The story of a big market maker becoming a leek: a careless move

It's raining again in Beijing, and I just met an old friend who has always been a talent I admire. But this meeting with his mood is full of dark clouds. I listened to the story he told me and asked for his opinion. I will share this story with you here, so as to give you some warnings. After all, it is embarrassing in itself to be reduced from a big talent to a small leek. For the convenience of narrating the story, I will write the following story in the first person. Remark 1: If readers do not have deep financial experience, some concepts presented in this article may not be easy to understand, such as high-frequency trading, market makers, and hedging strategies. When encountering these contents, you can skip and then search-ethexc for keyword learning. This article is talking about a truth, no matter how professional talents are, they cannot operate against the trend. Remark 2: Readers can get a glimpse of the market logic and ecology of the domestic cryptocurrency market from the article. Many times, although they are in the market, they can't see anything clearly. Most of the time, those who can see the price trend most clearly are not analysts or project parties, but market makers, market value managers, market makers, and exchanges. Article structure: High-frequency trading is not enough? The Rise of Market Makers, Combine Harvesters, Gambling or Investment, How Do Talents Become Leeks? Follow-up My name is Li Changle. I graduated from the Computer Department of Beihang University in 2012, and I minored in finance at that time. Then I went to a financial company as a trader. I entered the currency circle in 2015, because I wanted to get rich, and traditional finance was not fast enough. I did do it in the later period, but I just turned a corner. However, you will see later that my fortunes and losses are different from those of coins and futures in the general sense. I made my fortune through a unique technical route. Encrypted lending company Nexo files lawsuit against co-founder over asset account: Jinse Finance reports that encrypted lending company Nexo is taking legal action against its co-founder Georgi Shulev, a director who claims to own part of an asset account held by the company. ownership. Nexo on Wednesday asked the U.K. High Court to order Georgi Shulev to transfer nine cryptocurrencies, including bitcoin and ethereum, to the company as part of a July settlement. According to the agreement, Shulev himself will receive USDT and Nexo tokens worth $1 million in five installments. Nexo claimed that its corporate accounts were locked at a time when crypto asset prices were falling. According to the suit, the assets in the account were related to losses of about $7.9 million. It is reported that Nexo and Shulev have been fighting over the account, which is estimated to hold 880 bitcoins. The company claimed that the account was used for corporate purposes, while the former director believed he opened it in his personal capacity and claimed ownership of some of its crypto assets. (Blockworks) [2022/8/17 12:31:34] At that time, I wrote a lot of quantitative trading strategies, which can make money, but I know this is not the best trading method. I began to think about how to trade at high frequency in the encrypted market. But until now, the most profitable thing in the traditional financial market is not by strategy, but by high-frequency trading. This is relatively popular in North America, but there are not many people involved, mainly large organizations. The reason is that server rental is very expensive. This is not a joke. High-frequency trading can quickly capture market fluctuations at the millisecond level, and no longer rely on the so-called judgment of a single or comprehensive strategy. It is normal for the annual rent to be hundreds of thousands of dollars. 33 digital cultural creations from the collection of cultural relics launched Whale: Golden Finance News, from May 16th to May 23rd, Whale launched a series of activities of the Treasure Plan - 28 cultural and museum units re-interpreted the creation and distribution of the collection of cultural relics For digital cultural and creative products, the public is invited to participate in the historical knowledge answering activity of "inheriting culture, this is very ancient", and a live broadcast of Yunyou tour museums is launched on Alipay Life Channel, presenting more possibilities brought about by the digitalization of cultural museums. It is understood that the 33 digital cultural and creative products launched this time are designed from representative national treasures of various dynasties in the history of China, and are collected in 28 national first-class museums. According to Duan Xiaoming, curator of the Hunan Provincial Museum, cultural relics are the memory of history and culture, as well as an important carrier of national genes. From physical cultural and creative commodities to digital cultural and creative exploration, the goal of better development and promotion of cultural relics resources in the collection continues, allowing cultural relics to 'walk out' of the museum with new forms and new carriers, approaching the masses, and improving the public accessibility of the museum to give full play to the power of the museum. At the same time, the innovative creation of cultural relics must avoid vulgarity and spoofing, and digital cultural and creative products must avoid disorderly