultural phenomenon, and there are benefits to investing in this trend. Once the time is right, these memecoins may see significant gains, which is why we invest in this culture.
Foresight News: You have said on many occasions that investing by directly purchasing tokens is to help project parties that are in "difficulty". This means that these projects are already relatively mature. So do you not believe in the initial team? ? Because seed rounds are basically just ideas, not even products.
Andrei Grachev : Of course, we believe in startups. When it comes to investing, there is a clear distinction between startups and secondary markets. Secondary markets provide data insight, traction and user or trader interest, allowing for risk assessment and potential hedging. However, for startups, it's completely different. This has nothing to do with trust, but more with risk management, taking into account that the market narrative is long-term, such as DeFi or GameFi, etc. If a startup has a great team, a great product, and fits the long-term narrative of the market, it’s a good investment. While there's no guarantee it will succeed, you can play the game, weigh the possibilities, and then the question becomes how much money to allocate from the portfolio. If 90% of your portfolio is start-ups, it's very risky; if it's 5% to 10%, it's totally fine. You can invest a little bit and even if it doesn't work out, it won't jeopardize your entire portfolio. But if you win, there are huge potential gains.
This is the approach we take. We always trust startups, otherwise we will not cooperate with them. What we have to do is to control risks and optimize investment decisions based on calculated probabilities.
4. Not only funds, but also confidence is needed in a bear market
Andrei Grachev said that DWF Labs’ investment is not only financial investment, but also provides further support to the invested projects through DWF Ventures and the technical team. For him, it is important to build confidence in the industry in a bear market.
Foresight News: How do you decide and operate your OTC transactions and secondary market currency purchases now? In addition to buying coins, what support will be given to investment projects?
Andrei Grachev : Our focus is not just on providing financial support, which is only secondary, anyone with cash can invest. In the world of cryptocurrency and venture capital, money is usually not an issue; good projects can often find sufficient funding. What sets us apart is the value-added services we provide.
We have our own incubation department that can assist in formulating market strategies, conducting market research, and working with KOLs, media entities, and local businesses. In addition, we provide solutions through HR to help portfolio companies recruit talent for their teams.
In addition, we provide technical assistance through an in-house team of around 10 developers. While this team is currently managed by us, we plan to spin them off soon. They provide consulting, computational and other technical expertise to our projects. Finally, we also provide support services such as listing and market making.
Foresight News: In 2022, the encryption market has experienced the collapse of Three Arrows Capital, Celsius, Voyager, FTX and other events, which has caused immeasurable damage to the encryption industry. The Crypto Winter is harsh, the financial market is cold, and the global economy is becoming conservative. However, DWF Labs is bucking the trend. For example, it supports the Binance Industry Recovery Fund Plan, the TON Foundation’s “Rescue Fund”, and even the overall investment pace has accelerated significantly. This is What kind of considerations and decisions were made?
Andrei Grachev : Looking back at the beginning of this year, when FTX just collapsed, it was a great time to deploy funds. Because everyone is selling, you need to buy. This is the golden rule of investing. When the market is fearful, taking the initiative often means reducing competitors.
Binance’s industry recovery plan after the FTX collapse is far-reaching, and our cooperation with Binance has made a positive contribution to the industry. For us, it’s not just about making money, it’s about building confidence. In times of market turmoil, it's really important to have a person or a group of people say, "Hey, keep building, we've got your back." I would say that we have made a number of investments that have provided significant support to the project and have given us strong returns.
Regarding the TON Foundation, it is no secret that we have invested heavily in TON. It was a long-term commitment with low capitalization, but we believed so strongly in its potential that we invested tens of millions of dollars. When TON launched an initiative, we naturally provided support. Whether supporting market makers or facilitating over-the-counter transactions, we support our partners in every area.
5. What to do when the bull market comes? "We are very adaptable"
Andrei said that DWF Labs has strong adaptability, has a bear market investment logic in the bear market, and is also preparing for the bull market through other support and investment. At the same time, since a large part of its own funds are frozen in FTX, DWF Labs will also acquire a local exchange of FTX.
Foresight News: How long will the current "high-frequency" large-scale investment continue? Now is a bear market. You invest in project parties that are currently experiencing "difficulties" through over-the-counter transactions. In the bull market, the project parties' capital flow will be more abundant. It is very likely that the existing investment strategy will not work. You will be optimistic about the next round. What are the investment and market strategy plans for the bull market?
Andrei Grachev : First of all, we do not only invest in projects that are in "difficulty". We also made a large investment in Fetch.ai, which is not a "troubled" project but is performing very well. This is a lucrative investment and we will continue to support it.
Our efforts are not just about injecting capital into businesses, but also about building an ecosystem. We now sell not just our capital, but our full support, which is proven to help close more deals.
Last July, 12 months into DWF Labs’ operations, I tweeted: “During that time our portfolio reached 250 projects.” Since then, our portfolio has grown. to about 470 projects. This means it was easy for us to close deals in the first 12 months when the market was in trouble, and also during the subsequent four months of positive market conditions. This speaks to our adaptability in a variety of market conditions and our ability to function in more optimistic market sentiments. It can be said that our current efforts and achievements have exceeded half a year ago.
