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The DeFi investment strategy of SBF, the founder of Shenpa FTX

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Is SBF maliciously shorting the DeFi market? What is SBF's DeFi investment strategy?

Author: Brother Mask

Introduction:

In this article we will discuss 3 core question.

Is SBF maliciously shorting the DeFi market?

What is SBF's DeFi investment strategy?

How should we retail investors learn from institutional investment thinking in the DeFi market?

This article has a total of about 2400 words, and the estimated reading time is 6 minutes.

A photo of sleeping in the FTX office, a harmless and peaceful expression, SBF may be 2020 The hottest figure in the encryption circle of the year.

bsp; bsp; bsp; bsp; The prices of DeFi tokens have plummeted one after another. Whether it is SUSHI, KIMCHI and other "foodies", or popular leaders such as YFI and UNI, they all experienced the "fastest toe cut in history" within a month.

Someone broke the news that the "behind the scenes" of all this turned out to be SBF, the founder of FTX.

The reason is that SBF’s Ethereum address (0x477573f212a7bdd5f7c12889bd1ad0aa44fb82aa) was picked up, and we found that this address has a market of about 90 million US dollars worth of total assets while having total liabilities with a market value of approximately $25 million.

The Debank wallet data of this address

Research In the debt process, it is not difficult to find that the address of SBF mortgaged about 21 million FTT, 2.2 million SRM, and 14 million SUSHI on the decentralized financial platform Cream, and borrowed about 165 YFI and 2.7 million UNI.

This process is understandable, similar to the major shareholders of listed companies mortgaging their own equity to obtain cash, which is a traditional market normal operation.

CREAM platform data for this address

by tracking address , we found that some YFI and UNI tokens flowed into the Binance Exchange. This problem is very big. It seems to be the real hammer of SBF shorting DeFi.

YFI lending records at this address

How much impact will these YFIs have on the market What about the impact?

According to Coingecko data, on October 15th, the YFI network-wide transaction volume reached 770 million US dollars, and the address borrowed 165 YFI is about 3.14 million US dollars, so that is to say, the YFI lent by SBF accounted for 0.4% of the total market turnover on that day-obviously, 0.4% does not seem to be established as the fuse of an objective short trend.

Coingecko YFI historical data

No on YFI" After harvesting”, I explored the SUSHI historical transaction data of this address. After all, Chef Nomi dumped the private key to SBF. However, it can be seen from the figure that the address was transferred from FTX, Binance exchange, and obtained SUSHI through liquidity mining, and did not sell at a market high of more than $10.

Etherscan SUSHI historical data

When I searched the The on-chain transaction records of addresses, YFI, SUSHI, UNI, LINK, CRV, CREAM... read them one by one. I can't seem to find any evidence of malicious shorting. Such a rich SBF sold YFI with 0.4% of the daily trading volume? Why not cash out the $10 SUSHI?

After exploring here, I suddenly realized that something went wrong.

Do you still remember the total asset size of the address at the front? Total assets of US$90 million and net assets of US$65 million.

What is the scale of assets borrowed from this address? $25 million YFI, UNI.

What are the uses of the loaned assets? Rush into the exchange to open short and earn income.

What is it to take part of the $65 million DeFi ecological net assets to "short" $25 million?

If it is short, why doesn’t he sell more than $65 million in assets; but it seems that this is not simply Otherwise, why doesn't he just hold a $40 million net-long position?

When I think about this problem in a different way, the problem suddenly becomes clearer.

SBF is holding $65 million in DeFi ecological assets, which he has long been optimistic about and supports. At the same time, due to the large scale of assets and the obvious overheating of the DeFi market in July-August, he needs to hedge the risk of short-term market downside, so he holds a hedge position of less than 25 million US dollars.

Actually, Hedging is an all-too-common investment strategy. In the same sector, holding long and short positions of different sizes on different assets can effectively balance the overall risk of the market.

Give me an example that couldn't be more popular. Suppose you want to invest in milk tea shops in the long-term. You are optimistic about and buy more HEYTEA (although HEYTEA is not listed yet), but there is another risk at this time. For example, the potential outbreak of the second epidemic may have an impact on offline retail.

What should I do? The best way is to short another milk tea shop at the same time. For example, you short Nayuki while you are shorting Doheytea. In this way, even if the overall milk tea field is in a downturn, you can still surpass the market share and market share of your peers through Heytea. Profit from brand stickiness.

Thinking about this, SBF's investment strategy seems to have been fully exposed.

