crypto strategy

Shorted $173M Near Original Triple Following FTX-Binance Deal Collapse

UPDATED 9:15 PM ET, November 9, 2022: In the 24 hours since controversial investor Avraham Eisenberg shorted the peg cryptocurrency over fears it could lose its peg following the collapse of the cryptocurrency exchange , FTX, it nearly tripled its position to $173 million, it says Forbesand provided commercial screenshots.

Eisenberg used his original $20 million in USD Coin (USDC) as collateral on the decentralized compound exchange and borrowed $173 million of tether. If the tether cryptocurrency drops 1% below its $1 peg, it will collect $1.73 million, less transaction fees. “I’ve spoken to other top traders who have agreed tethering is likely to have issues,” says Eisenberg. “And I thought it made sense to keep measuring.”

Perhaps coincidentally, Tether had a problem on Wednesday, one that the stablecoin’s creator said was technical in nature, involving a faulty data stream that made the crypto look like it had broken its ankle. “This morning, due to a data issue resulting from CoinGecko’s API connection with a few select exchanges, the Tether peg appears to have dropped below $1”, Tether Operations said in a statement posted on its website. Tether has not disappeared.

The company also said it did not give credit to FTX or its sister company Ameda Research and called out “industry critics and skeptics” for “doing itself an injustice by remaining misinformed.” and jumping to conclusions.

As of 9:15 p.m. EST, tether was holding its peg at exactly $1, according to the Compound platform used by Eisenberg. He says the stablecoin was trading at $1.0001 when he started the short and fell as low as $0.9985, although he only recovers if he closes the position when the coin is down. below peg, which he has until Friday to do so.

In October, Eisenberg made a name for himself by obtaining After more than $100 million by outwitting a decentralized exchange, forcing him to pay him the exorbitant sum. After admitting to the aggressive tactics and promising to return most of the money, he applied his unconventional investing acumen in the form of two bets placed around the epic collapse of FTX, the exchange that moved from cryptocurrency JPMorgan to its Lehman Brothers. overnight.

On Sunday, Binance CEO Changpeng Zhao, widely known as CZ, announced on Twitter
TWTR
it was selling an estimated $500 million worth of the FTX token used to reward users of this exchange. CZ seemed to imply that his decision was based on reports that FTX withdrawals were slow and that the cryptocurrency giant could be insolvent. Exactly what happened next is murky, but it appears the tweet contributed $6 billion from the FTX exchange. “I didn’t know it was going to be ‘the straw that broke the camel’s back'”, CZ tweeted On Monday

The losses were immediate. Lauded FTX CEO Sam Bankman-Fried saw his net worth nearly wiped out after peaking around $24 billion, mostly based on private enterprise’ assess. A number of companies, including cryptocurrency trading platform BlockFi, which was bailed out by FTX following the $40 billion terra collapseluna stablecoin, rushed to allay concerns that without their benefactor, they could disappear.

But not everyone loses money to the drama, and Eisenberg has already made a few bucks. With the collateral damage surrounding the rapid demise of one of crypto’s major forces only beginning to be measured, Eisenberg launched the first phase of his terra bet last night.

“Most likely they are fully backed, and they are doing well, in my opinion,” says Eisenberg, of the anchor cryptocurrency with a market value of $69 billion. “But everyone is freaking out now. And so if they weren’t doing well, then the most likely time for there to be a bank rush and panic and rejection is probably in the next two days.


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Tether (USDT) is supposed to be pegged to the US dollar but is faster to electronically transfer than the greenback and therefore used as an on- and off-ramp for cryptocurrency transactions that need to be capitalized quickly. The asset was designed to be backed 1:1 by cash and less stable commercial paper, but several companies behind Tether were a fine $41 million last October for making misleading claims, leading to a process by which the company’s CTO, Paolo Ardoino, said this would shift support assets into short-term US Treasuries.

On Tuesday, Eisenberg, who resides in Puerto Rico and operates an undisclosed number of unidentified businesses, filed $20 million USDC,
USDC
the stablecoin backed by Circle and Coinbase, as collateral on Compound
COMP
and borrowed $65 million USDT from the funds.

In May, Eisenberg says, he made $10 million in a single week on a short of TerraUSD (UST
UST
), the stablecoin behind the former $40 billion Terra
LUNA3
ecosystem that collapsed when the luna cryptocurrency that supported it disintegrated.

Also on Tuesday, Eisenberg says, he bought a $17,000 put option that expires Friday on shares of $8.4 billion investment firm Robinhood, the only one of several companies FTX has invested in during the month. current market downturn and which is also listed on the stock exchange. He says it was the same day he opened the tether position.

In May, Bankman-Fried bought a 7.6% stake in Robinhood, which in addition to offering traditional stock trading, allows users to trade cryptocurrencies. Based on what was at the time a 20% drop in Robinhood shares, at around $9.64 each, Eisenberg made a profit of around $60,000, essentially betting that Bankman-Fried could liquidate the assets of his business in the brokerage. “My thesis was just that if he’s in financial trouble, he might not want to own that much or might have to sell some of it.” Eisenberg no longer recommends this strategy because it’s possible that all the downsides have already happened.

A possible next step based on the FTX saga: Eisenberg says he’s in conversation with a few groups who have cash trapped in FTX that he can buy at a discount now, hoping for a full refund more late.

Relatively new to the public eye, Eisenberg came to public attention in October when a blogger named him the author of a ‘hack’ of decentralized exchange Mango, which earned him more than $100 million. of dollars. Although it later revenue $67 million to help make the swap solventhis twitter defense of the “highly profitable trading strategy” has earned him respect and notoriety on social media.

On Tuesday night, Eisenberg tweeted that he was considering buying his own exchange. “I think I could tweet better than SBF and not lose embarrassing money while bragging about the quality of our risk engine,” he wrote.

He also had harsh words for Binance, FTX, and the entire crypto industry. Both FTX and Binance have allowed the exchange of luna assets on their sites, and Binance has directly invested in the project. “They’ve been the way that a lot of retail investors have been wronged,” he says. “And I think if you ask them, and they’re honest, they’d say they don’t care. They are just there to supply the market. People can buy whatever they want. People have the right to lose money or whatever. And they gladly accept their fees.

“I’m very skeptical about crypto,” he added. I think it hurt a lot.

.

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