Foresight News: You said before that you would consider acquiring FTX assets. Recently, there have been strong calls to acquire FTX and restart FTX2.0, and the FTT token has also increased at a high rate. Have you had any communication with FTX? Are you moving forward with this plan?
Andrei Grachev : Our lawyers are in contact with the FTX liquidators regarding the assets and everything is going well so far. Regarding FTX 2.0, we were approached by a local FTX exchange seeking our participation as a market maker. No word yet on which one, but I think we'll be involved. Because a large portion of our funds on FTX are frozen, we need to do some transactions to recover these funds. However, it is currently unclear how this process will unfold. I have no problem with FTX 2.0.
Foresight News: I wrote a brief history of LocalBitcoins, which was once the largest Bitcoin OTC platform in the world. It has been operating for ten years and announced this year that it would cease operations. Its peak has several factors, such as the bull market, the failure to popularize payment infrastructure in third world countries, the political, economic and regulatory environments of different countries, etc., and its final failure was because LocalBitcoins catered to supervision, implemented KYC, etc., and the original P2P anonymous privacy The attributes disappeared. Under the same conditions, OTC platforms such as Binance P2P have seized the market in many regions. Moreover, Binance P2P did a better job in functional services and was more popular among users, so LocalBitcoins failed. So, I would like to know the OTC operating mechanism of DWF Labs, which regions provide this service to users, and how do you do supervision? Also, can you introduce the institutional-level OTC/RFQ platform DWF Liquid Markets that you will launch?
Andrei Grachev : I haven’t thought about too many details yet because we will make an official announcement when the time comes. However, what I will say is that it is different from LocalBitcoins and more like Binance P2P, but we have some unique innovations. We will announce more details when the time is right.
Foresight News: You said before that DWF Labs has obtained the Dubai Multi Commodity Center (DMCC) license to become its ecosystem financial partner. What business will it carry out in Dubai in the future?
Andrei Grachev : We have recently applied for multiple licenses to expand our business into the Middle East. To ensure our operations are fully licensed, we are being audited by one of the Big Four audit firms.
Just yesterday, DWF Labs hosted a hackathon at DMCC Dubai together with DMCC, Bybit and other partners. We provide funding and advisory services to startups headquartered in DMCC, UAE. That's what we do here. There has been positive feedback from these efforts, and while they didn’t make the news, they did work.
6. All in the East, embrace the mysterious power
"I have 5 Chinese tattoos on my body," Andrei Grachev said with great pride and excitement. He has some oriental flavor in his body, and perhaps his trading is consistent with the characteristics of oriental cryptography, which makes him so persistent and confident in the east.
Foresight News: You have three offices in Asia: Singapore, South Korea and Hong Kong. The other two are the British Virgin Islands and Dubai. Most of the team has Asian faces. It seems that you have had close relations with the Chinese market for a long time, so you are How do you view the Asian market? The U.S. domestic market is still very large, but you seem to be focusing more on non-U.S. markets?
Andrei Grachev : The Asian market is the world’s leading cryptocurrency market. All the leading exchanges are from Asia, such as Binance, OKX, Bybit. Only Coinbase and Bitfinex are not from Asia, but in terms of trading volume, I think Coinbase is not even as good as some Asian exchanges such as Gate.io.
When it comes to regulation and compliance, the global regulatory and financial landscape appears to be splitting into East and West. You need to make a choice because neither Eastern nor Western markets offer both compliance and risk-free trading. So we decided to focus on the East, which is why we have a lot of Asian colleagues. I love Asian culture and I even got 5 tattoos in China . I have been dealing with Chinese people since 2018. That's our target market and we love working there. The Middle East, Asia and China are all our target markets.
Regarding the industry as a whole, I would say that the development of the entire industry, including market makers and conventional trading, has been affected by the Great Firewall between the United States and the rest of the world. We trade on the Coinbase International Exchange, which is an offshore perpetual contract trading platform, but we do not trade on the Coinbase spot market because it may be regarded as a market maker by the U.S. Securities and Exchange Commission (SEC). From a risk and reward perspective, this makes no sense.
The world is talking about Bitcoin ETFs right now, and while it may start with news of ETF approval in the United States, the impetus and momentum for its success is expected to come from Asian and Middle Eastern markets, further driving its adoption and growth.
Foresight News: Last question, CZ was recently forced to resign from Binance. What impact do you think this will have on the crypto market?
Andrei Grachev : This is bad news because Binance is undoubtedly the leader in the industry, but I don’t think the crypto landscape will change anytime soon because of this. In fact, U.S. regulators have a huge victory. They have access to all of Binance’s data and understand all user behavior. I think this may push users towards DeFi as users seek more decentralized, less regulated alternatives. Exchanges not affiliated with the United States may benefit from this shift in user behavior.
Still, I don’t think this will have a significant impact on Binance’s business. Binance has cemented itself as a major player in the crypto space, and while regulatory scrutiny may drive some users to other platforms, it is unlikely to significantly erode Binance’s market dominance.
