Cole Kennelly, Volmex Labs | theCUBE + NYSE Wired: FinTech Exchange Series

Palo Alto studio connection Silicon Valley and Wall Street. I'm John F co here with Dave Volante my co-host. Hello, I'm John Furry with the Cube. We are here at our cubes NYC studio. Of course, we have our PaloAlto studio connecting Silicon Valley to Wall Street as the worlds collide. Tech and capital markets are intersecting. This is our fintech series. We explore the leaders who are pushing the envelope, innovating in the financial area. But as you know, blockchain and AI come together, new financial stacks are being built. The world is moving to a new normal and that's going to be innovation speed, original content, things that will change the game, but the world is completely different. We have Colin Canelli here. He's the founder and CEO of Volmex Labs. Great to see you. Thanks for coming on. >> Thanks, John. >> Explain what you guys do because you're in the data business. Okay. Fintech has evolved over time as definitions, but it's still the same. Finn, finance and tech coming together. What do you guys do? >> So, at Volmex, we build the leading Bitcoin volatility index. We have over 300 different indices that are that are alive today. We're most well known for our Bitcoin and our crypto volatility index family. Um, really we're an index, emerging index conglomerate that has a number of families of indices and we make them available forformational display purposes to various partners. Bloomberg Terminal, Trading View, Refinitiv or Else Data Analytics. Now we have nine tradable contracts on four exchanges including Poly Market, Bitfinex and a couple of others. And so really we're this robust uh Bitcoin crypto volatility index standard and expanding into other areas including rates and factors and more. >> Talk us about the journey. When did this start? When did you get going? What was the idea? What was the problem? What was the opportunity? >> So company's about 5 years old. Um, I, you know, I've been following the options market my whole life and I've also been working in crypto for about eight years full-time. I worked at another crypto startup that's got that got that got acquired and um, my dad works at a US equity options exchange for a couple different exchanges for about >> in family blood. >> Yeah. [laughter] Um, and so, you know, I had kind of been dabbling in the crypto option space early on and then I started trading more and more and I realized there was no crypto VIX and I realized that, hey, there really needs to be this this tool for risk management, speculative behavior is alsoformational, you know, uh, providing valuable robust information to investors and traders. And so I started started building this out and um we've assembled a great team and you know um we've built a great product that that many thousands of people use. >> What was the uh core value from an index team? What what were people needing? Understanding the volatility piece of it, the predictability, what was the main value that you saw that people needed? I think similar to the VIX, you know, the VIX and BVIV are both uh a robust measure of of implied volatility that uh traders and investors and market participants can can follow and understand hey you know the market is feeling very uncertain at the moment is feeling very uh you know there's the market's expecting a lot of risk. Um so I think the sort offormational use case is a very big one but then also a pure volatility instrument where traders and investors can express a view purely on implied volatility just like the VIX with the futures complex and ETF complex um you know without a uh sophisticated options you know capability right so in the you know options market you can compose a series a strip of options to get this you know pure volatility exposure but you need to constantly manage that and A volatility product really abstracts away all the complexity. It makes it so traders and investors can very easily hedge, diversify, speculate on this asset class. >> You know, I'm smiling because crypto is a very unique culture. Volatility, there's huge swings in crypto. Um, and the participants are holders. They hold long positions, but you got big whales, right? You got and but you also have a developing market. When did the velocity of trading start kicking in when you saw a lot more I won't say retail like activity but obviously with Salana you saw a lot of uh de apps coming out um in gaming and of other verticals you saw retail come in dabbling uh anyone who's been alive for the past 5 to 10 years that's under the age of 40 probably have crypto in their portfolio because the price has accelerated lots since then. I remember when I first started Silon Angle it was like 32 cents a bitcoin and they were giving it away to get people to use it. Um so but it's now mature. Talk about the volatility. Is it still the same pattern? What's your take on that? Has it kind of settled in? What's the data tell you? >> So in times of extreme fear in the crypto market, you'll always see that very negatively uh you know correlated V and spot relationship, right? And so early in February, Bitcoin went from, you know, 85K to 70K in a matter of, I don't know, 12 hours or something like this. And our index went from 45 to above 80 and peaked and mean reverted back to below 80. Um, and so essentially, um, in those, you know, very volatile, uh, days in the Bitcoin market and crypto market, it's always going to be very negatively correlated. Um, in general, you know, the VIX is 14 or so right now. Biv is about 40 and so you can think that Bitcoin is you know two and a half three times more volatile than