The Advantage is Massive: TradFi Talent Flocks to Crypto

They’re leaving lucrative positions at blue-chip investment banks and top-tier law firms. They’re saying their final farewells to Silicon Valley. They’re also coming out of retirement in some cases.

The great migration from the upper echelons of the corporate world to the crypto economy has been building for years and is expected to accelerate now that Wall Street firms have paid out their bonuses, according to 15 industry participants.

“It’s definitely happening, and it’s happening at a breakneck pace,” said Frank van Etten, chief investment officer at digital asset lender Celsius. Van Etten, who had spent the previous 20 years in traditional finance, went all in on cryptocurrency in September of last year.

“I’m lining up about a dozen people to bring in [to Celsius], and about three or four senior people are literally coming out of retirement to work in crypto,” he said. “If you want to achieve something more at my stage in your career, crypto is the right environment to do so.”

Crypto companies, now flush with venture capital cash, are for the first time offering comparable compensation to Wall Street peers — not to mention equity.

According to one source at an investment firm, the digital assets space now has “higher potential upside” than traditional finance firms. Anonymity was granted to the source and others who were not authorised to speak on the record.

“The industry has matured and now offers comparable salaries with more potential for significant equity in the firm, and thus higher potential upside,” according to the source.

According to Brooks Wallace, head of communications for Blockchain.com, the crypto exodus will only intensify after financiers receive their hefty annual bonus, referring to it as a “great migration.”

A sizable portion of Blockchain.com’s team, as well as nearly all of its expanding institutional division, began their careers in traditional finance, working for firms such as Citadel, Credit Suisse, Deutsche Bank, Goldman Sachs, and UBS.

Last year, cryptocurrency exchanges led the charge. According to The Pomp Letter, Coinbase, Binance, Kraken, BlockFi, and Gemini collectively hired nearly 5,000 new employees.

According to Jonathan Tamblyn, Gemini’s director of talent acquisition, roughly one-third of the exchange’s talent comes from traditional finance. Tamblyn stated that the company places “a lot of value” on traditional training because “it’s an industry we hope to change and evolve in the future.”

One source at a top global capital markets firm noticed the exodus about a year ago and claimed that top banks such as Goldman Sachs and Morgan Stanley are losing “so many people to crypto.” According to the source, professionals ranging from recent college graduates to 30-year finance veterans are diversifying into crypto.

“There are numerous arbitrages between TradFi and DeFi,” as information shared by various hedge fund analysts. “The arbitrage between the value in labour is one of the most overlooked components.” Employees in TradFi’s operations roles are largely commoditized, underpaid, and overworked. The market structure in DeFi is very inefficient, putting pricing power on salaries for roles willing to delve into the minutiae to make things more efficient.”

According to the hedge fund analyst, this arbitrage is causing “brain drain” from traditional finance operations as well as back office settlement issues because prime brokerages are underpaid and understaffed.

“As a result, we are staring down the barrel of a massive arbitrage between two financial systems: one that is much faster and pays their employees to keep up with inflation, and the other that is much slower and continues to cut corners on head count in operations,” the analyst explained. “This battle in the back offices is analogous to the difference between dial-up internet and cable, or between the fax machine and email.”

What began in traditional finance has since spread to other white-collar industries.

Katherine Dowling, for example, left a long career in financial law to become Bitwise Asset Management’s general counsel and chief compliance officer in September. Separately, four ex-Facebook developers left their jobs to form a Web3 and blockchain-focused company.

LinkedIn had over 44,000 US-based jobs with the keyword “crypto” or “blockchain” as of Feb. 2. According to LinkedIn’s Economic Graph, job postings in the United States with those keywords increased 615 percent between August 2020 and August 2021.

“The fact that the cryptocurrency industry frequently appears to be an exciting new frontier, combining elements of the tech sector with interesting parts of finance and a fun, young vibe…

“Huge amounts of energy, talent, and momentum are appealing,” according to an investment firm source.

But what is it that is causing people to leave? Crypto players stated that they are in pursuit of money, innovation, purpose, or a combination of the three.

Traditional finance backgrounds provide a natural stepping stone to crypto, appealing to candidates who want to be a part of building the future of finance, according to Maya Miller, CPO at Blockchain.com.

“I don’t think anyone can say there is no migration,” said a capital market source. “However, why do they do it?” Money, money, money, and the potential upside is enormous. But what’s the catch? Perhaps it will not work out.”

As Web3 grows in popularity, ambitious people in technology and finance are taking notice, according to Charlie Silver, CEO of Permission.io. His firm, which focuses on digital ownership in Web3, has recently hired employees from Google, Microsoft, and Facebook.

“The upside potential in Big Tech and Big Finance is extremely limited,” Silver said. “These [traditional] companies are more like working for the federal government for ambitious creatives.”

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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