Skip to main content

The Great Crypto Conspiracy? Or do prop traders just do their job?

 


Alameda Research is a crypto trading firm and liquidity provider founded by crypto billionaire Sam Bankman-Fried (SBF) . Before founding his company in 2017, SBF spent three years as a trader at quantitative proprietary trading giant Jane Street Capital, specializing in equities and bonds.


In 2019, SBF launched crypto derivatives exchange FTX, which has quickly become the fifth largest exchange by open interest. The exchange is based in the Bahamas and was able to raise $400 million as of January 2022. The company is valued at $32 billion.


FTX's global derivatives exchange business is managed separately from FTX US, another SBF company, which also raised $400 million from investors including Ontario Teachers Pension and SoftBank.


The self-made billionaire has big dreams, such as taking over financial giants like Goldman Sachs . In July 2021 he already mentioned that "investors' money will very likely be used for mergers and acquisitions".


On June 18, crypto broker Voyager Digital announced that Alameda Research had agreed to provide the company with a $200 million coin ( USDC ) loan and a "revolving line of credit" worth 15,000 bitcoin ( BTC ) . grant of $319.5 million.


In an interview with NPR on June 19, SBF, Alameda Research and FTX said they "have a responsibility to seriously consider intervening to contain the contagion, even if it means a loss to ourselves."


In the interview, SBF also said its companies had "done this a number of times in the past." He loaned $120 million to then- ailing Japanese crypto exchange Liquid .


This news raises some interesting questions. More importantly, traders understand what a proprietary trading firm is and how market makers work in the crypto space.


What is a Proprietary Trading Company?

Proprietary trading means that the investment firm or investment vehicle uses its own money instead of charging commissions on client trades. Banks and financial institutions use this trading strategy to make profits and minimize risk.


Through the use of sophisticated modeling and trading software, quantitative firms use a variety of strategies to gain a competitive edge over regular traders and investors, including arbitrage, derivatives and high-frequency access to the market.


Also known as "prop trading" for short, this strategy is a popular concept in traditional finance for bonds, stocks, commodities, and debt securities.


What is liquidity provision?

Companies that provide liquidity enable trading in financial instruments by offering their own resources to allow buyers and sellers to trade with ease. Liquidity means being able to convert an asset into cash. So "liquidity provision" essentially means market making.


Market makers are regulated entities in traditional finance. Their job is to maintain a minimum level of bid and ask prices at all times so that investors have the liquidity they need when entering or exiting a market.


As a rule, this process is carried out by specialized commercial companies, but it can also be carried out independently. Official markets have lower trading fees and get cheaper funding, but anyone can arbitrage at their own expense and risk.


What does Alameda Research have to do with cryptocurrencies?

Alameda Research, Jump Trading and DRW Cumberland are among the leading prop trading firms providing liquidity for core exchanges and DeFi purposes .


These companies aim to generate profits for their respective shareholders, but sometimes that means investing in crypto assets directly and using middlemen. In short, they take a risk in order to achieve a potential longer-term gain. Risk is an essential part of liquidity provision.

My Top Picks
Honeygain - Passive earner that pays in BTC or PayPal
MandalaExchange -The Best no KYC crypto Exchange! 
BetFury - Play And Earn BFG for daily Bitcoin and ETH dividends!
Pipeflare - Faucet that pays in ZCash and Matic, Games pay in DAI
Womplay - Mobile dApp gaming platform that rewards in EOS and Bitcoin
Cointiply - The #1 Crypto Earning Site
Torum - Join the latest Social Network and earn TRM for Free! 
LiteCoinPay - The #1 FaucetPay earner for Litecoin 
LBRY/Odysee - YouTube Alternative that lets you earn Money by viewing videos!
FaucetPay - The #1 Microwallet Platform
FREEBTC - The #1 FaucetPay earner for Satoshi's
FaucetCrypto - An earning/faucet site that pays out instantly
FireFaucet - An earning site that pays better for some than Cointiply
DogeFaucet - Dogecoin Faucet
xFaucet - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, FEY - Claim every 5 minutes
Konstantinova - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BNB, ZEC, USDT, FEY, 25 Claims Daily

Comments

Popular posts from this blog

From offchain to offchain: Statechains meets Lightning

  Without a doubt, the most significant off-chain Bitcoin solution is the Lightning network. But in its wake, the statechain has emerged as an intriguing replacement. There is currently a proposal to link the two offchain networks. From an ocean, for example, you can see sunbeams glistening in the water, waves rippling, and possibly a jellyfish drifting toward the light. But you only see a small portion of it. The distance from the sea's surface to its bottom is hundreds of meters. It has dozens of different fish species swimming in it, crabs and starfish crawling on the bottom, shells clinging to rocks, and sea plants climbing up. A completely new world starts where your gaze diverges. You can picture a blockchain like Bitcoin, just like the sea. What you see on the outside is only a small portion of what is actually there; the set of UTXOs (coins) and transaction history that full nodes store are just the beginning of a much larger world. It's the plan, at least. With Bitcoin

MSP Recovery and Tokenology aim to optimize healthcare with the help of Polygon

  MSP Recovery LLC, a Miami, US-based healthcare provider with an estimated enterprise value of $32.6 billion, is partnering with Web3 company Tokenology to jointly launch a new blockchain platform called Lifechain. Lifechain wants to leverage the verifiable and transparent nature of blockchain technology to aggregate medical care claims, medical expense reports and patient data and streamline their processing. For this purpose, MSP Recovery launched its own LifeWallet in January, which already has 1 million users. In addition to the wallet and blockchain platform, an associated crypto token called LifeCoin is also used. The press release explains that the primary purpose of the system is to enable secondary healthcare providers to more effectively bill health insurance companies for their costs. “The number of medical claims tokenized going forward will surpass $50 million per day by 2024. For this we need scalability, security and sustainability, which we have only found with Polygon

British financial regulator criticizes cooperation between Binance and Paysafe

  The British financial regulator FCA has expressed concerns about the partnership between market-leading crypto exchange Binance and payment service provider Paysafe. As the British regulator complains, the partnership gives Binance access to the influential British payment network Faster Payments Service (FPS), from which the crypto exchange was previously cut off. Last June, the FCA ordered Binance to stop all business activities in Great Britain. As a result, prominent banks such as Barclays have terminated their cooperation with the leading crypto trading platform . Through the cooperation with Paysafe, Binance can now again offer deposits in British pounds sterling and transactions within the European Payments Area (SEPA). However, this fact is a thorn in the side of the FCA, as it classifies the crypto exchange as a “considerable risk factor”. However, the financial regulator sees little room for maneuver to counteract this, as the Financial Times reports . “ Paysafe understands