Understanding Jump Trading's Investment Logic at a Glance: An Infrastructure Builder Covering Multiple Tracks such as DEX, Stablecoins, and Public Chains

Author: BlockBeats

No permission required, decentralized—this is the hallmark of the crypto world, making it seem like a deep, dark forest: opportunities abound, but risks lurk everywhere. Projects backed by well-known institutions become a relatively simple rule for investors when choosing projects.

In the crypto world, the actions of some well-known investment institutions are closely watched. In 2020, Multicoin Capital became a hot topic in the market, with investors combing through Multicoin's portfolio to capture the next undervalued asset. This summer, Coinbase's investment projects have become a new hot sector, with projects that Coinbase invests in but does not trade on Coinbase signaling a potential rise.

When discussing the phenomenal rise in the market this year, the Solana ecosystem is an unavoidable topic. Alameda Research, which heavily invested in the SOL ecosystem, has reaped significant rewards, while another important investment institution within the Solana ecosystem, Jump Trading, is also worth noting. Jump Trading has supported leading DEX Serum, yield aggregator Tulip, oracle Pyth, and cross-chain communication protocol Wormhole through investments or development participation, and Jump Trading has long been involved in the Solana ecosystem.

It is not difficult to see that Jump Trading is another investment institution that has reaped considerable rewards in the Solana ecosystem apart from Alameda. This is not the first time that Jump Trading, a traditional high-frequency trading giant, has ventured into the crypto space. In mid-September, Jump Trading announced the launch of a new $350 million fund. This fund is the seventh launched by Jump Capital and will be used for investments in crypto-related funds, equity investments, and token investments in areas such as DeFi, financial applications, blockchain infrastructure, and Web 3.0.

The launch of Jump Capital also signifies that this veteran capital is finally making its move into the crypto world. Although Jump Trading has long tried to maintain a low-profile public image, the company remains well-known in the market. We found Jump Trading's holdings on Nansen, and looking back at Jump's investment projects, how can we understand the investment logic of this veteran capital? (Their holdings are diverse, and BlockBeats only lists part of their holdings.)

In Jump Trading's holdings, most are relatively mature projects. Among the 10 projects selected in this article, only Sperax ranks outside the top 100 by market capitalization, while the rest are mostly within the top 200. Observing their holdings may help us better understand their investment style and capture the next market hot sector.

Looking at Jump Trading's list, BlockBeats found that among the 10 holdings we listed, Jump Trading's portfolio covers multiple areas such as DEX, DeFi, and Web 3.0. Jump Trading focuses on protocols that are expected to become the infrastructure of the ecosystem. For example, the importance of multiple DEXs goes without saying, while projects like oracles, savings protocols, synthetic assets, and stablecoins enrich the ecosystem and are essential for building a highly active and liquid DeFi world.

Perhaps we can understand that Jump Trading, which started with trading, has developed to this day, and their understanding of capital efficiency and trading is exceptional, which gives them an inherent advantage in capturing the next growth point in these areas. Innovations such as Compound's enhancement of liquidity and Sperax's creation of the first interest-bearing stablecoin can improve capital efficiency in the on-chain world. Such innovations that add value to the ecosystem should also have long-term value and be more attractive to investors.

Investing in Web 3.0 is even more open-ended. Everyone can see the trend of Web 3.0, but no one knows which path will ultimately succeed. Jump Trading makes significant bets in areas they are more familiar with—optimizing trading and capital efficiency—while remaining open to future trends. This is a strategy that combines aggressive investment methods with conservative risk-avoidance strategies.

DEX

Since its establishment in 1999, Jump Trading has been investing its own capital. This top global traditional investment giant has evolved from CME and is one of the largest traders by volume in traditional asset classes. The company has over 1,000 employees in New York, Chicago, Amsterdam, London, Shanghai, and Singapore, active in futures, options, cryptocurrencies, and global stock markets. As a company that was born and grew from trading, Jump Trading's emphasis on DEX is a natural fit.

