From BITMAIN to Asia’s largest crypto financial service platform Matrixport, Wu Jihan and John Ge seem to have been committed to the same principle: always start something new.
They prefer the “blue ocean”, and conquering the market in a straightforward way with original and high-profile products.
In 2013, BITMAIN as one of the first mining companies in the world claimed market share in such a swift way that it once has occupied about 30% of the global computing power. Its founder Wu Jihan was regarded as the only person who might be able to eventually control Bitcoin.
BITMAIN spent just over 5 years to become a crypto unicorn worth tens of billions of dollars.
At the end of 2018, Wu Jihan left BITMAIN. He then founded Matrixport with John Ge, focusing on the Asian crypto assets management market, which was still in a nascent stage then. “Dual currency” as their signature original crypto financial product quickly attracted interest from the market.
Two years later, Matrixport also became a unicorn. Today, Matrixport has become one of the most important leaders of the crypto assets management market with an AUM and assets under custody both over $3 billion.
In 2018, BITMAIN was experiencing a transition and preparing for an IPO in the US. Disputes arose among the founders regarding what route the company should take and hit the headlines. However, John and Jihan quickly went out of the conflict and left BITMAIN. They started another company with around 50 former BITMAIN employees.
In February 2019, Matrixport was launched. The company, co-founded by Jihan and John, is a crypto financial services platform that provides one-stop services such as OTC trading, lending, and custody of digital assets.
What’s different this time is that Jihan, who was the CEO of BITMAIN chose to stay behind the curtain, and John took on the role of CEO at Matrixport.
The transition from Bitcoin mining to crypto assets management seems like a big leap, but people who have been familiar with John and Jihan wouldn’t be surprised.
Before founding BITMAIN, John and Jihan met each other at a private equity fund, where they do investment analysis. That’s why a lot of people in the industry consider founding Matrixport to mark a return of them to the industry.
However, to John, this is a new start.
Leaving BITMAIN was not a carefully considered decision. Matrixport was the OTC trading and assets custody department of BITMAIN. During an interview with ChainCatcher, John said that they were not clear about the future when they left BITMAIN with a group of developers.
2018 was the year of a regulatory crackdown. In 2019, the crypto market was still buzzing with bearish sentiment. The market confidence dropped to the bottom.
However, John and other core team members at Matrixport still held positive views on the crypto market and Bitcoin trend and believed that adopters would only increase, eventually making them mainstream financial investment products.
This time, John would like to work on something closer to crypto users, as BITMAIN mining was too far away from them. Providing entry-level financial services for crypto users became their focus.
At that time, crypto exchange was the prevalent form of crypto financial services. Since 2010, when the first crypto exchanges such as Bitcoin Market and Mt. Gox were born, crypto exchanges had been in fierce competition. Even 10 years later in 2019, there were still no obvious winner.
In May 2019, FTX was founded. Binance, now the largest crypto exchange, was just two years old and striving to be a future market leader.
That was a time when crypto exchange had become a “red ocean”. John and his team members believed further breakthroughs would be difficult. “By nature, we don’t like repeating things. We like to start something new. ”
Two weeks later, the team decided that the crypto industry needed an assets manager. As a crypto OG that had gone through cycles, they knew the probability of a successful crypto investment was “1 out of 10, or even 0 out of 10.” In this case, how to manage assets and avoid the tragedy of returning to poverty would become an urgent need for most investors.
Matrixport initially positioned itself as a crypto financial services platform. However, in comparison with conventional exchanges, Matrixport has a very clear focus: helping users prevent the risk of falling back to poverty.
As 90% of exchange users are individuals, Matrixport first targeted rational investors with considerable assets, striving to help these high net-worth individuals obtain stable returns amid market volatility.
From a competition perspective, Asian crypto assets management was still a “blue ocean” then.
Entering a “blue ocean” means starting from zero. Although widely known in the crypto space from the outset thanks to BITMAIN, Matrixport would face huge challenges as it started anew.
How to re-introduce themselves to the users was a major challenge for John. As crypto assets management is highly regulated, adapting to regulatory trends is by no means easy.
In October 2019, Matrixport launched the “Dual currency” product, which was one of its kind in the crypto world. The product adopted the design of a traditional structured financial product, marking the first application of traditional finance to the blockchain industry.
At that time, most CeFi assets management companies offer single currency products, which were similar to savings products offered by traditional banks. Users earn returns by putting their cryptos into savings account, either flexible ones or fixed ones.
A startup launching an original product is like gambling.
But John didn’t have better choices. In such a fast-paced market, he must claim market shares as quickly as he could. “If our first product fails to persuade or retain users, we might lose it all.”
Fortunately, they won the gamble. Matrixport quickly took foot in the market with “Dual currency”.
During the 2020 DeFi Summer, the crypto market turned bullish. Crypto users went further to seek higher returns.
