Truth: the hedging strategy behind FTX CEO's "ten-million-dollar loss"

Today, after news spread across the cryptocurrency industry that "FTX CEO (Sam) has a $13m floating loss position in Bitfinex", RenrenBit founder dong zhao asked Sam on twitter whether the money for the contract was personal or FTX money. "It's personal money and it's a hedging operation that has been shorted elsewhere," Sam wrote on zhao's twitter account. "[Bitfinex is chosen because] Bitfinex has a big discount compared to other trading platforms."

So what are the facts?

Since it is not possible to query all trading data and position positions, block beat BlockBeats cannot fully recover trading details, but we can at least infer from some appearances.

First, we need to know that Bitfinex's Leaderboard is a list of all highly profitable or lossmaking traders, and users can use anonymous displays or disclose their twitter accounts. Similarly, BitMex, the largest bitcoin derivatives exchange, has a similar ranking.

What many people fail to notice is that Sam's earnings in the past two weeks ranked first in the Bitfinex website before the so-called floating loss, so why the huge floating loss this week?

(note: above is the Bitfinex ranking from feb 10 to feb 17)

(note: above is the Bitfinex ranking from February 17 to 24)

However, we found that the Alameda Research account in BitMex is currently in short position. Combined with the recent abnormal long fund rates in the contract market and the trend of the last three weeks, it is not hard to draw a conclusion that this is probably a hedging strategy of fund rate arbitrage. That is to say, short position is chosen in BitMex with higher long fund fee, while long position is made in Bitfinex with lower long loan fee, so as to build a Delta neutral investment portfolio. In other words, under this strategy, traders can ignore the rise and fall of the underlying asset price of BTC, and just take the difference of fund interest rate between the two platforms.

In fact, in addition to unilateral speculation, cryptocurrency leverage products can also be widely used in a variety of relatively stable arbitrage strategies, including cross-market arbitrage, cross-period arbitrage, short-term arbitrage, capital rate arbitrage, option arbitrage, exchange rate hedging and so on.

In cross-market arbitrage, investors benefit from the price difference caused by liquidity differences between different platforms for the same underlying asset.

In intertemporal arbitrage, investors gain profits by the difference in the price spread of the same underlying asset in different delivery periods.

In futures arbitrage, investors gain profits through the convergence of the basis difference of the same underlying asset at the futures and spot ends, and the return of premium and discount;

The fund rate arbitrage in this case is that because the market interest rate will eventually converge, investors benefit from the difference in the fund rate of the same underlying asset on different platforms, which essentially takes advantage of the difference in long-short sentiment among different trading platforms in the same market.

& have spent

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