In the crypto world, trading carries the most data on-chain. The structure of the crypto market is filled with nuances and different characteristics at every level of the stack. Complex trading systems often amplify these nuances, and scaling further magnifies them. Kanav Kariya, head of Jump Crypto, pointed out in an article he wrote, "Our early work focused on building a robust platform that allows users to participate in these unique markets at scale and elegantly. Coupled with serious trading intelligence, as the crypto space continues to evolve, this market will enable us to be leading market participants." In their holdings, we found several DEX project tokens.

Serum

As of today, Jump Trading holds approximately 3,000 SRM, valued at about $10,000.

In September 2020, Jump Trading invested in Serum, the leading DEX on the Solana chain. SBF revealed in a media interview, "Serum is the first project Jump Trading has ventured into and invested in the DeFi space." And just as a "first venture," Jump Trading's investment has been remarkable—SRM token has been dubbed one of the "SBF's four-piece set" by the market, experiencing a significant rise. CMC data shows that in September 2020, SRM Token was only $1.84 each, while in September this year, SRM reached a high of $12.48.

Unlike most DEXs that use the "automated market maker (AMM)" mechanism, Serum adopts the same order book mechanism as CEXs. The advantage of this design is that it does not produce significant slippage like AMMs. However, due to network performance and order processing speed limitations, this mechanism was not common in the previous DeFi world. Serum leverages Solana's high TPS characteristics to design a central order book, allowing this protocol to integrate liquidity from multiple other on-chain protocols.

BitDAO

As of today, Jump Trading holds approximately 390,000 BIT, valued at about $740,000.

In June of this year, the derivatives trading platform Bybit announced that BitDAO, led by them, completed a $230 million financing round. Bybit also committed to contributing 0.025% of its futures contract trading volume to BitDAO's treasury, which, based on revenue from January to May this year, is expected to exceed $1 billion annually. This is seen as the most direct value support for BitDAO.

BitDAO plans to take a different path from Bybit by investing significant funds and talent into the DeFi space, aiming for decentralization. BitDAO claims to be one of the largest decentralized autonomous organizations (DAOs) in the world, focusing on three areas: research and development, liquidity, and funding. It aims to develop BitDAO DeFi products, provide liquidity for protocols like DEX, lending, and synthetic assets, and support emerging projects through donations. Additionally, this so-called largest DAO in the world has not issued any tokens before, and Bybit and BitDAO are also seen as value supports for the BIT token.

From BitDAO's vision alone, the project's planning is undeniably grand, leaving ample room for investors' imagination about the "largest DAO in the world." And in Jump Trading's wallet, we also see holdings of BIT.

1inch

After the popularity of AMMs and the explosive growth of DEXs, DeFi trading has become an undeniable force in the market. However, the rise of numerous AMM projects has also brought new problems—liquidity "fragmentation." Especially for large trades, the cost of slippage is a trading friction that cannot be ignored. Aggregator platforms like 1inch have partially addressed this fragmentation issue.

1inch can aggregate liquidity from multiple protocols to provide traders with the best quotes. Specifically, 1inch splits the user's swap request into multiple parts and executes them from different DEXs to achieve the optimal total transaction price.

Before EIP1559, due to the characteristics of the ETH network, high gas fees were a significant concern for DeFi users (of course, this issue remains even after EIP1559 was implemented). The gas token launched by 1inch in May last year provided users with a better way to save on gas expenses: the gas token. Chi is a functional token developed by 1inch that allows users to store gas at low prices in CHI and destroy CHI to release gas when prices are high, achieving gas savings. With the implementation of EIP1559, although the use of gas tokens has come to an end.

Despite the abandonment of the CHI gas token, we cannot deny the innovation and value of this project, nor can we overlook the contributions 1inch has made to the ecosystem. As of today, Jump Trading holds approximately 690,000 1INCH, valued at about $1.72 million.

