knot here Profile picture
Dec 11, 2022 24 tweets 6 min read Read on X
As a trader, there is barely a time that you can transparently share edge, but since FTX has gone down, it is clear that this strategy is never coming back, and I thought I would share insight on how i extracted round 5000% of value from the incompetency off SBF (1/x)
FTX offered many exotic derivatives, but what made a lot of these different is the way that they were all rebalanced. Most exchanges keep this within a tight threshold or if it's rebalanced intraday, they keep it pretty private (2/x)
FTX offered something infamous called the "Leveraged Token" which was tokenized leverage from a perpetual futures market contained within a spot token. For example ETHBULL was a spot token that SHOULD have given you 3x leverage on ETH-PERP (3/x)
ETHBEAR SHOULD have given you -3x leverage, ETHHEDGE SHOULD have given you -1x leverage (4/x)
The problem with this, is the fact that these tokens were almost NEVER at their true leverage. If you owned ETHBULL and the market pumped, you would end up with lows of 1.5-2x leverage, and if the market dumped, you would have up to 4x (sometimes more when it was meant (5/x)
to auto rebalance but this was very rare, and meant that if you were wrong you would get over 1x extra unsolicited leverage) (6/x)
To make ensure, that these tokens retain the advertised leverage at some point in time, FTX would rebalance these tokens everyday at 00:02 UTC. To which they would inject capital to the respective perpetual futures market to reback the "Leveraged Token". It would take (7/x)
about 10 minutes for all of these leveraged tokens to go back "out of balance", almost always against the token holders (8/x)
However, this is extremely stupid, and why these funds that invested in Sam really need to have a look at themselves, as I'm a literal street lad that found this anomaly and was able to quantify it and extract exponential value quite easily (9/x)
By finding all of the leverage tokens and grouping them respectively to their underlying perp, meant I could literally use an excel program with VBA to figure out how much each perp is out of balance respective to their Leverage Tokens (10/x)
Then in the same excel file, we can then see how "out of balance" each group leverage token is (leverage discrepancy is how much out of leverage it is -100% equals it needs a whole 1x worth of capital to be rebalanced (as you can see this is over 2x out of leverage, (11/x)
which is beyond the "FTX Guaranteed" intraday threshold) (12/x)
Using this strategy, I could position myself with 20x leverage in the direction that I KNOW FTX has too take. Because 1. I know what time they enter 2. I figured out the market sizes (re: all BULL/BEAR/HEDGE tokens etc) needed and the directions to rebalance" (13/x)
This worked for a long time, and it was when I was up about 2000%, SBF decided to 1. brick my account 2. change the rebalancing process so they frontran my frontrun. Luckily most my capital was out of FTX for a daily post 00:02 UTC strategy (14/x)
So while FTX's onboarding process was easier than gmail in 2004, I made burner accounts that I would loop my capital and continue to extract value from SBF. After they changed the strat to frontrun their own rebalancing (wonder with who's funds), I would frontrun their (15/x)
frontrun, and then was now about to backrun their unwinding of their new daily position in their rebalancing strategy. This ended up becoming more profitable for me as I got to vs SBF directly as well as the systematic bot. (16/x)
This was ongoing for about a year and a half, and I have accepted I will never get gains this good ever again, because that was the most idiotic setup for a rebalancing procedure I've ever seen (17/x)
It's also worth noting that the Leverage Tokens aren't even ran by "FTX", but rather a company called LT Baskets Ltd. based in Antigua?…… (18/x)
I hope this is able to give people some insight on how bad @SBF_FTX was as a whole, and to really have a think if you ever thought he was a genius (not as an insult, maybe as a lesson)

- (19/x)
And big shoutout to @aussiebattler90, very underrated trader that helped a lot with developing this strategy. And to @BitcoinTrad3r for pointing out the anomaly - (20/x)
And shoutout @SBF_FTX @FTX_Official
since my dicks on the table, heres an example of the data i could make to figure out how much they needed to trade. ALLLLL PUBLIC DATA OFFERED BY FTX
^^ That is bad data since its when they were nearly done, buy + == long, - == short :):):)
Found this screenshot, that's more of the data used for this strat. Maybe I'll have to upload a screen record from back in the day one day 🥲

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