"I have five Chinese tattoos on my body," Andrei Grachev couldn't help but reveal his joy and excitement when talking about non-US markets.
As a Russian, Andrei Grachev embodies the wildness of a fighting nation. However, his crypto investment does not have the identity entanglement between Russia and Europe and Asia, but firmly chooses the East. In the crypto world, Asia has always been famous for trading, speculation, and hype. Andrei Grachev's story has also become part of this narrative. He started as a trader, engaged in market making, high-frequency trading and investment, and believed that the Asian and Middle Eastern markets would lead the new wave.
If we look back at 2022, DWF Labs and Andrei Grachev are both undeniably controversial. Where does the money come from for tens of millions of dollars of investment every month? Manipulation of the secondary market? Non-traditional market-making methods squeezed out by Wintermute and others? Various controversies have come, but Andrei Grachev never cares. He believes that he is just challenging tradition and has neither violated the law nor done 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, DWF Labs is a large high-frequency trading company, market maker, VC, OTC, incubator, ecosystem, fundraiser, event brand, TVL provider, DeFi Taker, consultant, listing agent, HR, PR/marketing company, KOL, RFQ quotation request platform, etc.
Grachev said that in the past 16 months, DWF Labs has provided these services to about 350 Web3 projects in the top 1,000 of CoinMarketCap’s market capitalization. When the founder of Wintermute disdained to be associated with it, the fighting nation never admitted defeat, and Grachev publicly responded, "We are controversial and proud of it":
It is a shame for me to be in the same boat with the “orthodox” market makers who take loans, do nothing, sell or profit from call options. They are just jealous. We dare to take risks, be unconventional, change the crypto world order, and raise the bar for market makers.
Since Crypto is breaking through the narrative order of traditional nation-states, why can’t DWF Labs break the order of traditional crypto market makers? Since Crypto is constantly being reconstructed and has not yet given a new set of constructions, why can’t DWF Labs reconstruct the past and construct its own narrative? Moreover, the author has heard more than once about the need for “one-stop service” from Web3 projects.
In this interview, Grachev revealed the basic structure of DWF Labs, its various businesses, sources of funds, risk management methods, investment logic and style, bull market planning, the latest progress of the acquisition of FTX, and his views on the global crypto market. Regardless of its operating model and its controversy, objectively speaking, DWF Labs has supported 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 traditional markets in 2014, starting his trading career. In 2016, Grachev seemed to have purchased his first ETH, which made him rich in the 2017 bull market. His experience in founding a crypto trading company and serving as Huobi Russia also allowed him to grow rapidly.
Foresight News: How did you transition from the logistics industry to the crypto space? Are there any key turning points or interesting experiences you would like to share? How have these experiences influenced your current career?
Andrei Grachev: I entered the logistics industry at the age of 18 and worked in logistics for 8 years. I started trading on traditional markets around 2014. Later, I switched 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 industries 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 have been working remotely with large distributed teams since 2010. Both industries helped me develop a big picture perspective.
In 2016, a friend in London told me about Ethereum mining, which was my chance to enter the crypto world. The big bull run in 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 crypto market. This was a good time for us to gain experience and learn how to operate. I also joined a community organization RACIB, but it was not a job. It attracted some of my interest, but I also understood that this organization looks like a self-regulatory agency, but it is not actually the case, and I will not work in such an organization again. At that time, I also managed funds for friends and family, provided consulting, 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 finally we sold the Huobi Russia business back to Huobi and made a lot of money. Before starting DWF Labs, we also created VRM.trade, doing proprietary high-frequency trading on second-tier CEX, and learned a lot of product and technical details.
Foresight News: This is an interesting experience. So why did you start DWF Labs? How did your team come together? Where are the members located and how do you communicate and coordinate your work?
Andrei Grachev: DWF Labs was founded in 2022, and before that there was only Digital Wave Finance, which was founded in 2018. At the beginning, I helped Digital Wave Finance work with exchanges to negotiate better fees and conditions, etc. During this period, I met my current partners Zac, Eugene and Hank, who helped me a lot in the Asian market. In the process of discussing cooperation with Digital Wave Finance, I proposed to my Asian friends to start a market maker business, which was the starting point for us to establish DWF Labs later. We are mainly based in Asia and Switzerland, so remote has always been our normal work. Telegram, Zoom and Google Meeting are mainly used for communication.