I. DeFi Infrastructure

As DeFi becomes the main category of on-chain applications, the infrastructure supporting the operation of the DeFi ecosystem has become a focal point of attention. Many of the most exciting and successful projects in the DeFi space are backed by intricate and complex economic mechanisms.

Oracles, storage protocols, synthetic assets, stablecoins… Jump Trading's investment track record in this area is enough to prove their proficiency in this track. This may be the more conservative part of Jump Trading's portfolio. Jump Trading believes that "the rise of DeFi has paved the way for Jump to bring twenty years of trading expertise and engineering technology into the crypto space, attracting them to explore the magical rabbit hole of internet currency."

In Jump Trading's holdings in this area, in addition to top 100 market cap projects like ChainLink, Compound, and Synthetix, there are also many undervalued early projects that could serve as "wealth codes" for viewers.

Compound

Jump Trading's wallet currently holds approximately 20,000 Compound, valued at about $4.17 million.

During the "DeFi Summer" of 2020, Compound shone brightly. The protocol rewards contributors with "liquidity mining," allowing Compound to quickly launch the protocol in its early stages. Lending, as the infrastructure of the DeFi space, currently has a relatively stable landscape, with Compound, Maker, and Aave dominating, and their corresponding tokens are regarded as DeFi blue chips.

With the advent of the multi-chain era, many well-known protocols are deploying cross-chain. Unlike other lending protocols, Compound's multi-chain solution is unique, having developed its own Compound Chain. Compound Chain is a distributed ledger that can transfer value and liquidity between peer ledgers, allowing users to borrow and lend cross-chain assets based on Compound Chain from different blockchains such as Polkadot, Quorum, Solana, and Celo. Compound Chain aims to complement Ethereum contracts and plans to issue a native token for transaction fees, with COMP still serving as the governance token.

In May of this year, Jump Trading once purchased over 47,000 COMP, becoming the eighth-largest holder of COMP, second only to a16z and Polychain among investors.

Synthetix

In Jump Trading's wallet, we found as many as 200,000 SNX tokens, valued at about $1.13 million.

Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. This protocol allows users to mint, hold, and trade a variety of synthetic assets, including fiat currencies, commodities, stocks, and crypto-native assets like BTC, MKR, and LINK.

Synthetix also issues an over-collateralized stablecoin, sUSD. Users can mint sUSD by collateralizing sufficient SNX. The innovative synthetic asset model of Synthetix has attracted market attention since its launch. Currently, the SNX token has become the leading token for synthetic assets, with a total circulating market cap exceeding $1.1 billion.

Sperax

Jump Trading's wallet currently holds 3.61 million SPA (but according to another Jump Trading-related address discovered by Reddit users, there are over 30 million SPA tokens).

Among the various DeFi projects discussed in this article, Sperax is the most unique. Sperax aims to build a full-stack DeFi ecosystem based on its native hybrid stablecoin Sperax USD (USDs) and decentralized products like Sperax Synthetic Asset and Derivatives, which may also be one of the reasons for Jump Trading's investment.

The core design team of Sperax consists of former Terra founding member Nicolas Andreoulis and Professor Marco Di Maggio from Harvard Business School (both of whom were founding members of Terra and designed core products like UST, Anchor, and Mirror before leaving Terra). The market cap of the target Terra is currently $17 billion, while Sperax's market cap is about $20 million. Sperax has issued the first interest-bearing hybrid stablecoin (USDs) currently on the market, one of its features being the ability to provide passive interest income to minters. This project has been favored by many institutions, including Messari, Jump Trading, Alameda Research, and Amber, with Messari praising it as a "next-generation stablecoin project with tremendous potential to change the stablecoin track."