The number of DeFi “liquidity mining” projects surged, with 100x, 1000x or even 10000x ROI, attracting a huge capital flow.
As the market sentiment went wild, more and more institution and individual investors demanded riskier portfolios and higher returns, even CeFi prioritized principal security. In order to retain users, crypto financial products had to improve ROI as well.
Matrixport’s “Dual currency” had a unique advantage. Compared with single currency products, “Dual currency” as a short-term investment product was able to deliver more returns for users.
As “Dual currency” well captured the market demand, many financial services providers, digital assets wallets and exchanges started to copy the model. For example, Binance launched its “Dual Investment” product, Hoo and other CeFi institutions followed suit.
John recalled that “Dual currency” educated the market to some extent. To many mature investors with considerable assets, they thought they had only two options: trading or holding. There is actually a third option: invest and earn interest on asset managers such as Matrixport.
After acquiring the first users with “Dual currency”, Matrixport continued to offer Flexible Savings, Fixed Income, structured products, lending, and strategy funding according to users’ different risk preferences.
John believes that a crypto assets manager will only be able to retain valuable users when it stands the test of time, rather than relying on a single product.
That’s exactly what Matrixport did when it led users through a market cycle from bust to boom. These users have become loyal customers.
“Many users found that Matrixport was capable of protecting their assets even under extremely volatile market conditions, while growing their assets significantly along Bitcoin’s growth cycle. ”
According to John, the AUM of Matrixport once exceeded $5 billion, with the average asset size of a single user over $10,000. At that time, the team also grew from less than 100 people to 200, doubling the size of the team.
Having gone through a complete market cycle, what’s more attractive than its superstar co-founders is Matrixport’s growth potential.
On August 2, 2021, two years after it was founded, Matrixport completed $100 million financing with a market cap of $1 billion and became a unicorn.
On the list of investors are traditional renowned venture capital funds such as K3 Ventures, C Capital, DST Global, IDG Capital, and Qiming Venture Partners, as well as crypto-native funds such as Dragonfly, Foresight Ventures, Polychain, and A&T Capital.
2022 caught the crypto industry unexpectedly. After a relentless bull market with DeFi Summer and NFT Summer, 2022 was the year of large-scale failures, especially in CeFi assets management.
In early 2022, the crypto market cap reached around $3 trillion, but two-thirds of it was gone at the end of the year, also gone were a long list of top players: Luna, 3AC, Celsius, Voyager Digital, FTX, BlockFi…
The collapse of FTX in particular, created a ripple effect that impacted a group of crypto financial institutions. While outsiders showed concerns for CeFi assets managers like Matrixport, John stayed calm.
One reason is that he saw it as a pattern in history. In traditional finance or crypto, there are always institutions that pursue high profits relentlessly and despise risks.
Another reason is that Matrixport has been prioritizing risk control and compliance with a long-term vision so that industrial systematic risks would only impact it slightly.
Since the first day, Matrixport has developed and built a crypto custodian Cactus Custody. The platform was comprised of a corporate-level compliance crypto financial system and custody platform designed based on internal demand and has been constantly improved to meet customer needs. Matrixport is also one of the earliest platforms to provide institution-grade crypto custody services in Asia.
With its bank vault-grade security, cold-hot storage separation, and other safety mechanisms, Cactus Custody has a track record of zero accidents. As of today, Matrixport and Cactus Custody have safeguarded over $10 billion of assets.
Each financial crisis came along with a trust crisis. Users became cautious about the crypto assets management industry after a string of CeFi collapses. Now what they worry about is not the profit, but the safety of their principal.
The crypto industry calls for “Not Your Keys Not Your Coins”, and Matrixport also experienced surging requests for withdrawal.
For the users, no explanation can be more assured than a smooth withdrawal process. Therefore, Matrixport dedicated itself to creating a smooth and safe withdrawal experience to address user concerns.
John believes that recovering from an industry-wide trust crisis takes time, and what Matrixport can do is continue to optimize compliance and risk control.
Matrixport launched several updates on its risk control services, including more comprehensive disclosure, keeping a good track record, etc.
In terms of risk control decision-making, compared to many assets management companies where decision-making is a one-man show, Matrixport has established a comprehensive mechanism that maintains an inter-departmental balance of power and even draws on external committees when it comes to making major decisions, according to John.
At the technical level, a risk control system is also built and is in stable operation, making sure that Matrixport can react at the earliest time to extremely unexpected accidents.
Most importantly, Matrixport has been striving to minimize counter-party risks, leaving the counter-party less exposure to risks at the capital level.
Matrixport decided not to participate in most of the on-chain contracts and optimized the rights and daily monitoring of the very few contracts in use.
