In podcast cp0x #22, Evgeny Gaevoy, founder of Wintermute, explains market‑making mechanics, token transactions and the Hyperliquid crisis.

Overview of discussion

The episode discusses how market‑making firms balance inventories, use derivatives for risk management, and manage relationships with exchanges and counterparties.

How market makers generate profit

Gaevoy details revenue streams including bid‑ask spread capture, strategic hedging, and opportunistic positions taken during heightened volatility windows.

Role of options and trade structuring

He explains that options are used both to structure asymmetric payoff profiles and to transfer risk between balanced trading desks efficiently.

Token trades and execution tactics

He discusses token trades, including structuring block trades, managing slippage, and employing derivatives to hedge protocol token exposures.

Hyperliquid episode analysis

The discussion reviews events around Hyperliquid, examines liquidity shocks and counterparty exposures, and traces how stress unfolded across connected venues.

Scapegoating and industry practices

He argues market makers are often made scapegoats when losses occur, despite performing mandated liquidity provision under extreme conditions.

Risk controls and transparency

Gaevoy emphasizes the importance of transparent reporting, robust risk limits, and clearer contractual terms to reduce misunderstandings during market stress.

Lessons include tightening counterparty standards, improving margin mechanics, and preparing for contagion risks stemming from shared infrastructure.

The episode delivers a practitioner perspective on liquidity provision mechanics and operational challenges that shape institutional behavior in crypto markets today.