Thread by @EvgenyGaevoy

What Wintermute does thread

It’s been exceptionally “fun” on twitter last few days with some accounts hitting new lows in terms of market structure understanding. I’ve written a few times in the past about what we do and how we prefer to do things, but maybe it’s a good time for a refresher:

1) This is not intended to be an apologetic thread. I’m not looking to win support from people in the trenches. We don’t deal directly with people in the trenches – we certainly trade with them either on defi or cefi venues, but neither they nor us have any choice in the matter – it’s all very much anonymous and permissionless (as it should be). It’s possible that this thread will make some of you trench warriors change your mind about what Wintermute (and lots of other, less public, prop trading firms) do, but my hopes are pretty low. Reality is, so many people are retarded, and prop trading firms make the best margins on, what we charitably call, “uninformed flow”. I should therefore not complain that much. This thread is for anyone who we deal directly with – token protocols, OTC counterparties, centralized and decentralized exchanges, and maybe an occasional regulator🫡🙃

2) Also worth noting that I have enjoyed my time on twitter during last few years and developed my own style of posting, which is likely occasionally pretty incomprehensible to most people. This funnily includes some people at Wintermute (especially susceptible to copypastas, sorry team…). I generally enjoy trolling, being trolled and being mentioned at green frok’s snapshots. As such I also embrace and not fight memes about Wintermute. Lately these memes are about various charts being down and it can be funny so I sometimes make fun of it myself. If you take it seriously, well it’s on you. Having sense of humor is an essential human quality and I’m sorry if you are lacking in that department. And to those who think it’s not nice to make jokes about degens who lost their life savings on doing levered bets on cat inside bread – it is maybe not nice, but you are in a most insane casino ever created, grow up

3) Furthermore to make things clear – we are not a charity (or foundation🙃). Very much far from it, Wintermute (like any other prop trading firm) is in business of making money by trading. More specifically, our core business is trading digital assets. As such, we are very much interested not just in extracting as much as possible from various opportunities in the market, but also in this space continuing, evolving and growing. We have been investing into crypto since 2020 with our venture arm and at no point of time have been net short crypto. Our crypto exposure oscillates between 20% and 30% of our net equity (combination of venture and treasury positions). The notion that we have any interest in crypto going down is therefore very unserious. Various negative events such as Luna crash, 3AC collapse and FTX bankruptcy have been net negative for us and making money from these short periods of volatility did not offset losing on long term positions in the mid term as well as market being dead for prolonged periods of time

4) So what do we do really? Our core business is defi, cefi and OTC – very much diversified unlike most of our competitors with a strong emphasis on being able to redirect our efforts on whatever trades the most at any given time, whether it’s BTC, eth L2s, memes or “AI” tokens. When we deal with specific token protocols, we ideally look to engage them through all 3 core businesses.

Cefi is to a big(ger) degree about liquidity provision. We continuously show bids and offers in hundreds of digital assets on all the exchanges you heard of (and bunch you did not), from Binance to gateio, from Coinbase to Backpack and from Kraken to Bitvavo. It’s good business when it’s busy and people are crossing spreads. It’s not great when it’s bear market and people crossing the spreads are fellow prop trading firms (screwing us if we are too slow or stupid). We do run taker strategies as well of course, allowing us to arb differences in prices between different venues (as well as screw our fellow prop trading who are either slow or stupid). It’s pretty much what I did before in tradfi at Optiver trading ETFs. Same neverending tech/quant/latency rat race. It's glorious

Defi is a bit more diverse. We run liquidity provision on rfq protocols like 1inch, bebop and Jupiter. We arb the AMM pools (Uniswap). We operate as solver on cowswap. We do liquidations on aave and morpho. And we do trade on CLOBs like Hyperliquid (which is same as our cefi business). We are pretty good at defi.

