Thread by @arjunmahadevan

The pseudonymous crypto trader @GiganticRebirth was feeling bearish at the crypto market top in November, 2021.

So his team of alpha hunters started shorting altcoins.

They made millions.

Here's how the "Big Short DAO" (@RebirthDAO) bet against the crypto market and won:

In late November, a pseudonymous crypto trader behind the Twitter handle @GiganticRebirth issued a warning to his legion of over 85,000 followers:

“High confidence interval that we're very late in the cycle [and that cycles still exist],” he wrote. “Secure your freedom if you've won it.”

@GiganticRebirth, who also goes by GCR (an acronym for Gigantic-Cassocked-Rebirth), said he was feeling increasingly bearish about the cryptocurrency market, which had just enjoyed a 20-month-long bull run that showed no signs of stopping.

As others shilled predictions of “a new crypto supercycle” or “bitcoin to $100K,” GCR was planning a different, contrarian trade: a big short, or a major bet against overvalued altcoins that would generate massive profits if his bearish views played out.

To pull off the trade, he says he assembled a smattering of part-time crypto researchers, ranging from a professional poker champion to a medical student. They shared their findings with each other in a Discord channel and traded on their own.

GCR says he shorted nearly 30 different tokens across multiple exchanges at the height of crypto fervor last November. In January, he tweeted out a screenshot of a trading dashboard from the FTX crypto exchange, purportedly showing big profits from the gambit.

“The market consensus is that no one saw this coming. I saw it coming, I took action."

Over the past 13 years, the crypto industry has minted billionaires who were early to bitcoin and held onto the asset as its price mounted a seemingly inexorable climb.

But in the notoriously volatile world of cryptocurrencies, timing these rapid market cycles has proved far trickier. In fact, there's no telling whether profitable trades can be replicated in the future.

The crash that started in late 2021 and extended through January sent the total crypto market capitalization plummeting from a high of $3.1 trillion in November to $1.7 trillion in late January, nearly wiping out half of its value.

Breaking even during a market downturn is difficult; profiting is even harder.

GCR's tale offers also a window into the quirky world of crypto markets, where individual traders sometimes team up to speculate on volatile asset prices, hoping their collective assessment proves right.

With faint echoes of “The Big Short,” Michael Lewis’ book (adapted into a hit movie) about Wall Street misfits who bet against the frothy U.S. housing market, here is the story of how one independent crypto trader appears to have predicted last year's market top...

It all started in October, when a group of crypto traders assembled in a Discord chat to focus on one of the biggest market catalysts of the year: whether the U.S.

Securities and Exchange Commission (SEC) would grant approval for a hotly anticipated bitcoin futures exchange-traded fund (ETF).

If the group could spot and digest the decision minutes, even seconds, before the rest of the market, they might be able to profit off a move in bitcoin’s price.

To prepare, the team of pseudonymous collaborators – they didn't share their real names with each other on Discord – spent days researching arcane regulatory filings and coding web-scraping bots.

On Oct. 15, 2021, at 4:15 p.m.

ET, a web-scraping bot pinged the Discord group as soon as an announcement went up: A new SEC filing had just been posted regarding the Proshares Bitcoin ETF.

The news: approved (or technically, not opposed).

The bot notification gave the group enough time to buy bitcoin before much of the world had time to process the bullish news. The price of bitcoin instantly popped to about $59,000 from $57,100.

The team behind the ETF experiment called itself RebirthDAO, a "decentralized autonomous organization" founded by GCR.

In most blockchain-related conversations, a DAO is a decentralized organization powered by a token that confers voting rights; this was really just an informal group that met in a Discord channel.

Alpha refers to the excess returns that some investors seek to pocket above and beyond typical market returns, known as beta.

The pursuit often relies on bespoke strategies; in both crypto and traditional financial markets, alpha is difficult to achieve and trading secrets are closely guarded.

https://twitter.com/GiganticRebirth/status/1449115590006919173?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1449115590006919173%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fmarkets%2F2022%2F02%2F17%2Fhow-the-big-short-dao-bet-against-the-crypto-market-and-won%2F

Since mid-2020, GCR has amassed a cultish legion of over 85,000 Twitter followers. The account has attracted speculative retail “copy-traders” who trade according to his recommendations.

https://twitter.com/chief_katan/status/1445122501378547726?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1445122501378547726%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fmarkets%2F2022%2F02%2F17%2Fhow-the-big-short-dao-bet-against-the-crypto-market-and-won%2F

His tweets have ranged from theses on shorting frothy metaverse tokens...

https://twitter.com/GiganticRebirth/status/1466869214845755394?s=20&t=UgLYXlPsFiy-zmLadFWbjA

to calling the SHIB run and other dog-coin phenomena...

https://twitter.com/GiganticRebirth/status/1445732441788846084?s=20&t=_YMJslxj6FUCIq82awn9Lw

Before crypto, GCR says he cut his teeth trading political prediction markets on the popular betting site PredictIt.

