Billion Dollar Trades & The Crypto Supercycle w/ Su Zhu
Apr 27, 2024
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Su Zhu, Co-founder of Three Arrows Capital, shares insights on making & losing billions in crypto, importance of memecoins this cycle, biggest fumbles vs wins, risks of trading vs investments, L1 trade evolution, and more. Discusses ETH ETF, Dogecoin ETF, and future of crypto exchanges.
Lessons learned from making & losing billions in crypto highlight the risk of mixing trades with investments.
Understanding the importance of memecoins this cycle showcases the evolving landscape of crypto investments.
The collapse triggered by Luna's failure emphasizes the need for diversified and risk-aware strategies to prevent vulnerabilities.
The development of Ox Exchange highlights the shift towards community-driven crypto trading strategies for a more engaging experience.
Deep dives
Rapid Growth and The First Signs of Trouble
The fund experienced significant growth, going from 200 million to 4 billion within two years, becoming one of the top players in the industry. However, the rapid expansion led to a reliance on easy profits and investments without proper assessment of potential risks. The first red flag emerged post-Luna, where overexposure to Bitcoin and misconceptions about Luna's mechanisms caused vulnerability in the fund.
Over-Reliance on Luna and Ecosystem Dynamics
The over-reliance on Luna's success and failure to understand ecosystem dynamics created vulnerabilities. Luna's governance mechanics, inability to halt minting, and UST pegging issues were major contributors to the fund's downturn. The lack of controls to address these challenges worsened the situation, as the fund's heavy involvement in Luna further amplified the impact.
Market Contagion and Position Impacts
The collapse of Luna triggered market contagion affecting Bitcoin, Ether, GBTC premiums, and other holdings, leading to a cascade effect of losses for the fund. Contagion spread through interconnected positions and heightened vulnerabilities due to the fund's exposure across various assets. The rapid decline in positions and market values further exacerbated the fund's financial strain.
Lessons Learned and Retrospective Strategies
In hindsight, the fund could have benefited from a more diversified and risk-aware strategy to mitigate losses during the downturn. Opportunities for restructuring and collaboration with renowned firms were suggested post-crisis as a means to stabilize and recover. Reconstruction of investment frameworks and deeper risk assessments were vital to navigate market uncertainties and prevent future vulnerabilities.
Creating a Community-Based Exchange with Innovative Features
The speaker discusses the development of Ox Exchange, a community-oriented DeFi exchange that allows trading with an exchange token. Users can engage in copy trading vaults, participate in trading missions for rewards, and benefit from a unique approach where losing trades earn a second token called Milk. The exchange aims to blend social trading elements with a community-centric model to encourage engagement and learning.
Exploring the Evolution of Cryptocurrency Trading Strategies
The speaker reflects on the evolution of crypto trading strategies, highlighting the shift towards community-driven approaches and innovative financial products. By introducing features like lost farming, copy trading, and reward incentives, Ox Exchange aims to reshape the traditional narrative of crypto trading and provide a more engaging and inclusive trading experience for users.
Foreseeing the Impact of ETFs on the Crypto Market
The discussion delves into the potential impact of ETFs on the crypto market, drawing parallels with traditional financial markets. With the introduction of ETFs for cryptocurrencies like Bitcoin and Ethereum, the speaker anticipates a significant shift in market dynamics and investor behavior, potentially leading to increased institutional adoption and liquidity.
Embracing Self-Awareness and Continuous Learning in Trading
The speaker emphasizes the importance of self-awareness, humility, and ongoing learning in navigating the cryptocurrency market. By staying attuned to emotions, seizing opportunities, and remaining hungry for knowledge, traders can enhance their decision-making skills and adapt to the ever-evolving crypto landscape.
Su Zhu is previously co-founder of Three Arrows Capital, one of the largest crypto hedge funds last cycle. In this episode we discuss lessons learned from making & losing BILLIONS of dollars in crypto, understanding why memecoins are so important this cycle, biggest fumbles vs biggest wins, the risk of mixing trades with investments, Airdrop Points, ICOs, the ETH ETF trade, Dogecoin ETF, how the crypto exchange meta will evolve, the new L1 trade this cycle, and more.
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