John is very confident about Matrixport’s risk control system, saying that it’s “one of the most mature and comprehensive risk control systems in the industry. ”
The crypto failures also drew global attention to countries and regions where crypto financial services were active, thus accelerating crypto regulation. Countries and regions such as the USA, Hong Kong, South Korea, Japan, Singapore, and the European Union led the efforts of setting regulatory standards.
For CeFi, this crisis was also an opportunity. In October 2022, the Hong Kong Financial Secretary published the Policy Statement on the Development of Virtual Assets in Hong Kong, actively embracing crypto and other virtual assets. This indicated that Hong Kong would provide a conducive environment for Asia-focused asset managers to thrive.
In June 2024, the transition period of the virtual assets exchange licensing system of Hong Kong ended. Hong Kong SFC disclosed the list of 11 applicant platforms (now applicant virtual assets exchanges) that were “deemed as licensed”, and Matrixport HK (Matrixport subsidiary) was one of them.
Hong Kong SFC implements strict approval procedures, which touch upon various safety and compliance issues, including technical and safety measures, compliance in anti-money laundering and anti-terrorism financing, trading mechanisms, risk management, and investor protection measures.
Matrixport’s efforts in safety and compliance have made itself on the list. Since the beginning, Matrixport has been actively seeking to be licensed in various regions. So far, Matrixport has obtained the Hong Kong Trust or Company Service Provider (TCSP) license, the money lender’s license, the US Money Services Business (MSB) license, the UK FCA Appointed Representative (AR) license, and the membership of Switzerland FINMA SRO-VFQ.
The Next 5 Years: Build a Super Account Connecting the Crypto with Traditional Finance
In 2024 around its fifth anniversary, Matrixport entered the Hurun Global Unicorn Index 2024 with a market cap of $1.5 billion.
Having gone through two boom-bust cycles, Matrixport has retained a large base of loyal users and created an enormous product matrix.
Matrixport provides a comprehensive suite of offerings tailored across different risk appetites and yields expectations for institutions and individuals These services include: digital assets trading, lending, custody, payment, investment, etc.
The scope of Matrixport’s business has also been expanding. From the beginning, Matrixport has developed independently an institution-grade third-party custody solution Cactus Custody. It also owns a crypto exchange BIT, an on-chain real-world assets platform Matrixdock, and an investment arm Matrixport Ventures.
This in turn demands the capability to identify real needs and manage human resource efficiency. Matrixport used to fail to meet market demand, just as most startups would have the same experience when the product was terminated because it didn’t meet market expectations.
Nowadays, John has very clear rules on what to do and what not to.
Firstly, aligning with the mainstream narrative is the basic logic. On top of that, try to reduce the efforts as long as the majority of users don’t demand it. “Being concise and simple makes risk control easier. ”
Through the development of the first 5 years, Matrixport has become one of the largest crypto assets managers in Asia, with an AUM and assets under custody both around $3 billion.
What to expect for the next 5 years?
According to John, Matrixport will continue to protect users through cycles and volatility, and help them earn along as the industry grows.
“The market for crypto assets management will grow.” Earlier this year, Bitcoin once surged above $70,000, surpassing silver in market cap after Bitcoin spot ETF was approved.
John said this means that Bitcoin and even Ethereum will not see such large and rapid growth in the future.
“It is easy to grow from $1,000 to $10,000, but it would be much more difficult to grow from $100,000 to $1,000,000, because then Bitcoin would overtake gold in market cap. ”
According to John, users would shift their attitude from speculation to assets management as opportunities for excessive assets growth become rarer. Users who have experienced gains and losses would begin to look for more professional assets management platforms with the objective to protect their assets, reduce risk, and earn more rationally.
On the other hand, Matrixport needs to embrace traditional finance to serve a larger user base.
After the crisis in early 2023, the crypto industry started to embrace rationality and seek integration with traditional finance.
Efforts to bridge traditional finance and crypto finance such as RWA have attracted large institutions in traditional finance, including Goldman Sachs, Hamilton Lane, and Siemens. CeFi platforms such as Binance and Matrixport, and DeFi platforms such as MakerDAO and Aave also actively participated in the game.
US Treasury Bill tokenization is the main pathway taken by RWA. Matrixdock, the assets management platform of Matrixport, has launched Short-term Treasury Bill Token (hereafter referred to as STBT) to introduce the risk-free rate of traditional finance for crypto users. Besides reducing credit risks, STBT also creates stable interest for the holders.
Following RWA, it is expected that the pace of integration between the ever-growing crypto finance and traditional finance will accelerate.
So far, Matrixport has built a one-stop crypto assets management platform offering services from deposit, trading, custody, and investment to withdrawal. It will become an important gateway for most users of inclusive crypto finance and even users of traditional finance.
In the next 5 years, Matrixport will continue to push beyond the boundaries, and become a super account connecting traditional finance and crypto finance.
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