Foresight News: What are the departmental settings 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 divisions and offer a variety of products, such as OTC trading. Here, we focus on providing seamless trading and settlement of tokens for individuals or entities that meet our KYB, KYC and AML requirements. Generally speaking, handling token settlement is simple, we only need to provide the option of whether to sell the token, which simplifies the decision-making process. Currently, we have several people working on this and are also enhancing settlement capabilities to allow more users to obtain 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 the DWF ecosystem to promote exchanges between different projects and entrepreneurs, enabling them to explore and participate in new investment projects and increase trading opportunities.
But these three directions are different. Market makers operate independently as technical trading departments, they have no connection with the sales team, even in different countries, their focus is still on technical trading strategies using dedicated tokens. We are also involved in incubation and cultivation projects. Currently, there are about 60 companies in the DWF Ventures portfolio that have received our support at the angel and seed round stages. These projects have not yet been listed on the exchange, but we firmly believe that most of them will be successful on the exchange once the time is right. DWF Ventures works closely with the OTC department, their functions are intertwined, and effective communication is required to ensure the success of the transaction.
2. Does money all come from the wind?
Perhaps the bull market in 2017 and 2022 made Grachev rich, but did all the money come from the wind? Money that comes from the wind can also be blown away by the wind. So let's take a look at Grachev's money-making and risk-taking thinking.
Foresight News: Among your frequent investments for quite some time, what is astonishing is the large amount of investment. So many people, including me, are curious about where DWF Labs’ funding comes from and whether it has ever received financing?
Andrei Grachev: We have never participated in fundraising and we have no plans to do so. DWF has always been financially sound, and we made a lot of money, especially during the bull market phase from 2020 to 2022. We used these funds while continuing to make profits. Although I cannot reveal specific figures, I can assure you that we have the financial capacity to easily invest tens of millions of dollars in startups every month. Our main goal is not to invest 10 million and make 200,000, we prefer to invest 10 million, be patient, and then make 50 million.
Foresight News: How do you manage tokens and control risks?
Andrei Grachev: We distribute tokens through CEXs and follow strict risk protocols. We are very strict about risk management and it makes sense. Making money is one thing, but protecting those gains is equally important. Exchanges get hacked, protocols get hacked, market makers get hacked, and we don’t want to be one of them. So we need to adopt risk-mitigating solutions.
According to our risk strategy, we have a portion of our funds stored in CEXs and are also using custodial services such as Fireblocks, which we evaluate as providing a robust solution. We also have on-chain multi-signature wallets and will use them when necessary. As for BTC, most of it is 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 maverick path, and as long as it is compliant, let the doubts go to hell. "DWF Labs is a one-stop solution for all needs," this is how Andrei Grachev positions DWF Labs. In the past 16 months, they have provided these services to about 350 Web3 projects in the top 1,000 of CoinMarketCap's market value. He wants to compete with the "iPhone" rather than the "Nokia." As Grachev said, DWF Labs provides support for portfolio companies in the Korean market, which is tricky for many people, but they can do it in a compliant way. "Be creative, 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 with higher market share and memecoin.
Foresight News: This year, you have been in the whirlpool of public opinion because of your compound operation mode of "investment + market making". Since March, traditional crypto market makers such as Wintermute have been extremely disdainful of your investment methods, believing that you are just "trading" and not "investing". So, what kind of relationship do you maintain with these traditional market makers now? Do you have any business connection?
Andrei Grachev: I don't think there are many ways to cooperate with them. Maybe the only way I can suggest is to hire some of their talents for DWF. But in the business world, it's like a media person like you. Let's say you are a pioneer in the media world, and another media starts complaining about your interview style, saying that your interview style is not traditional enough, then you will care a lot? I think not. You will probably be happy because you have innovation and you can attract more attention.
For us, the focus is on legality. As long as we are operating within the correct and legal scope, if a method is proven to be effective, we will adopt it without worrying about what others say or being afraid of criticism or complaints from competitors.
Foresight News: The secondary market also believes that you are manipulating the market. Data companies and media are reporting on your on-chain fund flows. Your fund flows have become a direction indicator for institutional and retail investors to make market judgments. What do you think about this?
