Novogratz's Crypto Trading Desk Lost $136M in Nine Months • Hacker News Board

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#51

Post by lend000 » Tue, Dec 18, 2018, 8:23 PM UTC

lordnacho wrote: post #12

The article is missing some critical details. What does the fund do? The article suggests they do arbitrage. Those opportunities actually tend to increase when things are volatile. Also while you can lose money doing it you wouldn't expect a precipitous collapse in NAV. If you discover you're slower than everyone else you can shut down. Volumes aren't necessarily correlated to price either, so that isn't entirely con…

Any arb strategy requires holding reserves, so while the amount of the asset you can afford may increase by 4% per month, it's not a great business to be in if you're measuring from the start of a bear market. Same goes for a lot of stat-arb funds in the space, which are currently measuring their performance against the market, but which are significantly down YTD.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#52

Post by polkapolka » Tue, Dec 18, 2018, 8:27 PM UTC

GreaterFool wrote: post #24

lordnacho wrote: post #12

The article is missing some critical details. What does the fund do? The article suggests they do arbitrage. Those opportunities actually tend to increase when things are volatile. Also while you can lose money doing it you wouldn't expect a precipitous collapse in NAV. If you discover you're slower than everyone else you can shut down. Volumes aren't necessarily correlated to price either, so that isn't entirely con…

I also hear arb is doing fine. I wonder how it works though. Most exchange APIs are terrible and it is simply not technically feasible to do anything using those APIs. Also prices at too many exchanges move in absolute lockstep. Must be private, privileged access to better (internal) APIs, profit sharing, rip the face of "retail" investor kind of deals. After all the "exchanges" are not really exchanges as we know th…

You bypass the API completely and fill orders "manually".

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#53

Post by wpietri » Tue, Dec 18, 2018, 8:32 PM UTC

bhaak wrote: post #25

lordnacho wrote: post #12

The article is missing some critical details. What does the fund do? The article suggests they do arbitrage. Those opportunities actually tend to increase when things are volatile. Also while you can lose money doing it you wouldn't expect a precipitous collapse in NAV. If you discover you're slower than everyone else you can shut down. Volumes aren't necessarily correlated to price either, so that isn't entirely con…

This interview[1] sounds like they called bottom at 6k and then the floor fell out: "We thought it was a bear market. I went into it thinking in the long run crypto is going to be a real structural shift in the world and I can just hedge my portfolio. And to be fair, we did a really great job not losing money the first 60 percent down. What you forget is that a market like Bitcoin that’s down 84 percent has dropped 6…

"Felt like". That's beautiful. The dude had a feel and lost the equivalent of 2300 years of labor (at the US median income).

There's this bit in Taleb's first book, "Fooled by Randomness". This was before he made a shit-ton of money. He pointed out that a lot of the nominally successful traders he worked around would declare a strategy, make a few bets, make a lot of money, and then act like geniuses for thinking up the strategy. However, they'd never really examine the obvious alternate hypothesis: they got lucky.

I used to work for a proprietary trading firm. We'd get new traders by taking very confident, driven people (e.g., former Olympic athletes), making them be clerks for a while, and then turning them loose in the pits. The CFO kept a very close eye on them early on because their natural confidence combined with early successes lead them to believe they were gods. It wasn't until they got really hammered by a bad bet or two that she'd begin to trust them.

It reminds me of a favorite line: "Every corpse on Mount Everest was once a highly motivated person with a can do-attitude."

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#54

Post by orbifold » Tue, Dec 18, 2018, 8:41 PM UTC

JumpCrisscross wrote: post #27

Filligree wrote: post #18

Earlier quoted context omitted.

All you have to do is look at the buy/sell curves. Crypto is 80% market manipulation, 19% traders and maybe 1% genuine use.

> All you have to do is look at the buy/sell curves What the hell are buy/sell curves?

How the orders are distributed in the order book.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#55

Post by Topgamer7 » Tue, Dec 18, 2018, 8:45 PM UTC

wpietri wrote: post #48

robk wrote: post #46

Earlier quoted context omitted.

How??