the US equity. Makes sense actually >> in the you know when I started Volmex Biv was uh even even more you know at higher levels it was you know uh 100 plus in certain times so the volatility as big players like black rockck fidelity micro strategy you know some of the big uh institutions that have entered the space and started you know running various you know options volatility strategies I think that's you know dampened suppressed the ball with time um but yeah it's become a little bit less volatile with time but it's always going to be very negatively correlated and you know we'll see those you know >> 70 80 vol point you know highs on on very volatile days. So it's an interesting question >> you know Cole you have a unique position and I want to get this out there because I think it's important for people understand the impact of the culture shift from the folks who were inside the ropes for over a decade or more to now it's going mainstream. talk about that mainstream adoption and impact just categorically. Give us give people a sense of the reality of the scope of adoption in mainstream. >> I think crypto broadly has become a very mainstream you know phenomenon. You do have uh the likes of uh stable coins, USDT, USDC, [clears throat] which uh you know hundreds of millions of people use globally for better money uh more stable and more transferable uh you know money in in different countries which don't have access to swift in the US banking system. And so I think that you know crypto with stable coins with Bitcoin has permeated the mainstream you know culture. Um, in terms of what we're doing at Volmex, I mean, there's many, you know, traders that follow the BV index on Trading View. We've been on, uh, Bloomberg television. It's been featured organically. We've been featured in CNBC International segment. >> There's a standard. You [clears throat] guys have really good standard. >> Coindesk writes about Volmex um, often. Yes, exactly. It's >> Well, we'll start quoting it immediately. We'd love it. >> Let's do it. >> I mean, people want to have um, confidence. Um, there's no doubt that anyone who knows anything about crypto and and fintech knows that this asset is going to grow. I mean, I think I am 100% bullish on on on Bitcoin, Ethereum, they all have use cases. I'm more uh enthusiastic about um the programmability and integration of the wallet and the economies that come out of these deployments. I think that's going to have a huge take. What's your vision on that? Because that's I mean, Bitcoin is Bitcoin. and some things that are going on with Bitcoin but you know Ethereum salon people are building on top of that's going to increase ton of activity how does that uh change your thinking >> so bitcoin has two use cases or two functions send and receive you know it's really just a ledger for sending and receiving value um salana and ethereum on the other hands uh and and things like hyperlid um you know there's a lot more expressivity you can you can uh you know achieve with these networks you know smart contracts are kind of the uh you know the innovation that Ethereum created and um you know essentially Salana has just taken forward with more more throughput lower latency. Essentially, you know, these networks allow for developers to create uh applications that are, you know, really just anything can be created with sort of, you know, you can create a program on these networks and then have all different sorts of functions. you know, um, collateralize, redeem, mint and burn and, uh, you know, issue token or redeem token, um, you know, trade a future, trade a swap, trade an option, uh, settle that option. Like all of these, uh, functions can be codified into the blockchain and run on, you know, Salana, Ethereum, and things like Hyperlid. I think what Hyperliquid's doing is really interesting. They've created this 247 futures market for, you know, commodities and single stock equities. Um and I think that you know Bitcoin uh started moving you know decentral decentralization and and crypto forward but >> you know Salana, Ethereum uh Hyperlid, Lighter these type of applications are are kind of carrying the torch and Bitcoin is really a pristine money a pristine collateral will continue to be around but >> is nobrainer in my mind. But you bring up a good point. I mean you're talking about I mean the physical and digital world are converging. I mean, I got I I ride the subway here in New York and I pull out my iPhone, click on my Apple Pay, boom, click. I mean, that's a wallet. I mean, eventually custody is going to be nailed down 100%. That gets done. The the programmability, you mentioned the applications on top of these these networks are going to provide massive innovation uh products on top, specifically finance. Um, absolutely. This is a huge opportunity. I'm sure you must be thinking about this on the product roadmap. Um, how are you thinking about this as from a business standpoint? You obviously got the standardization, you got the great index, you're measuring some volatility, great starting point, but it's just was just getting started actually. What's your views on as this develops for your business? >> It's a great question. You know, the way we think about Volmex is really that we are kind of this index conglomerate. We've started and and been very successful, I think, with implied volatility for Bitcoin and crypto, but with the advent of things like AI, prediction markets, other sectors emerging, there's going to be the need for robust benchmark indices. And so, um, we're building some new things that, >> you know, are are relevant to those things and we're excited about