II. Web 3.0

Web 2.0 and centralized giants have existed in this world for too long. By breaking the traditional business model centered around corporate interests, Web3 shows us the possibility of community-centered economies of scale. This spirit of collaboration and its related incentive mechanisms can attract the most talented and ambitious developers from various technology fields today, who will develop many unprecedented projects.

As deep author Ki Chong Tran stated in a previous article published in Decrypt, Web 3.0 is "the next major iteration of the internet, which has the potential to help people reclaim control from the centralized enterprises that dominate the web today." Jump Trading has also made moves in the Web 3.0 space, and from their holdings, we naturally find tokens from currently popular Web 3.0 projects.

Audius

In the tide of the Web 3.0 era, some fields will inevitably enter the Web 3.0 era earlier than others. The decentralized media music platform Audius is one of the pioneers of this era. Audius aims to create a decentralized and open-source streaming music system controlled by artists, fans, and developers. The company primarily helps music producers and artists connect directly with fans and get paid for their music, with no intermediaries on the platform.

Data shows that music artists can only earn about 12% of the total income from their works, and without sufficient support, new or niche artists cannot continue to create. Audius not only hopes that "intermediaries no longer profit from the difference," but also clearly defines the platform operator's role as limited to music discovery/hosting and adjusting incentives based on creators and listeners, rather than playing the traditional distribution role like Spotify or Apple Music. Previously, Audius Music was also officially recommended by the Apple App Store.

As of today, Jump Trading holds approximately 570,000 AUDIO, valued at about $1.89 million.

Mask

In the Web 3.0 era, how to bind wallet addresses to your social identity is particularly important, especially as we increasingly use our NFTs in social interactions. Mask Network has long been leading the NFT and SocialFi space with a plugin and has launched multiple features, including sending and receiving red packets on Twitter, posting encrypted tweets, and displaying and purchasing NFTs. Additionally, this plugin integrates information platforms like CoinGecko and CoinMarketCap and connects to decentralized applications like Uniswap, SushiSwap, and QuickSwap.

However, Mask Network is doing much more than that. In addition to launching the ability to identify and display NFTs from platforms like OpenSea on Twitter earlier this year, Mask recently introduced NFT Gallery (NFT Wall), NFT Avatar (NFT Profile Picture), and NFT red packet features, and has even launched NFT avatar features for some users, with potential future support for using NFTs in gaming, offering a cool pet-like experience similar to QQ pets.

Through a browser plugin, Mask Network allows people to experience Web 3.0 and the metaverse earlier on Web 2.0 platforms in a simpler way. As of today, Jump Trading holds approximately 29,000 MASK, valued at about $320,000.

III. Jump Trading: Infrastructure Builders

Although Jump Trading's portfolio covers multiple tracks, these projects share common traits: they are more ecosystem-friendly, likely to become infrastructure, technologically advanced, and have grand visions, and these investments have also brought substantial profits to Jump Trading. By observing their portfolio, we can easily see that Jump Trading prefers grand projects that are likely to become crypto infrastructure.

We can also see this investment strategy of Jump Trading reflected in other projects: in September of this year, Jump Capital invested in Eden Network. As of now, Eden's computing power accounts for over 50% of Ethereum's total computing power. Jump Capital participated in building the Pyth network, which outputs various data, including stock prices from compliant securities trading platforms, on-chain. Jump Capital, as an initial code contributor to Wormhole, has achieved fully generic communication across heterogeneous chains…

On Jump Capital's official website, there is a prominent statement: "Jump Capital is advancing towards building the next generation of cutting-edge crypto infrastructure." Kanav Kariya, head of Jump Crypto, once wrote, "Building has become the team's battle cry: building underwater tunnels and railroads, establishing communities, gaining deeper insights into the crypto ecosystem, and exploring the treasure trove of system design and engineering issues."

"Blockchain has opened up an incredible new mode of resource coordination by establishing trust between parties that do not trust each other. They make communities true stakeholders." Their goal is to "help lay the groundwork." Investing in infrastructure may be their way of "paving the way."