Andrei Grachev: I come across this kind of discussion quite often. In terms of volume, we process billions of dollars of trades every day. However, our volume is relatively small compared to overall volume, and importantly, we do not hedge our trades. While the media and people may speculate and comment, we do have an impact. When people observe our actions, they may buy or sell, but these are their own decisions and we cannot control them. We play the long game, not the short game.
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 trading based on market manipulation; our approach remains unique.
Manipulating the market does not appeal to us. As the industry moves towards a more regulated and legal direction, our focus is on the long-term game rather than short-term gains. Ultimately, whether their trading choices follow us or go against us is up to the individual, but our purpose is to make strategic long-term games in an ever-changing market environment.
Foresight News: I noticed that you responded to Coin98 Analytics on Twitter, and you said that the 174 projects they sorted out account 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 primarily centered around long-term narratives, which account 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 allocated to certain coins that may have a high market share or people like them. In addition, we also keep a small portion of investments for short-term narratives, such as certain memecoins. The charm of memecoins is not that they have any breakthrough technology, but the culture they embody. They represent a cultural phenomenon, and it is good to invest in this trend. Once the time is right, these memecoins may rise sharply, 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 projects that are in "trouble", which means that these projects are relatively mature. So do you not trust the initial team? Because the seed round is basically just ideas, not even products.
Andrei Grachev: Of course, we believe in startups. When it comes to investing, there is a clear difference between startups and secondary markets. Secondary markets provide data insights, traction, and interest from users or traders, allowing for risk assessment and potential hedging. However, with startups, it is completely different. It is not about trust, but more about risk management, taking into account that the market narrative is long-term, such as DeFi or GameFi, etc. If a startup has a good team, a good product, and it fits the long-term narrative of the market, then it is a good investment. Although there is no guarantee that it will succeed, you can play the game, weigh the possibilities, and then the question is how much money to allocate from the portfolio. If 90% of your portfolio is startups, then the risk is huge; if it is 5-10%, then it is completely fine. You can make some investments, and even if they don’t succeed, it will not jeopardize the entire portfolio. But in case you win, there will be huge potential gains.
This is the approach we take. We always trust startups, otherwise we will not work with them. What we do is 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 very important to build confidence in the industry in a bear market.
Foresight News: How do you make decisions and operate your over-the-counter transactions and secondary market purchases of coins? In addition to buying coins, what kind of support will you provide to the investment projects?
Andrei Grachev: We focus not only on providing financial support, which is secondary, and anyone with cash can invest. In the cryptocurrency and venture capital world, money is usually not a problem; good projects often find enough funding. What makes us different is the value-added services we provide.
We have our own incubation department that can assist in developing market strategies, conducting market research, working with KOLs, media entities and local businesses. In addition, we also provide solutions through our HR department to help portfolio companies recruit talents for their teams.
In addition, we provide technical assistance through an internal team of about 10 developers. Although this team is currently managed by us, we plan to separate them 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 crypto market experienced the collapse of Three Arrows Capital, Celsius, Voyager, FTX, etc., which caused immeasurable damage to the crypto industry. The crypto winter is severe, the financial market is cold, and the global economy is conservative, but DWF Labs is going against the current. For example, it supports the Binance Industry Recovery Fund Plan, the TON Foundation's "Rescue Fund", and even the overall investment pace has significantly accelerated. What kind of considerations and decisions are behind this?
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, which is the golden rule of investment. When the market is fearful, taking the initiative often means reducing competitors.
The Binance industry recovery plan after the FTX crash was far-reaching, and our partnership with Binance has made a positive contribution to the industry. For us, it's not just about making money, but about building confidence. In times of market turmoil, it's very important to have a person or a group of people saying "hey, keep building, we'll support you." I would say that we have made multiple investments that have provided important support to projects and have brought us good returns.
About TON Foundation: It’s no secret that we are heavily invested in TON. It’s a long-term commitment with low capitalization, but we believe in its potential and have invested tens of millions of dollars. When TON launched its initiatives, it was natural for us to support them. Whether it’s supporting market makers or facilitating OTC trading, 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 its own 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 this "high frequency" large-scale investment last? Now is a bear market, and you are investing in projects that are currently in "trouble" through over-the-counter transactions. In the bull market, the project's capital flow will be more abundant, and the current investment strategy may not work. What plans will you make for the investment and market strategy in the next round of bull market?