where the market's going and we think that, >> you know, anything >> you feel good about it. >> Very good. Yeah. Anything that's unspoken for in the incumbent index markets, the MCIs, the S&Ps you know uh and and not created by sort of an emergent upstart index company. We feel that you know we understand how to make a robust index methodology and commercialize it. We know how to get it on Bloomberg and Trading View and the media and so it's >> first of all I love going down the rabbit hole so to speak you know pun intended but like the reality is is that if you look at the financial market again I'm a wet east uh east coast guy originally but living in California for 25 years in Palo Alto I come in with fresh eyes it's very transactional real time is everything and now you have the immutability you have now the programmability as these things rise up you're going to see a massive focus on the tech around data so there's a data opportunity And there's obviously challenges with data gravity and real time latency and timing. You mentioned prediction markets. I mean, if you if you got trades and things going on all around the world, physics is still physics. You're going to need to have, you know, the right clock. You need to have all these tech features. So, we still got more tech to build. Um, that's coming. So, there's going to be a lot of real time. So, as real time becomes important, it makes the data sourcing. You're in the data business basically. Yep. >> Feed business. And I mean I guess I would say you're kind of in the platform business. You're doing data platformization. Um explain that to people how what that means. really we you know build these methodologies for Biv, for Biv US, for EV and our 300 other indices and we publish it you know every second every 100 milliseconds every so you create an implementation and we publish it and the way we commercialize it is we have a set of APIs which exchanges uh product creators data platforms can can pipe into and then consume that index uh for either a display purpose or a tradable product. >> Yeah. And they use that as an input. You're an ingredient to their product. >> We're a benchmark for Exactly. We're a benchmark for uh derivative products. Yeah. Um you know, spot, you know, uh potentially other other things, regulated products, offshore products, really every type of form factor of derivatives, futures, uh perpetuals, prediction markets, >> ETFs, regula, you know, uh regulated swaps, you know, everything really that that it trades requires a benchmark. And so really, you know, we license our index, our indices to these different entities which then ingest the data and then have uh a tradable product, you know, experience or maybe just display it. >> Yeah, you got you got to my next question before I got to ask. I was ask about the business model. So you're API based, usage based, right? Anything else going on in your business how you guys are organized and make money or is it straight up connections, API, build the best IP methodologies, make it as fast as possible, accurate? really there's this standard that's emerged you know you have uh Bloomberg terminal refinitive you know poly market bifinex bybit that have all started adopting our indexes and basically you know other companies want to be part of that right so they want to have a va product and they want to tap into the broader liquidity and the ecosystem of of futures and perpetuals and other things that are coming around BVIV and Biv US so >> um essentially we get inbound we do some outbound to different exchanges different product creators, um, ETF companies, you know, regulated exchanges and, you know, work to, um, basically get them participating in this standard. And really the big business model is licensing the product, licensing the index for tradable products. >> And so futures, you know, as mentioned, all these different form factors, but then also display is another interesting one. So >> yeah, >> you know, uh, >> there's like a zillion use cases. The the beauty is in the eye of beholder, right? if you're NYC or their parent company, Intercontinental Exchange, they're in the data business. Are they a customer? Are they using you guys? >> Hopefully soon. >> We'll get on that. I don't work for NYC or ICE, but I think I mean looking at what their business is doing. Um, and looking at say the Bloomberg terminal, there's a huge appetite for one display for media, um, product integration. So I'd imagine if I was a data company, I'd want to integrate you immediately because then the entrepreneurial or product management type behavior kicks in. Talk about that piece because I think you know immediate lowhanging fruit to me is great. If we have a cube terminal someday, not that would be a do a bloom for terminal like but we probably do it on a site. I'd imagine AI could manufacture a great feed say content bring in multiple things. as I do my job and I'd love to pump in stuff to add value to people. So I probably and look at Perplexity Computer, right? They're doing some pretty cool things. You mentioned Salana, they're super fast. So I'd imagine that the creativity of the product side to your customer base is probably kind of at an all-time high right now formulating where to start. What's your take on that? What's your observation around the the opportunity to productize off of that enablement? >> Yeah, AI is, you know, a huge innovation and I think it's a great, you know, it's an it's the UI in a sense, right? Where you go to the AI and you you ask it a question with the MCP servers and um, you know, the like. And so essentially, you know, our data can be ingested by AI