Q&A: CMS Holdings co-founder says he's entering markets cautiously

Q&A: CMS Holdings co-founder says he's entering markets cautiously

Dan Matuszewski, director of crypto investment fund CMS Holdings, is a fixture among experienced digital asset traders.

Few in the crypto industry have handled as much capital as Matuszewski; He led Circle's over-the-counter trading desk, one of the largest in the industry, for more than two years. In 2018, the desk processed more than $24 billion in crypto trading volume.

Matuszewski founded CMS Holdings in 2019 and has since become one of the most prolific funds in the industry, having made 84 investments in various crypto startups through its venture arm, according to Crunchbase.

He is also a board member of the GMI PAC – a reference to the oft-used crypto phrase “gonna make it” – alongside Anthony Scaramucci of SkyBridge Capital and a number of crypto bigwigs. The super PAC agreed spend $20 million to fire pro-crypto candidates into office. It appears to work.

CMS Holdings' website is admirably boring - it's just a picture of a waterfall with the words "PROVEN LIQUIDITY" written on it - a worthy advertisement for a crypto fund. However, CMS Holdings' Twitter timeline is anything but boring.

But leading a fund through the recent turmoil has undoubtedly been challenging. In a series of phone calls over the past month, Blockworks caught up with Matuszewski to see how CMS Holdings... is doing.

Blockworks:What do you think about the current crypto sentiment? How is CMS doing?

Matuszewski:I would say the mood got worse, and then the mood got better. It seems quiet now, that's what I'm saying. Things seem quiet here. We are alive and we are here to advance the game, which is the most important thing. We're just not running that hot.

Blockworks:Do you think the worst of the chaos has made its way through the markets?

Matuszewski:Yes, I do. I think the securities that needed to be sold were sold. The forced licks are through the system, now all you're dealing with is the hangover. I don't think there's a ton of risk that needs to go out the door now.

Obviously everyone is licking wounds and trying to plug holes in their balance sheets, but I think the bulk of the forced selling is now happening through the market. I think it's been a while, so let's do a baseline, right? People are still afraid to deploy new capital, but there is a lack of forced sellers in the market.

Blockworks:Is the CMS Holdings portfolio focused on the long term or do you manage it on an ongoing basis?

CMS:It's a mix. Some of our positions are obviously much longer-term positions and many of them we don't touch for tax reasons. I think we're probably structured like 40/60 between the liquid and the illiquid venture side, which we don't want to touch.

You have to be conscious; If you want to trade, you must be aware that you not only have to beat the market, but also the tax burden you impose on yourself. If you live in a high-tax jurisdiction, look at a 50% haircut for a short-term cap gain position. Let's say you sell a position after it goes up 50% and then want to buy it back. They would effectively have the same position; really all you did was just change the cost basis of your taxes.

Blockworks:Is CMS Banking a pile of dry powder to be unleashed? Or does it enter cautiously?

Matuszewski:Going in carefully is a better way to put it. You have a lot of assets that have hit real lows. Solana is a good example. Avalanche is another.

Many of the altcoins have bottomed out primarily because they were not deposited as collateral as often. What you have is a situation where Bitcoin and Ether were probably the worst hit by forced sales because they were most commonly placed as collateral with various lenders, but many of the altcoins really weren't, largely because they weren't taken as collateral. They bottomed out much earlier - if it is the bottom, who knows - but they have been a bit more stable than the majors in recent months.

Blockworks:You have said in the past that the concerns of many Tether critics are unfounded. What do you think about its reserves flowing into US Treasuries?

Matuszewski:Tether has always been the big one and USDC has always been very, very conservative. Tether is becoming more conservative. I think a lot of it is basically just giving the shorts the middle finger and saying, "Okay, fine. Your beef is really in our corporate treasury holdings. We're going to move the whole thing to treasuries. What's your beef now?"

So I think Tether is too conservative, mainly because they have guys on their back, but I think they will shake them.

Blockworks:What do you think of the theory that TradFi (traditional finance) is trying to get into cryptocurrency because valuations are low?

Matuszewski:I think this is a meme. TradFi has their watch cleaned and everything else they own. Crypto is the kind of thing you buy when the rest of your portfolio is flying. It's not like you're like, "Oh my God, my tech stocks are down 40%. I'm going to buy some crypto because it's depressed."

Blockworks:Is the recent surge in mergers and acquisitions (M&A) across the industry positive for the industry? Wouldn't it become more centralized?

Matuszewski:It is very beneficial. Actually, there should have been more M&A activity in the crypto space in the last two years. The problem was that everyone was doing so well for so long that there was no impetus to make it happen. I think it will accelerate through this year.

I think Binance, FTX, Coinbase, and Kraken are all going to acquire many different components of the industry that probably should have been acquired years ago. There are too many centralized services offering the same thing. I think consolidation is healthy. The centralization of these platforms is actually not a problem because they are already centralized. I don't think that much changes.

Blockworks:Do you expect that we are at the beginning of a long bear market?

Matuszewski:I don't know enough about how macros work, but I think in the end, when the cycle turns, crypto will be the fastest horse again. It's the place you want to be when things get better, and they will get better. It's not the end of stocks for our whole lives, is it? It just sucks for a while and then it gets better. I know you definitely want to be in crypto when the time comes.

Blockworks:Do you have any advice for cryptocurrency traders on how to succeed in the digital asset markets?

Matuszewski:You have to survive and you have to stay here. The opportunities will present themselves and they will make sense at the time, but the important thing is that you really just have to make it through the other side. You have to survive.

This interview was assembled from the results of two telephone interviews, with responses edited for clarity and brevity.

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The post Q&A: CMS Holdings Co-founder Says He’s Carefully Entering Markets is not financial advice.