Well. Crypto's crashed quite a bit in the past few days, leading up to a GIANT crash (BTC touched sub-$30k!) a few hours ago. It's ticked back up somewhat since, and started bouncing around a bit. What happened?

A thread about lemons and lemonade.
The narrative in the winter was clear: institutions were getting into crypto and that's why crypto rallied so much. This mostly happened in BTC, but the other coins mostly had a beta to BTC so they all rallied some, too.

Simple enough.
More recently, the rumors turned to ETH. Now, institutions were getting into ETH, too! And some other coins, but at least for the past couple weeks, the ETH rally was The Big Thing happening (ignoring DOGE). Look at that ETH/BTC over-performance! BTC dominance was at a local min.
Many alts reached all-time highs -- some for these more fundamental reasons, and some from Elon-related hysteria.

Which coins are rallying isn't all that matters, though, and understanding reasons for the buying isn't enough, either. We need to go deeper.
I saw a TON of speculation that the rallies (especially the ETH rallies) were low-leverage and spot-driven, and therefore "more organic" somehow. An important implication of that is that, in the event of a downturn, there'd be relatively few liquidations.
This narrative was super wrong, though -- and it was possible to know that. How? Well, this narrative has basically been true zero times in the past 3ish years -- you can tell from the fact that all the volume is in derivatives or spot where the exchange allows leverage.
More specifically, though, this rally looked identical to all the others I've discussed on here. Open interest (on Binance, but also on all the other platforms) was shooting up basically the entire time, premia were high for those products, etc. Tale as old as time.
BTC perp funding was consistently between low + and really quite high + as new contracts got opened -- looking just at Binance (the most important for liquidations), you can see this was literally never untrue during the past 3 months (BTC > $40k the whole time).
That people thought ETH in particular was just all institutions buying on Coinbase or something was particularly baffling to me. Look at these GIANT OIs/premia as ETH skyrocketed to its ATH! This was all on leverage, just waiting for a day like today to come along ...
And come along it did. I won't repeat myself here -- when there's a big 1-directional move with lots of aggro positions getting opened and then there's a small reversion, liquidations create momentum and make it a BIG reversion. See: Thanksgiving 2020.

Whatever caused the initial market-wide crash -- probably a lot of Elon with some China and other vague regulatory news thrown in, or maybe it's a "natural correction" -- it happened, and liquidations did a lot of work to make the downturn more intense.

This started happening *before* BTC hit $40k. When it managed to dip below $40k -- a level it's not seen since February, meaning a LOT of new buyers have gotten long since -- there were a LOT of long positions which had their first chance to get liquidated. And, well ...
If you were paying attention to the last times moves like this have happened, this was a PERFECT chance to get mega-short into the recent lows. ETH was even more extreme -- less time since this level, but a TON of new open interest, much of which got rekt in a trademark cascade.
Another thing we've seen time and again -- when these natural moves get exacerbated by liquidations, the fundamental thing to understand is: NO ONE wanted to sell them as low as they got. That means, whenever the market can gather its collateral, the market *should* rebound.
The timescale for this trade tends to be pretty quick -- minutes to hours, depending on magnitude. It's one of the nicer trades because of how much *sense* it makes -- no one wanted to sell here ... so ... people will buy.

And so Alameda did just that -- we bought a LOT.
The actual probability/timescale of reversion is unclear -- maybe it's done, maybe this whole few days of crashing is partially inorganic. We've seen moves like this revert super predictably, though, when they're partially liquidation-driven -- and this all was, so we're LONG.
And there were non-delta trades that were amazing today, too! Markets got SUPER out of line as they tend to when they move a lot, and %s of arbs were possible -- if you had free capital. Which you might have, if you were considering opportunity cost ;)

Now, that's not exactly to say it was correct to have lots of capital sitting around -- lots of profitable yield farms, spreads, normal types of trades, etc., and who *actually* knows the probability of a day like today a priori.
Empirically, though, I think it's been frequent enough to justify at least having *some* easily-accessed capital laying around. You could easily make multiples on $ you had if you, e.g., knew when to buy the bottom -- disregarding lower risk %s-wide spreads.
Even something like selling into this Bitfinex bid wall and simultaneously buying elsewhere was AWESOME. These walls tend to be super price-insensitive, so as the other markets move, an awesome spread develops as this person doesn't move their bid.

