How One of the Largest Institutional Whales Came Out From the Shadows

BitMex leaderboards allowed traders to use a three-word pseudonym to protect their identity while being able to boast their trading profits. In 2019, two of the top 10 were revealed to be one single institution: Alameda Research. Run by quantitative trader Sam Bankman-Fried, Alameda has burst onto the scene as one of the first few publicly identifiable whales. Additionally, Alameda is the company behind FTX, which has quickly become one of the most popular cryptocurrency trading platforms, reported by Bloomberg, November 13, 2019.

Billion Dollar Trader

Market making, the process of providing liquidity on trading platforms, has become one of the most important businesses for seamless cryptocurrency trading. Institutions like Alameda Research play a profound role in keeping order books liquid.

But other than acting as a market maker, Alameda Research also functions as a proprietary trading firm. According to Sam Bankman- Fried, the firm takes a massive number of trades per day and targets a 0.02 percent profit on each trade.

Institutions and individuals with significant volume in the crypto market tend to prefer to remain anonymous. Their decision to remain so has been amplified by numerous incidents of kidnapping and extortion of well-know cryptocurrency traders. Bankman-Fried himself acknowledges the risk of going public, stating that the Alameda team has had internal discussions to rule out certain countries for travel as the risk of being identified and targetted is higher.

Today, Alameda claims to account for nearly a billion dollars of daily volume, or 5 percent of the cumulative money traded in cryptocurrency. But this wasn’t always the case; Bankman-Fried’s foray into crypto began with simple arbitrage opportunities in 2017 when LTC was trading at a 30 percent premium on Coinbase. Since then, most of the arbitrage opportunities have been wiped out, but Alameda still only trades with its own money and borrowed funds – no outside capital.

Lawsuit Against Alameda and Whale Identities

On November 8, a lawsuit for $150 million was filed against Alameda for allegedly manipulating the Bitcoin spot and derivatives market. Alameda denies the merit of these suits and laughs them off as a product of their recent decision to go public. Bitfinex was also hit by a similar class-action lawsuit.

With Alameda revealing their identity and the world finding out one of the largest whales was actually an institution, could this be an indication that crypto already has its own native financial institutions, and they are simply lurking in the shadows? Going from unknown to a billion-dollar whale, it doesn’t seem like a stretch to assume most whales may indeed be prop funds.