Andrei Grachev: First of all, we don’t only invest in projects that are in trouble. We also made a large investment in Fetch.ai, which is not a project in trouble, but is performing very well. It is a very profitable investment and we will continue to support it.
Our efforts are not only about injecting capital into businesses, but also about building an ecosystem. We are now selling not only our capital but also our full support, which has proven to help close more deals.
Last July, on the occasion of DWF Labs’ 12-month run, I tweeted: “During this period, our portfolio reached 250 projects.” Since then, our portfolio has expanded to around 470 projects. This means that we were able to close deals easily in the first 12 months when the market was in trouble, and also in the subsequent four months of positive market environment. This shows our adaptability in various market conditions and our ability to play when market sentiment is more optimistic. It can be said that we are working harder and achieving more now than we did six months ago.
Foresight News: You said before that you were considering acquiring FTX assets. Recently, there has been a lot of calls to acquire FTX and restart FTX2.0. The FTT token has also risen sharply. Have you communicated with FTX? Are you promoting this plan?
Andrei Grachev: Our lawyers are in contact with the FTX liquidator regarding the assets, and everything is going well. Regarding FTX 2.0, a local FTX exchange approached us and sought our participation as a market maker. I can't say which one it is, but I think we will participate. Because a large part of our funds on FTX is frozen, we need to do some transactions to get them back. However, it is not clear to us how this process will develop. I have no opinion on FTX 2.0.
Foresight News: I wrote a brief history of LocalBitcoins, which was once the world's largest Bitcoin OTC platform. It operated for ten years and announced that it would cease operations this year. There are several factors that led to its peak, such as the bull market, the failure to popularize payment infrastructure in third world countries, and the political, economic and regulatory environment of different countries. The final failure was because LocalBitcoins catered to regulation and implemented KYC, etc. The original P2P anonymity and privacy attributes disappeared. Under the same conditions, OTC platforms such as Binance P2P seized the market in many regions, and Binance P2P did better in functional services and was more popular with users, so LocalBitcoins failed. So, I want to know the OTC operation mechanism of DWF Labs, which regions provide this service to users, and how you do it in terms of supervision? Also, can you introduce the institutional-level OTC/RFQ platform DWF Liquid Markets that you are about to launch?
Andrei Grachev: I haven’t thought about too many details yet, because we will officially announce it when the time is right. However, I will say 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 earlier that DWF Labs has obtained a license from the Dubai Multi Commodities Centre (DMCC) to become its ecosystem financial partner. What kind of business will it conduct in Dubai in the future?
Andrei Grachev: We recently applied for multiple licenses to expand our business into the Middle East. To ensure that our business is fully licensed, we are currently being audited by one of the Big Four auditing firms.
Just yesterday, DWF Labs also held a hackathon in Dubai DMCC with DMCC, Bybit and other partners. We provide funding and consulting services to startups based in DMCC, UAE. This is what we do here. These efforts have had positive feedback. Although they are not in the news, they are indeed effective.
6. All in the East, embrace the mysterious power
"I have five Chinese tattoos on my body," Andrei Grachev said with great pride and excitement. He has some oriental aura, and perhaps his trading is also in line with the oriental encryption characteristics, 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 in the British Virgin Islands and Dubai. Most of the team members are Asian. It seems that you have a close relationship with the Chinese market very early on. So how do you view the Asian market? The domestic US market is still very large, but you seem to focus more on non-US markets?
Andrei Grachev: The Asian market is the leading cryptocurrency market in the world. All 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.
For the industry as a whole, I would say that the development of the entire industry, including market makers and regular trading, is affected by the firewall between the United States and the rest of the world. We trade on Coinbase International Exchange, which is an offshore perpetual contract trading platform, but we don’t trade on Coinbase Spot Markets because we may be considered a market maker by the SEC. From a risk and reward perspective, it 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 momentum and success is expected to come from the 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 industry leader, but I don't think the crypto landscape will change anytime soon because of this. In fact, the US regulators have won a big victory, they have access to all Binance's data and understand all user behavior. I think this may drive users to DeFi as users seek more decentralized and less regulated alternatives. Exchanges not related to 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.
