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Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

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Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#51

Post by JumpCrisscross »

friend_and_foe wrote: post #48
Animats wrote: post #14

So who lost $120M? This is a zero-sum system.

It's not a zero sum system. There are capital inflows. Who loses are people who voluntarily sell. They think they're making a good decision, so does the counterparty, and only time will tell. Every deal you make with someone is both of you doing something you perceive as in your best interest. Speculative investment particularly is a high risk game. Often, it is a good decision on both parts, because peoples needs di…

> It's not a zero sum system. There are capital inflows

It's still zero sum from a dollars in / dollars out perspective. Delayed consequences doesn't make a zero-sum game positive sum. (And to be clear, all money systems are zero sum if we ignore transaction costs without accounting for their economies.)

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#52

Post by JumpCrisscross »

hbbio wrote: post #37
martynr wrote: post #29

Earlier quoted context omitted.

Genuinely curious- In what sense is the risk calculated? I understand that the leverage factor is known but fundamentally isn’t this still just a bet that eth will rise? And if it falls then won’t the loss be multiplied by the same leverage factor? Obviously you can research the eth market and form a view but you can also research horse racing form and the odds themselves should be a fair calculation indicator if the…

As the article says, Ethereum needs to move down 60% for them to be liquidated. This is unlikely to happen overnight (if they are finance pros, they do compute probabilistic models), leaving them time to unwind their position when situation changes.

> As the article says, Ethereum needs to move down 60% for them to be liquidated

This is basic margin math.

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#53

Post by mhluongo »

declan_roberts wrote: post #25

Crazy that people think these cryptocurrencies are somehow less easily manipulated than the dollar.

Not sure anyone in the space believes that.

Rather, a common belief is that over a long time horizon, the debasement of USD will hurt buying power, and that BTC and friends will benefit from that.

Not such an oddball belief if you look at the change in the value of a dollar over the last century.

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#55

Post by [deleted] »

JumpCrisscross wrote: post #52
hbbio wrote: post #37

Earlier quoted context omitted.

As the article says, Ethereum needs to move down 60% for them to be liquidated. This is unlikely to happen overnight (if they are finance pros, they do compute probabilistic models), leaving them time to unwind their position when situation changes.

> As the article says, Ethereum needs to move down 60% for them to be liquidated This is basic margin math.

[deleted]

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#56

Post by friend_and_foe »

JumpCrisscross wrote: post #51
friend_and_foe wrote: post #48

Earlier quoted context omitted.

It's not a zero sum system. There are capital inflows. Who loses are people who voluntarily sell. They think they're making a good decision, so does the counterparty, and only time will tell. Every deal you make with someone is both of you doing something you perceive as in your best interest. Speculative investment particularly is a high risk game. Often, it is a good decision on both parts, because peoples needs di…

> It's not a zero sum system. There are capital inflows It's still zero sum from a dollars in / dollars out perspective. Delayed consequences doesn't make a zero-sum game positive sum. (And to be clear, all money systems are zero sum if we ignore transaction costs without accounting for their economies.)

By that logic everything is zero sum. The number of living organisms started at 0 and will end at 0. In the meantime we have entropy to generate...

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#57

Post by throwawaymaths »

JumpCrisscross wrote: post #49
m3m3tic wrote: post #45

Earlier quoted context omitted.

it's recursive leveraging using multiple different market makers that are giving you further leveraged bets on already leveraged assets

> it's recursive leveraging using multiple different market makers that are giving you further leveraged bets on already leveraged assets This is approximately what Bill Hwang was indicted for doing [1]. [1] https://www.wsj.com/articles/archegos-founder-and-cfo-charge...

You don't suppose he got in trouble with the law because he was doing it with other people's money (and not telling them that's what he was doing)?

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#58

Post by advael »

One time I made nearly 20 times my money in one night of playing poker

I mean, I used to have a poker game pretty regularly with some friends and friends of friends. We'd basically just play until one person got all the chips, but we also allowed buying back in once if you were out before 11 PM. One night when it was especially big, we had a lot of people playing and a bunch of them bought back after going out quickly, and I happened to win that night.

Also, the buy-in was $5, so I won like $95 total

Notice how you can make the story sound really impressive or really piddly depending on how you decide to count it. 20x ROI sounds crazy! Winning less than a hundred bucks doesn't. Also, probably over all the games we ever played I came out about even or maybe a little ahead. I'm okay at poker compared to my friends who played. Not amazing, better than average maybe. But there was no amount of losing that would have represented an untenable risk for me.

Similarly, this article is describing the gains from a single bet in isolation. When you say $120M it's, well, more money than most normal humans will see in their lives (though probably the average income here is more like the top quartile of US incomes), but when you say it's like maybe a 2X ROI on that bet, which represented like sub-5% of the assets of just the wallets making the bet, which I doubt even represents the total assets of whoever owned those wallets (Which could also be jointly-owned), it's a lot less impressive. I'm not sure why it's even worth reporting on unless your goal is to push Ethereum through this kind of number-jiggling for the credulous

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#59

Post by charcircuit »

hbbio wrote: post #19
Cheer2171 wrote: post #18

This ought to be as newsworthy as the headline "Gambler just made $120M using a strategy called 'bet it all on a horse with 20-1 odds"

It's not, because the risk is calculated. Finance has been doing the same for ages, so these people may come from a very traditional finance background...

Risk being calculated doesn't make it any less gambling. Do you think people who play roulette don't understand the risk?

Re: Two Ethereum DeFi traders just made $120M using a strategy called 'looping'

#60

Post by arandomusername »

yashg wrote: post #44

Good for them if they manage to convert those imaginary numbers to actual money. With actual I mean real world money with which you can pay your bills, taxes etc, not the funny internet money. It's still a Ponzi. And writing about this thing in the same terms as legitimate financial trades will not change the fact that it's all a meaningless charade by habitual gamblers.

You seem needlessly aggrevated.

Other people are willing to pay for it, so it doesn't really matter how you feel it's "funny internet money", it's a currency of value.

Curious, what are those "legitimate" financial trades you are speaking about?

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