hype. [2022/5/16 3:19:51] Since 2015, my colleagues and I have discussed high-frequency matters. It was found that the depth of the market was too poor. Basically, the difference between the first selling price and the first buying price can be quite different. There is no way to realize my dream of high-frequency trading with this depth, and the liquidity is not enough to deal with real high-frequency trading until today. The famous American director Kevin Smith will release his latest movie NFT series on Secret Network: On April 6th, the famous American director Kevin Smith announced on Wednesday that he will release the NFT series of his latest movie "KillRoy Was Here". Smith will issue the NFT on the Cosmos ecosystem's Secret Network, which released the NFT of Quentin Tarantino's "Pulp Fiction" in November last year. While the “KillRoy” NFT initiative has been discussed for about a year, its details are only now being revealed. A release date is scheduled for the second quarter. Like Tarantino's collectibles, Smith's NFT collection will include the film itself as well as additional behind-the-scenes footage that will only be visible to NFT holders, for a total of 5,555 NFTs. Smith's plan is that holders can use the characters involved in these NFTs to create their own content, the best of which will serve as sequels to the movie. (CoinDesk) [2022/4/6 14:08:47] We suddenly discovered a business opportunity, high-frequency trading cannot be used, and the reverse is used as a market maker. What does that mean? Since the market liquidity is not good, there must be a market for market makers. We went to the exchange to cooperate to provide them with liquidity, and then collect money. It's not just the commission here, but the actual money that the exchange gives us. Because we are valuable, we can help him make the transaction smooth and the data look good. Only in this way will customers be willing to play. At that time, there was still room for arbitrage. In fact, it was also the same reason. The greater the price difference between different platforms, the greater the room. Multichain set up a security fund to compensate users for losses caused by system vulnerabilities: On March 17, Multichain officially announced the establishment of a security fund, which is mainly used to compensate users for any potential losses caused by loopholes in the multichain system and services. From March 17th, 10% of Multichain's monthly transaction fees will be used for security funds. When a risk occurs and users do suffer losses, Multichain will jointly investigate the incident with a third-party security agency to determine the cause of the loss, and the analysis and compensation plan will be displayed in the Multichain community. It is reported that the fund is not applicable to losses caused by the system/service of the project partner, the user's own misoperation, or the user's own risky operation due to negligence. [2022/3/17 14:03:05] We became market makers after a crazy year in 2017. From a computer science student, I became a relatively free financial person. The second half of 2018 and 2019 were originally a bear market in the market, and various digital currencies were diving, but we did not delay making money, because it is very convenient for many funds to use the ERC20 protocol of Ethereum ETH to issue coins, and they need market makers and Market value management teams and small exchanges have also sprung up like mushrooms, and market makers are also needed. Let me tell you here that in traditional finance, there are market makers. To put it bluntly, market value management is manipulating stock prices, which is a violation of regulations. The rule in the crypto market is that there are no rules. So our team is both a market maker and a market value manager. There's also a lot of room for profit here. Japanese game development company Square Enix reached a cooperation with The Sandbox: On March 3rd, the Japanese game development company Square Enix ("Final Fantasy" game publisher) announced that it had reached a new agreement with The Sandbox, which will make its "Dungeon Siege" (Dungeon Siege) game IP into The Sandbox, and allows players to incorporate these elements into their own custom experience. (News bitcoin) [2022/3/3 13:35:29] I still remember last year, the Super Mario line and the fishing line, that can’t happen often in traditional finance, but the encryption market is slippery, the project Fang Lamxxx, boxx, SHx, etc., I won’t name them directly here, let’s share the pictures for you to experience for yourself. These currencies are the result of market value management. When the market value grows to a certain target, such as a circulation market value of 10 million, if it reaches 20 million, the increased market value management team can get a considerable share (10%-30%) It’s all possible, that is to say, if we pull 10 million yuan, we earn 1 million+, and we generally don’t need to make market-making funds, high-yield and low-risk transactions), and it’s enough to design a strategy for pulling and shipping, not very Difficult, what is needed is experience. There should be dozens of such teams in China, and less than ten professional ones, and I am one of them. If this is the traditional financial market, of course it is an illegal operation. There is no such rule in the encrypted market, so it can be done crazily. The picture above has nothing to do with our team, please don't guess. I'm just stating the matter, just giving an