Finally, we trade OTC with a wide range of counterparties. Our coverage is great, both in number of tokens we can quote and in types of products (spot/cfds/options etc) we can do. We scale OTC business with tech. not with armies of BD/sales people (and we are pretty good at it)

All these activities are very much delta neutral. This means that if we sell on Binance, we will be looking to buy back at whatever price Is best across all liquidity sources available to us. OTC trades might take longer to close down, especially in long tail assets, but the idea is to get to delta neutral eventually

What you don’t see mentioned here is discretionary position taking. While we do take positions occasionally, frankly speaking it is not what we are really good at. We are not taking months long positions like Trabucco did at Alameda and when we take these positions, they are fairly small (and subject to that 20-30% of net equity range I’ve mentioned earlier). Vast majority of our discretionary plays are longs, buying the dip or buy locked tokens at big discount type. While we do take short positions, these are very rare. The reason is the market can stay irrational way longer than our preferred holding period. It’s not uncommon to see tokens go up 100-500% in a week on completely bs reason – this making shorting a very risky business. Maybe there are firms out there who are good at this kind of plays, I personally don’t know any outside of shkrelli maybe

5) Now more specifically why prices are going down (and why they tend to go down when Wintermute and Binance enter the stage)

a. Macro. Before you look at another dumb martyparty post about Wintermute transferring SOL across exchanges (which is very normal and is literally how spot exchanges operate when there is arb between them), I’d recommend zooming out and looking at: BTC price and ES/NQ futures on CME (s&p and Nasdaq respectively). The two recent crashes have been directly linked to tradfi events (DeepSeek and Tariffs). Understanding that our little crypto market is now very directly linked to the real world outside (NQ down -> BTC down -> SOL down -> FARTcoin down) is pretty essential to being a (more) successful trader. But sure, you can ignore this information and chose to believe in a Wintermute+Binance conspiracy. Good luck, hfsp

b. Supply>Demand. It might come as a shock, but prices go up when there are more buyers than sellers and they go down when reverse is true. If your token doesn’t go up, it could simply mean nobody wants to buy it (while some people want to sell it). Some of the potential buyers moved on to another token – there are tens of thousands of them being launched daily. And some sellers made enough on your token and now want to buy something cheaper – again there are thousands of options out there. And sometimes whoever is behind the token wants to sell a bit, a more than a bit, or, sometimes, a lot. And the worst part is – the more liquid your token is, the easier it is to sell it. And so when Binance (or another exchange) lists your token, and Wintermute (or another MM) starts showing bids and offers in size, it becomes easier for anyone to sell and rotate to something new and shiny. This is literally the meta for a while. If you haven’t figured it out by now and instead prefer to blame exchanges and MMs on your trading skill issue, hfsp

c. One final nuance is the embedded call option for the token MM agreements. It’s 100% true that it makes sense for MMs to sell tokens above strike price. These strike prices are generally significantly above the price when MM engages, but given that tokens can still go 100%+ up, its not impossible to be above the strike at some point for some of the tokens. I strongly believe we would have a more fair market if the loan amounts, strike prices and term lengths have been public. I generally believe that we could use a lot more transparency in crypto. We cannot disclose it on our won however – it is the token projects that should have a say in it. Same goes for OTC transactions – these should be disclosed by protocols or insiders, but also we should collectively normalize these disclosures and not shit on people for being transparent. I actually did a conference thing about transparency and some people told me it was interesting (they could have been just nice to me idk)

youtube.com/watch?v=YVoAPw…

To finish off some quick q&a:
i. We don’t “hunt for stop losses”. Maybe we should – my perception was always that it is a fairly risky business, so we managed quite well without

ii. Sigh, we don’t manipulate prices, because a) we don’t know how b) our core business is valuable enough to not do stupid illegal shit. I live in London and like travelling to US. I really wouldn’t enjoy living in Dubai (on the run) (no offense to Mert and other non-scammy crypto people residing there)

iii. Our onchain activities are very easily explained. Transfers are just us moving inventory between exchanges that ran out of inventory. Christmas tree charts on AMMs is us arbing them vs cefi. In both cases we actually make markets better and fairer for “normal’ people. No need to thank us, we make money on it, win-win

iv. You can keep posting that stupid luna video and I’ll keep ignoring you – it’s bunch of statements taken out of context (with weeks and months in between said sttements). Maybe watch a season of Suits to understand what deposition is and how one-sided it always is. If you are a protocol that really wants to work with us but is unsure because of this (out of context) stuff, I’m happy to chat with you and tell our side of that epic story

v. Might not be obvious, but I don’t answer in dms to mentally challenged people (with an exception for westham family🫶). All DM screenshots are therefore photoshops (especially from westham family🫶)

vi. Already mentioned, but I reserve the right to continue making inconsiderate jokes about charts being destroyed (sorry to my compliance department🫡)