North Vancouver's EonLabs: From 0 to $20M in digital assets
Chief business officer Victor Hogrefe on how algorithmic trading and blockchain made his business possible.
EonLabs is a fintech company founded in 2021. They focus on the intersection of artificial intelligence and digital finance, specifically in the blockchain space. Their quantitative trading software, algorithm, and strategies help fund managers make money for their investors. Over the past year, the company says it has achieved more than 500% growth in investor returns and is managing upwards of $20 million in digital assets.
When Victor Hogrefe, CBO of EonLabs was asked why his company exists, he cheekily responded, “The short answer is: to make money.” Then he addressed the real spirit of the question I had asked, which was, essentially, “What tech and trends have enabled his company to do what it does?”
He said there are a few things to focus on, including the rise of algorithmic trading, the public nature of blockchains, and volatility crypto.
Why algorithmic trading? Firstly, explained Hogrefe, machines perform better than people at trading and the trends demonstrate this phenomenon. “The general volume of trades in the world is moving towards machine-executed trades because it just turns out machines are way, way, way better at this kind of stuff and faster, and they never sleep and they don't make any emotional choices,” he said.
Although he says this shift is undeniable, Hogrefe himself was not always convinced. “I've actually been incredibly skeptical of algorithmic trading, because there's a lot of like trading bots out there that you can get — free where you can just download it. It's open source, and GETCO is a good example. And I've written kind of long articles about reviewing GETCO and reviewing some of these trading bots. In general, they're terrible. So actually, going into this project, I was very skeptical of a trading bot because my thinking was that there might not be sufficient information just in the market to be able to predict the future in a consistent, reliable way, and what this project has really shown us is that there does seem to be.”
While traditional trading systems replicate human trader'’ behaviors, EonLabs’ approach is to use AI to automate trading without sharing any specific strategies.
Algorithmic trading works, but decision making, whether by people or machines requires good data. Where does it come from? This is where EonLabs’ focus on cryptocurrencies finds its genesis. Over the past three, Hogrefe and his team have developed software that plugs into the API of crypto exchanges (e.g. Binance). They capture information from its markets, analyze them, train models based on AI and machine learning, and then use that information to make relatively short-term predictions about price changes. How short? “It's between five-minute charts and 30-minute charts and sometimes one-hour charts,” explained Hogrefe. “And then if it's if it's confident in those predictions… then they execute the trade.”
The instruments that EonLabs is trading are cryptocurrency futures contracts. While focusing on this type of instrument gives them more flexibility in terms of market activities they can execute (like shorting the market), there are even greater benefits to focusing on crypto, however, Hogrefe noted.
“The reason why we're in cryptocurrency futures is it's one of the easiest markets to do this kind of thing with because the markets are on 24/7,” Hogrefe shared. It's always trading and to get the information is very easy. It's not like a lot of these other exchanges like the New York Stock Exchange, where in order to even get the data, you have to sign up for all kinds of stuff.”
There are even more advantages, Hogrefe said, including the fact that in crypto, there is generally more volatility than the regular markets, and importantly, “more irrationality.” EonLabs’ clients — to be sure, the fund managers using its software — are competing against human traders, “which is a benefit to us,” noted Hogrefe, “because we'd like to think of the system as just kind of arbitraging rational quality from the markets.”
In other words, Hogrefe is betting EonLabs’ machines trade better than most of the people who are in the market. So far, so good.
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