models. We're working, you know, towards that where, you know, you can query the MCP server or the AI frontier model and say, you know, um, you know, what is the BV level on the last, you know, 2 months on average on a Friday or something like that. And so I think an AI, you know, wrapper around index data is is is very interesting and it gives it makes way for a lot of different tradable products. >> It's 24/7, too. The thing about I love about the the market you're in is that [clears throat] there's no bell. It's always on, right? So, you know, we're >> it's pushing the broader market forward like that, right? I think all the the options exchanges, the equities exchanges, >> you should talk to the ICE people, the uh Continental Exchange because they're progressive. They were, you know, they they invested in Coinbase >> initially. They were one of the early investors in Coinbase. They since liquidated. They were Bitcoin. Um they're they're got u companies going public here. There's and that's what I love about the market on crypto just to go on a side is that you know you go back during the nuclear winter dark times you know now pre-regime that's in there now it was it was tough people took a lot of shrapnel now the companies that were survived and thrived through that their market cap could go public here like compared to the best IPOs because they're they were disciplined they have they're making good money and it's just incredible I mean look at Salana I mean they're incredible >> yeah you know Coinbase is worth 45 billion or so. Last I checked. Robin Hood's a9 billion company. >> You know, Robin Hood's bigger than CME. You know, it just shows the innovation to a broker versus an exchange, but it just shows um you know, the innovation. >> Robin Hood's fund is in the building today. They got an I think an ETF up there now. >> Oh, yeah. They have a uh a new like venture fund that's trading, right? >> Yeah. That's pretty cool. And so, again, this speaks to the cultural shift. We are in a cultural shift. explain that because a lot of people over the age of 40 or 50 are look at crypto oh crypto and they think like oh it's NFTTS ICOs scams but not not really I mean anyone under the age and that other generation the younger generation they're like this is the future because they're all digital I mean explain that put context around that because I think that's a super important people don't understand the relevance of Everything is digital now you know um banks used to do you know have uh carts of of transaction tickets and and everything became digitized. I think you know crypto is a step further in that in that journey where you know everything is global now the you know the thing the really interesting about you know tokens specifically uh or onchain applications decentralized applications things like hyperlquid or applications on salana or ethereum is that anybody anywhere in the world if whether you're in you know Singapore Abu Dhabi Brazil France New York LA Miami you're buying the same exact currency the same exact form factor the same exact product. There's no concept of, hey, this >> this instrument trades on NYC and there's an ADR on another exchange or buying two different things and there's a delta between the price. You know, crypto really is a, you know, equalizer of the playing field where anybody anywhere in the world is buying the same exact, >> you know, thing. And so I think that's really powerful. Um, and that that goes, you know, with uh with with tokenized equities, you know, anybody anywhere in the world can buy, you know, a share or a derivative of of Apple or Tesla or SpaceX. And previously, that wasn't really >> even private companies. I love that vision, too. I mean, we had an event here on on the newi, we called it you why not put my stock up. I have if I'm a data bricks stockholder they're on series M or K I forget what letter they're on but you know they may never go public but you have companies going public with two years operations they hit escape velocity because of AI so you're seeing like the capital markets are are shifting but the game is still the same value creation value extraction liquidity just new format there's a couple good examples of this pre IPO that you mentioned um you know Hyperlid which is the biggest perpetual futures exchange you know, that's sort of in the decentralized form factor. Um, you know, has launched a couple of preIPO, uh, stocks and they launch it a couple months before it goes live and then there's some price discovery. Um, you know, the market is is not as big as, you know, NASDAQ or NY or, >> you know, incumbent exchanges, but there's price discovery and it shows, >> you know, um, >> you know, how the market is is feeling about this this security, this name. So I think crypto there's some crypton native innovations that are moving the market forward. >> Yeah. Whole new ball game. Cole, really appreciate what you do and congratulations on the hard work and getting that that data out there. I can see how that value value gets created for your customers and I think there's a lot more headroom out there. So thanks for coming on our fintech exchange program. Appreciate it. >> Thanks for having me. Cheers. >> All right. This is the fintech exchange again talking to the leaders and the innovators building, operating and investing in the new ways to do things. Again, the game is still the same, but it's changing how it gets done. And sometimes it's faster, quicker, sometimes a little bit more technical. It's all the same. If it happens, liquidity is there. We're doing our part here in the cube. I'm John Furry, your host. Thanks for watching.