example. I also dream of using long-term stable and effective strategies to make a lot of money like large institutions in the traditional financial market, such as Bridgewater Fund, Renaissance, Blackstone and other funds and asset management companies. Instead of developing and maintaining robot strategies to earn water delivery money, although it is not a lot, it is far from my dream. Because high-frequency strategies cannot be used, the only way to make a huge amount of money in trading in the encrypted market is to formulate medium- and long-term long-short plans, as long as you judge the trend well. Since 2017, I have always felt that Ethereum, as the second largest encrypted asset in the world, is useless. It is used for ERC20 currency issuance, and it is used for ICO crowdfunding to cheat money. A worthless thing must fall. ——Looking back now, I may have seen too little at the time. In 2020, I have adopted the latest mid-to-long-term strategy since May, because I think that DeFi will not rise, and it must not be compared with centralized traditional finance, so my strategy is to short Ethereum. I know that there may be a bull market accidentally after BTC is halved, but it should not start until half a year later, that is, November-December of 2020. However, this time it may be other mining coins or digital currencies, and there is a high probability that it will not be Ethereum. So, my strategy at the time was like this: short Ethereum; this is my judgment and long Bitcoin at the same time, which is the hedging insurance I added. I don't think eth will rise more than BTC, even if it rises at the same time, I can still make a profit, when the position ratio is close to the equivalent leverage. I think this is a rational gamble, that is, a reasonable judgment, and you can become famous after World War I. A week after Bitcoin was halved, I started to implement my own strategy. The short position of ETH was around 200 US dollars, and the subsequent replenishment slowly became 210 US dollars. My strategy has been deduced by me. As long as the growth rate of ETH is within 50%, I will not lose my position, and I can make a small profit. That is to say, as long as ETH does not rise to 210*150%=315 US dollars, if Of course I made a lot of money when it fell. Even with the addition of BTC insurance in my strategy, as long as ETH does not rise to $315 in one trading day, I will have no problem. The logic is self-consistent, I put most of my net worth into it, hoping that my capital will rise to a level after this time. The picture above shows the recent price trend of ETH (August 15, 2020). On July 19, 2020, ETH closed at 239 US dollars. I added chips to cover the short position and stick to my judgment. The next day, July 20, ETH broke through $318. If there was no margin call from the previous day, I would probably have been liquidated. But at this time, I already had a lot of losses. What I need to do now is to stick to my strategy and continue to short and continue to cover positions. I don't believe that I can increase another 30% on this basis, and I almost do my best to cover positions. As a result, in the future, 370$, 380$, 400$! During the continuous shocks on August 1 and August 2, I no longer had the funds to cover my position again, and I had to close my position after a big loss. This battle wiped out more than half of my net worth. It is because of shorting ETH. I haven't seen the greatness of DeFi applications before, maybe because I worked in traditional finance before. In fact, ETH is not just DeFi. ETH has created today's encrypted world. BTC is the originator of the mountain, ETH is the master of the generation, and Solidity The programming language is very important, and there are many cooperative ecosystems and developers. After I became a boss, I lost my geek heart and turned a blind eye to the cleverness of ETH. In fact, even if DeFi cannot be a big success in the future, the blockchain has other businesses , Ethereum is absolutely unavoidable. Going with the trend instead of going short, my idea of getting high returns by shorting ETH is now shattered. The above is the story of my old friend. I have always admired this buddy. He is an out-and-out computer and financial talent. However, he made a big mistake in the process of chasing his dream: going against the trend. Go short ETH. What is smarter than most people is that he is not only shorting Ethereum, but also adding insurance to go long BTC. But even so, when ETH skyrocketed, he still couldn't find a reasonable point to close the position, because ETH rose too fiercely. Why care about your bumper when a big car is unstoppable? Hit it directly. I asked my friend Li Changle about his future plans, and he said that he has not lost money yet, but simply doing more in trading is not the most stable. He wants to be more stable, he will take out part of the funds to deploy the Ethereum mine, and a small amount of Bitcoin will also be deployed. He said that he wanted to be a stable miner. He said that since he started shorting Ethereum, he hasn't had a good night's sleep for a long time. The sky was raining harder and harder. We sat in the corridor, facing our teacups, but felt very peaceful. I thought about many things, about his intelligence and brilliance, about how he changed from a talent to a leek. However, he is a thoughtful leek, and the future is still promising. Postscript: This story is purely fictitious, any similarity is purely coincidental.

Tags：

Huobi Exchange