Thread by @AlamedaTrabucco

Today was the first time I've been woken up because the market was moving in a while -- it's the biggest move we've seen in months! What happened?

A thread about history.

They say that those who do not learn from history are doomed to repeat it.

Who remembers what earlier this year? When crypto rallied a ton to $65k pretty quickly, futures were at high premia, and open interest of all the important contracts was up?

Here it is:

And what about May? When crypto had recovered some to $50k or so -- again with high premia and OI -- but then it dipped a bit?

Right.

The set-up is the same every time:

- futures are at really high premia -> this suggests aggressive buying
- OIs going up -> this suggests the buyers are opening positions
- number go up -> this means there's *net* buying

And "number go up" important sets up the opportunity for people to buy at "high" prices -- this matters because of the next stage of the set-up:

- number go down

Each time it's happened, it's been for a different reason -- maybe bad news from China, maybe bad news from Elon, maybe nothing that's easy to point to. But in each case, it happened -- and it was slow at first.

And as prices crashed, some of those aggressive net buyers who bought near the top get liquidated, and then more of them get liquidated, and then -- well, you know, BTC crashed an extra 10% over the course of a few minutes.

Like clockwork.

The past week looked a lot like this!
- high premia, all across the board
- OIs of big perps (especially Binance) growing quickly
- all while the market rallies

And last night, number started going down. Not sure why -- probably something like "someone sold" or "BTC = $50k?" and then during Eastern morning the stock market was also falling, and crypto sometimes follows those things.

Regardless, the market started to slowly fall ...

... until it wasn't slow anymore. Liquidations of course took over on the quick descent, like they always do -- as we said, just like clockwork.

Billions got liquidated earlier!

And honestly? I was caught a *bit* off-guard this time. I didn't think the rally had lasted long enough, and in particular I didn't think the initial draw-down was significant enough (yet) vs. the peak to cause a lot of liquidations.

Also, there's a very real chance that when you're at a local max (like we were yesterday -- it had been a while since >$50k by more than a bit!), the chance for old *shorts* getting liquidated makes *buying* the +EV side. So I didn't think a crash like today's was *too* likely.

If you *are* expecting it, the best move is to sell beforehand (we weren't so we couldn't). Barring that, though, there's still plenty you can do -- the best and most predictably great thing is to buy the HUGE dip -- buying right here has just never not been awesome.

(Reason, as usual, being that no one actually wanted to sell down to $42k in this case -- longs got liquidated down to that level, but they were forced to sell.)

Different products also got super out of line earlier. Perps, which have mostly been at huge premia lately, got to giant discounts, and closing short perp / long spot spreads that have been quite good for weeks was an AWESOME trade for hours.

There was other stuff like this -- quarterlies were way out of line with each other, spot exchanges had arbs, USDT got to like 20bp over $1 setting up a big arb opportunity there. Big moves always have big dislocations because platforms are so segregated.

And the biggest takeaway for me was just how familiar today's move still feels -- it's been a few months, but it was really just the same thing with a slightly different spin.

History repeats again, and I've got a feeling we've not seen the last of it.