There were TONS of trades like this all across the market -- if you knew were to look and had the money to do them, today was more important than any in the past 3 months, easily.
So, even though many of you were probably long and lost a lot to positions today (Alameda too!), there were still lots of great trades to make. These days are rough and can be tough to swallow as they're happening -- but buckling down during them is necessary to make the most $.
The most bitter lemons can make the best lemonade -- you just need a good recipe (I think this is just sugar, which makes sense). Make sure you're ready for next time if you weren't this time!

Because lemme tell you: lemonade is good.

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More from @AlamedaTrabucco

11 May
I throw the term "expected value" (EV for short) around a lot. What is it, and, more important, why is it the thing that matters?

A thread about the median and the mean.
Let's step back from trading and focus on an idealized situation which is sorta like trading. Say you've got $10 and all you're allowed to do with it is pay $10 to flip a coin which comes up heads 55% of the time, and you win $20 when it does. You can play as much as you want.
The *expected value* (EV) of each flip is

-$10 (cost of playing) + $.55 * 20 = $1

Meaning that each time you play, you're expected to make $1. Pretty good!
Read 25 tweets
28 Apr
I often talk here about decisions I/Alameda made that went well. Sometimes people ask for examples of the opposite -- times when I made a mistake and lost a lot, or even times I lost a lot by doing the right thing. Both happen a lot!

A thread about melted wings.
Alameda uses "March 12" in a Voldemort-like way -- it invokes dread like not much else, and it comes up a lot in mean vs. median discussions ("sure this usually works but it loses $5m on March 12," etc.)

Before March 12, though, there was another Terrible Day: September 25.
September 25, 2019 was -- at the time -- the scariest day I'd ever had trading, and I think it was maybe Alameda's worst potential vs. realized PNL day ever (we *could* have made a TON -- we, uh, didn't).
Read 21 tweets
22 Apr
2 years ago, Alameda maintained pretty strict delta neutrality most of the time, generally trying quite hard to make sure our PNL was from spreads and arbs. Today, not so much -- we got ... uh, really long in winter 2020, for instance. What changed?

A thread about super powers.
Let's back up a little: why does Alameda trade crypto? Why don't we do something else, like equities options trading? Or sports betting? Or competitive Scrabble?

(Incidentally, these are all things various team members have done or still do :P)
The basic answer: it's where the money is. We could make a bunch of sports betting models -- likely some of the world's best! -- but the money in crypto just makes it better. And sadly (for me), the money in competitive Scrabble is nothing to write home about.
Read 27 tweets
18 Apr
Haven't done one of these in a while: what happened in the crypto markets today?

A thread about the past and the future.
For the past week or so, crypto has been on a tear. It's risen slowly but steadily from the mid-$50s to new highs over $65k, seemingly without a ton of fanfare. Amidst excitement over the COIN direct listing, parts of this seemed almost inevitable.
The COIN listing came and went. And it's hard to say that it was anything but a pretty big disappointment vs. the market's hopes (and, certainly, amidst the market's hype-driven rally).

Read 25 tweets
14 Apr
So far, auction indications have been a bit lower than I think the market was expecting (e.g. where it was trading on FTX earlier).

On FTX, it's fallen to close to that indic price:
The crypto market is reacting broadly basically how I thought -- the world is all watching this, the world all expects BTC to be correlated to COIN right now (since Coinbase's success is seen as something of a proxy for success of BTC in the US), so crypto is crashing.
And the worst performers of all? The likes of BNB and other exchange tokens, who are seen as *especially* correlated with COIN and Coinbase more generally. When the indics first started crashing, BNB *really* underperformed -- it's recovered some but not totally vs. BTC.
Read 4 tweets
14 Apr
Heading into Coinbase's hotly anticipated listing, markets have been volatile, and there's been a lot of great trading to do if you know where to look.

Honestly, the trading has seemed almost ... *too* great? And pretty easy to predict.

A thread about efficiency.
Let me first discuss this notion more generally -- efficiency. A market is called *efficient* if prices in the market consistently reflect some true fair value, based on all possible data at the time -- trade history, blockchain data, news, etc.

How efficient are crypto markets?
This shouldn't be a *giant* surprise, but the answer is: not really :P

A priori this might not be totally clear, but we've seen time and again the markets just not move in the obvious direction for what seems like an eternity:
Read 25 tweets

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