On a plane to Miami, thinking about the topic of the panel i’m on: Is it possible to time the market? It’s a great question, and one my priors were REALLY wrong about.

A thread about being wrong and making money.
My initial training in quant trading came at SIG, trading more traditional assets than crypto (let’s hear it for fixed income ETFs). These are markets that have existed forever, and many large, skilled firms have traded them forever.
In these markets, it’s really hard for there to be large, fairly obvious, predictable moves — if those existed, these big quant firms would have figured them out too and arbed them out (or similar).
What do I mean? Let’s say that tech stocks consistently revert 50% of their post-earnings moves, always over the course of the following day. What would happen over time as the world figured this out?
Once a few firms figure it out, they’ll put the reversion trade for HUGE size first thing in the morning. This will have impact and now the reverting move happens all in the morning ...

until it’s pushed even earlier and now the earnings move is just 50% of its original size.
This is the typical pattern — big effects DO arise, but if they’re predictable and consistent, they start happening sooner once everyone’s trading them, until they’re just totally arbed out.

This is the paradigm I was used to when I started trading crypto.
I remember laughing at the idea that major coins always rally into big events. Surely if that’s true, I thought, someone should just be buying earlier than the rally usually happens ... right?

I said that right before BCH’s 2018 fork on 11/15 ... check out BCH/BTC from then.
Turns out this in fact DID always used to happen — hence the common “buy the news, sell the event” advice. And honestly, it still does USUALLY happen! For all kinds of events: forks, halvings, major exchange listings, etc. all have (decreasingly, in some cases) predictable moves.
I used to fuck this up all the time! I ignored a study that said coins rally between Coinbase announcing a listing and the listing itself — surely the world will know that arb it out. BTC rallies into a specific holiday every year? We’re not the only ones who know that, duh.
This was a really dangerous instance of me leveling myself and deciding that the obvious play is TOO obvious and couldn’t be right. It’s also an example of being way too clingy to one’s priors in the face of lots of evidence.

And it cost me and Alameda a bunch of money.
Eventually I connected the dots — this market worked differently, lots of the sophisticated firms aren’t in the game yet, more $ in the system than I’m used to ISN’T quantitative, etc. But it took me too long, and that was a huge lesson for me.
A profitable lesson, too! It’s let me make great trades around futures expirations, more recent big events, Elon Musk’s tweets, bad news from governments, other exchange listings, USDT, etc. etc. Things DO evolve, just most slowly than I wanted them to.
I pride myself now on updating quickly as new information comes up — I think it’s maybe even my primary value-add, or at least adjacent to it — and that involves abandoning priors much more quickly than I used to. Which is hard and unnatural, but important.
So! My answer to this panel’s question is a fairly nuanced “yes” (I’ve talked about instances of it before), and getting to that yes took me a LONG (but worthwhile) time.

Looking forward to talking about this (and other stuff 😘) in Miami!

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More from @AlamedaTrabucco

23 May
BTW not to be a downer but the stablecoin supply being up is less obviously +++ than a lot of people have claimed.

There are plenty of reasons why it could be good -- more USD flowing into the ecosystem could of course be used for buying crypto ...

... but, it could also be used to be parked in a yield farm, or as collateral for someone trying to get super short, or whatever.

Also, consider a common trade -- USDT gets really rich, MMs (such as Alameda) create USDT to sell it >1. This increases stablecoin supply!
Why does USDT (or any stablecoin) get rich? Various reasons -- maybe people really need something USD-like and so bid it up (because they're not creating for whatever reason). But maybe the BTC/USDT market has significant activity.
Read 6 tweets
23 May
FWIW this is the sort of move which hasn't happened in quite some time:
- big moves have basically all been driven by liquidations lately
- ESPECIALLY "low-liquidity" ones such as on weekends
So I think looking to data for the answer about what to expect as the weekend wraps up and liquidity increases is misguided -- intuition is likely gonna beat it.

What does intuition say?
Let's think about the features which distinguish this move / set of market conditions from other ones.

First: low liquidity and low volume.
Read 16 tweets
20 May
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.
Read 23 tweets
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

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