You think he'll tell you for free? Nah. To learn the amazing secret to claiming to make a lot of money, you have to send him a lot of money. There are rules.

Or buy this ebook for $9.99. Thousands of dollars in value, only $9.99. Get in on this limited offer!

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#56

Post by module0000 » Tue, Dec 18, 2018, 8:47 PM UTC

GreaterFool wrote: post #24

lordnacho wrote: post #12

The article is missing some critical details. What does the fund do? The article suggests they do arbitrage. Those opportunities actually tend to increase when things are volatile. Also while you can lose money doing it you wouldn't expect a precipitous collapse in NAV. If you discover you're slower than everyone else you can shut down. Volumes aren't necessarily correlated to price either, so that isn't entirely con…

I also hear arb is doing fine. I wonder how it works though. Most exchange APIs are terrible and it is simply not technically feasible to do anything using those APIs. Also prices at too many exchanges move in absolute lockstep. Must be private, privileged access to better (internal) APIs, profit sharing, rip the face of "retail" investor kind of deals. After all the "exchanges" are not really exchanges as we know th…

Forget the 3rd party exchanges with their homegrown APIs. If you are dealing with size(1k+), you go straight to the CME and trade crypto futures contracts. Dealing with the CME also adds the regulation necessary(ie CFTC) for your investors.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#57

Post by mv4 » Tue, Dec 18, 2018, 8:51 PM UTC

AznHisoka wrote: post #9

simias wrote: post #3

I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everything continuously but seeing how irrational and easily manipulated the cryptocurrency market has been in the past that seems rather foolish. Given his pedigree you'd think he'd know better than to bet on something that's 99% pure unbridled speculation and 1% act…

One of the best kept secrets in the hedge fund/financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.

I am beginning to wonder, seeing the increased rate of hedge fund liquidations this quarter.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#58

Post by tryptophan » Tue, Dec 18, 2018, 8:52 PM UTC

village-idiot wrote: post #32

apo wrote: post #30

This article was published November 28 of this year. From mid-November to now, cryptocurrency exchange rates have fallen by about 50% across the board, with some much higher. This move took many speculators, including Novogratz, by surprise: "I did think Bitcoin was going to hold at $6,200," said Novogratz. "It stayed there for four months. It felt like the selling was finished. But then Bitcoin Cash decided to fork…

Lightning is never going to happen. They have absolutely no idea how to scale that network or handle the routing problem. The entire system is just rife with potentials for monopolies and abuse. No consumer in their right mind would ever commit their money to it.

Even if it does happen, I don't see the point of it. Why use centralized bitcoin based transactions vs centralized USD based transactions?

Isn't the whole point of bitcoin that you get rid of centralization? But apparently people want to bring it right back with lightning.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#59

Post by module0000 » Tue, Dec 18, 2018, 8:53 PM UTC

dragontamer wrote: post #39

misiti3780 wrote: post #16

Earlier quoted context omitted.

to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&P, usually worse when you take into account the onerous fees those mgrs are charging.

To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money. $100 million isn't much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&P 500 has dropped 50% in the past (ie: 2008), and it doesn't make sense to risk that much money on that. You can't use…

Other side of the coin here..you can take that 1 million USD and dump it in a single order into the ES - you won't move it more than 1, 2, or maybe 3 ticks. This assumes you are using full day margin rates - if you are using overnight rates, you won't move it a single tick. Securities and ETF's are amateur hour for real sums of money. You'll need hundreds of millions, or billions, to move markets with the depth of the ES, ZB, TN, and other commodity futures.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#60

Post by module0000 » Tue, Dec 18, 2018, 8:56 PM UTC

robk wrote: post #46

paulie_a wrote: post #33

Earlier quoted context omitted.

It's always sad when I get my upwards of 10 percent by professionals. I personally get 500-1000 percent return year over year. I'm working with small amounts of money that if I lost entirely wouldn't be the end of the world. But some years they barely beat inflation.

How??

He'e eluding(likely) to the commodities market. You can make double your money on a mediocre trade. You can also lose 100% of your money on a similar mediocre trade.