8 months ago
Offering a unsocial insider perspective, David Choi chronicles his brushwood with arguably the astir notorious commercialized successful crypto’s history.
Unpacking the ‘Widowmaker Trade’ That Upended the Crypto Industry
In the annals of cryptocurrency’s roller coaster history, 2021’s alleged ‘widowmaker trade’ stands retired for galore reasons, including the magnitude of veterans it caught by astonishment and the fig of entities similar Three Arrows Capital (3AC), Blockfi, and FTX that yet were undone by it.
David Choi, an angel investor, MEV sniper and erstwhile crypto money manager, shared a fascinating insider’s account successful a thread connected X, detailing his travel done the infamous widowmaker trade.
1/ I mislaid -$700k successful a azygous trade… and I was lucky.
In 2021, it was known arsenic the Widowmaker Trade. The azygous crushed for each the blowups (3AC, Blockfi, Silvergate, FTX).
I adjacent sent an email & had a telephone astir the systemic risk, but the marketplace was pumping, truthful who cared? Me pic.twitter.com/8PfCWQe3W7
— David Choi 🏧 (@0xZergs) January 13, 2024
The commercialized centered connected Grayscale’s crypto spot products. Due to their unsocial structure, these products often traded astatine a important premium, which was partially owed to galore investors having trouble accessing cryptocurrencies, adjacent large ones similar bitcoin (BTC) and ethereum (ETH) astatine the time. As a result, the worth of the Greyscale spot shares were often higher than the worth of the underlying crypto assets.
This premium presented a seemingly lucrative opportunity: bargain BTC, lend it to Grayscale, person GBTC shares aft a lock-up period, and merchantability them successful the equities marketplace astatine a premium. As Choi recounts, “Every 1 BTC was worthy 1.3 BTC… huh?” The commercialized seemed foolproof, particularly erstwhile GBTC’s premium had, “NEVER BEEN NEGATIVE ONCE.”
Of course, we each cognize what happened. The scenery shifted dramatically and the premium turned to a discount. Choi spends the remainder of the thread recounting a commercialized that was expected to beryllium mostly automated, became a root of mounting stress. He touches connected the frantic efforts for harm control, including securing involvement alleviation and analyzing correlations betwixt Nasdaq and ethereum.
The culmination of this ordeal came with the unlocking of their shares. Choi describes the process of selling disconnected the shares to minimize losses, a strategy that contrasted sharply with others who chose to enactment in, hoping for a rebound.
Ultimately, Choi’s money exited the commercialized astatine a nett nonaccomplishment of -38%, a fig helium considers fortunate compared to others who faced catastrophic losses exceeding -1000%.
Choi’s thread, which is good worthy speechmaking done for each of the juicy details, is not conscionable a locomotion down representation lane, but besides contains immoderate absorbing connections to the present, post-approval ETF marketplace situation. Choi posits that the marketplace dumping experienced aft the ETF approvals stem from unlocks that, “came from this play wherever wealth was locked 2-3 years ago.” Later connected successful the thread, helium elaborates connected this point:
In the marketplace today, we are seeing $35bn of GBTC being sold. It’s truly the past happening near of the 2020-2021 cycle. It’s travel afloat circle. The marketplace is dilatory absorbing each this toxic baggage.
Do you deliberation the crypto scenery is successful a overmuch healthier spot now? Share your thoughts and opinions astir this taxable successful the comments conception below.
English (US) 