4/10/2023 0 Comments Coin drop gif moveSerum has a low circulating supply of coins–initially, only 10% of it was freely tradeable, while the other 90% was locked up for years. One way the firm’s executives apparently did that was by using largely illiquid cryptocurrencies–including FTX’s own token, FTT, and a related one, serum–as collateral to take out loans.įor example, Bankman-Fried helped incubate the creation of serum, which was released in 2020. On top of making big bets, Alameda was likely taking on too much leverage–that is, debt that can amplify wins and losses. Indeed, Bankman-Fried acknowledged in a Twitter conversation with a Vox reporter that it was around the time of luna’s crash when a lot of risky leverage built up in his business. “What makes you a hero in bull markets kills you in bear markets,” says Marina Gurevich, chief operating officer of London-based Wintermute, one of the most active crypto trading firms in the world. That’s a shallow pool of knowledge and experience to draw on.Īccording to several traders, many of Alameda’s long bets probably suffered big losses beginning in May 2022, after the dramatic collapse of the stable coin terraUSD and its sister cryptocurrency luna sharpened the decline in the crypto market. uh, really long in winter 2020.” As a rationale for why, he added, “it’s where the money is.” Both Ellison and Trabucco had just a couple of years of trading experience in conventional markets before joining Bankman-Fried to deal in crypto. In March 2021, then 26-year-old Caroline Ellison, one of Alameda’s co-CEOs, seemed to acknowledge this pivot when she tweeted, “Also relatable is the point where he realizes he's been wasting time trying to trade back and forth for a few points of edge and the way to really make money is figure out when the market is going to go up and get balls long before that.” Going long means betting that prices will rise.Ī month later, Sam Trabucco, Alameda’s other co-CEO, tweeted, “we got. Some traders believe Alameda changed its strategy because it lost its competitive edge as more experienced firms like Jump ramped up their crypto trading business. He brought with him to FTX his Alameda colleagues Gary Wang and Nishad Singh, who had been some of the most talented people at the trading firm, according to Doug Colkitt, a veteran high frequency stock trader turned crypto trader.Īfter bitcoin started to rise sharply in the fall of 2020, Alameda moved away from its initial focus on making high-speed, market-neutral bets that didn’t depend on predicting if cryptocurrencies would rise or fall. But the next year, he shifted his primary focus to launching his trading platform FTX. Bankman-Fried was regarded as an excellent trader when he started Alameda in 2018, and he focused on arbitraging price differences in cryptocurrencies in different markets. The first theory is that the young traders at Alameda, which was once one of the largest crypto trading firms in the world, weren’t as sophisticated as their reputation suggested.
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