In addition to his market calls, his political tweets have ranged from correctly predicting the retirement of Supreme Court Justice Stephen Breyer...

https://twitter.com/GiganticRebirth/status/1486746343951548418?s=20&t=_YMJslxj6FUCIq82awn9Lw

to betting on the underdog run of French Presidential candidate Valérie Pécresse.

https://twitter.com/GiganticRebirth/status/1406856900466053121?s=20&t=lIw1whmH0g0OkuWVE6xIGQ

“For 3 1/2 years, I did not take a single day off,” said GCR when asked about his trading background.

“You have to sacrifice literally everything.”

On Nov. 22 - just 12 days after bitcoin peaked around $69,000 but at a time when some commentators were still calling for a $100,000 price by year-end - GCR tweeted out his most controversial prediction yet.

He was “back and shorting” the market, just as bitcoin and Ethereum's ether notched new all-time highs and some crypto traders crowed that a "supercycle" might carry prices even higher.

https://twitter.com/GiganticRebirth/status/1462786206257852428?s=20&t=QUPKzJhGanRUer2v7CwAOg

“You just had every froth indicator. The total market cap of all crypto in November was at its peak, over $3 trillion,” said GCR. “There was peak euphoria and belief in eternal cycles. It was really contrarian at the time.”

In addition to perceiving a gloomy macro climate, GCR also had strong conviction in seasonality.

In 2017, just before the last prolonged bear market, bitcoin and other cryptocurrencies had begun falling in December; by early 2018, it was a full-blown meltdown.

https://twitter.com/GiganticRebirth/status/1466811762699870219?s=20&t=A2xBHMGIsQrclHFNiv9Aqg

To GCR, the signs pointed to an obvious new trade: short the market.

He believed the best way to profit off of the inevitable sell-off would be to bet against overbought altcoins, which stood to lose up to 90% of their value in a bear market.

“We knew that the Fed was going to signal a more hawkish stance,” said GCR. (A more aggressive approach by the Fed to tame inflation would undermine the “digital gold” case for bitcoin and/or spur selling by investors who viewed the cryptocurrency as a risk asset.

And where bitcoin goes, the rest of crypto follows.)

“Everyone had been saying for all of 2021 that they would sell everything, lock in gains,” GCR went on. “Once the sell-off started to actually happen, people found increasingly convoluted excuses for why the cycle would keep on going.”

After the success of the ETF project, RebirthDAO set its sights on a new trade: a big short.

On Nov. 26, GCR put out an open call to his legion of Twitter followers: He was hiring researchers to look into the distribution, unlocking and vesting schedules for dozens of tokens.

https://twitter.com/GiganticRebirth/status/1464278150121197589?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1464278150121197589%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fmarkets%2F2022%2F02%2F17%2Fhow-the-big-short-dao-bet-against-the-crypto-market-and-won%2F

Eventually, the thinking went, any unlocks – predetermined schedules at which locked tokens are deemed available for trading – would flood the market with a massive supply of additional tokens, depressing prices.

Although there are nearly 3,000 members in RebirthDAO, only 50 to 60 members have earned an exclusive "Alpha" designation, which allows those members to access restricted chat rooms and discussions where profit-generating trading ideas are exchanged.

To gain admission, a prospective member must "audition" by sharing some of their winning trading strategies with a handful of DAO administrators, who evaluate candidates based on the quality of their alpha. (No payment is required.)

Conversations in the Discord channels focused on several trading themes, including "The Big Short," "Macro Task Force" and "News Trading," as well as multiple web-scraping bots.

According to the group’s "Introductions" channel, members’ backgrounds span from former poker champions to medical students, with many having had trading experience in crypto or traditional financial markets.

While GCR provided a targeted list of tokens and the central trading thesis, the analysts would independently research the unlocks and then reconvene to iron out any conflicting information.

They also relied on blockchain analysis, such as following project treasury wallets, liquidity provider wallets and project team wallets.

After weeks of research, the researchers identified a list of about 30 highest-conviction tokens to short.

Other shorted tokens, according to GCR, included Gala’s GALA (-77% from November all-time high), IoTeX’s IOTX (-80%), The Sandbox’s SAND (-64%), Ethereum Name Service’s ENS (-80%), Gitcoin’s GTC (-76%), Livepeer’s LPT (-75%) and Axie Infinity’s AXS (-69%).

These tokens have all massively underperformed bitcoin (-45%) and ether (-49%), as well as the broader cryptocurrency market (-45%).

“Most altcoins will never recover back to their all-time highs. The vast majority will trend to zero and be replaced with new narratives and new rotations. Things can go much much lower than people realize" said GCR.

It's clear here that GCR and team "zigged" (sold) while everyone else "zagged" (bought)

And I don't know if I'll be executing trades anytime soon but I'll sure be following @GiganticRebirth to see what he predicts next 👀

This also feels like a good time to drop this quote:

"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria" - Sir John Templeton

Full credit to this thread goes to:
- coindesk.com/markets/2022/0…

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