Be optimistic about and hold logically self-consistent projects in the DeFi ecosystem for a long time, and hedge against areas that you are not optimistic about in the short term to reduce risk exposure.

Maintain your own independent thinking in this mindless public opinion in the currency circle that only allows ups but not downs , Learning the excellent investment strategies of big Vs is actually a shortcut to the progress of our retail investors.

Calm down and think about it, If the currency circle In other words, DeFi lacks an effective short-selling mechanism, which may instead encourage seedlings to grow.

Why?

The A-share and US stock markets around you are the best examples. It is difficult to short a certain stock in A shares, but the process of short selling in US stocks is very convenient. However, the overall increase of A shares has not been higher than that of US stocks.

That is to say, whether it is borrowing in Cream or shorting in CEX contracts, it is not the real reason for the decline of DeFi tokens Reasons, perfecting a reasonable short-selling mechanism and even a means to promote market value discovery.

Different market participants conduct long or short operations according to their own understanding of the pros and cons of the project, and finally The market is returning to value under such a joint force-severely overvalued projects are squeezed by short sellers, while undervalued projects can be discovered.

Of course, the dissatisfaction of some DeFi enthusiasts, especially YFI and UNI community members, is completely understandable. After all, the currency prices of the projects they support no longer skyrocket - but keep falling, and they need to find an "emotional outlet" .

Public opinion is concerned about the plunge of DeFi

Just, When the emotions are discovered, the reality still needs to be faced.

If the value support of YFI and UNI tokens is hard enough, then no matter who uses them as hedging positions Neither end of the market can change the trend of its market price.

IPhone 12 will be launched soon. If you check Apple’s stock price, you will find that Apple has gone north in the past 10 years. I have never experienced a major decline above the weekly level. Is there a lack of investors who short-sell Apple or buy other technology stocks to sell Apple in the past 10 years?

AAPL Monthly Trend

The answer is obviously no. Moreover, every short position closing is an automatic verification of Apple's value by the market.

It seems that the topic is far away, let's go back to the topic of SBF's DeFi investment strategy and talk about how our retail investors make money.

Can we copy SBF's DeFi investment strategy without thinking?

What DeFi assets does he hold for a long time, what do we hold? What is he hedging in the short term, we just do it?

Talking about this topic, we have to talk about the development of the DeFi world.

All DeFi projects can be roughly divided into three generations, the first generation is a simple lending project with MakerDAO as the core , the second generation is a token swap project with Uniswap as the core, and the third generation is an expanding DeFi and CeFi project. Of course, there are some decentralized lending agreements with relatively simple models that are not included in this list.

What is the core of the MakerDAO class? Overcollateralized.

Whether it is the first generation of Bitshares or MakerDAO or Synthetix, they are actually exchanging excess DeFi assets for lower value assets with stable prices.

What is the core of the Uniswap class? AMM (Automated Market Making).

Whether it is the first generation of Bancor or Uniswap, Iearn Finance, Sushiswap, most of them make use of the time value and flow of assets Conversion between sexual values.

What is the core of SBF's DeFi investment strategy? Be bearish on the AMM field, and be optimistic about other DeFi developments in the long run.

SBF Twitter's thoughts on AMM

The picture above Text translation:

“What needs to be added is that although lower fees and blockchain latency can help improve AMM, making it faster and cheaper to add or remove liquidity, so you can add or remove assets at any time, but in general , or the fundamental problem of not being able to AMM.

AMM forces you to take bilateral risks at the same time, which is obviously an ineffective trading method, even if you improve the slippage Algorithms, simultaneous hedging, or other approaches didn't work either.

Now just because of the rise of liquidity mining, we suddenly forget that AMM was actually a very inefficient trading method before , How unpopular the market is. But it still has to be said that AMM can demonstrate its value in some applications, such as the exchange of stable coins with low volatility, or new projects that require token liquidity.

You can't really fix AMMs at all, the best you can do is make them less difficult to use. Trading order books have solved trading problems in the past, and I believe that trading order books will still be an inevitable trend in the future. ”

So, when we think about this level, it is not difficult to understand how our retail investors should learn from SBF Use the experience gained for yourself.

If you are bullish on the second category and bearish on the first category, then you should hold the UNI category for a long time Assets, and short MKR, SNX hedging at the right time.

If you are optimistic about simple lending agreements such as AAVE and COMP, but you are not optimistic about the combination of DeFi Lego , then you should bet according to the corresponding point of view.

I think this is what we can learn from SBF, a front-line investor and trader in the currency circle.