by Bartcheeks
I started dabbling in DeFi around late September 2021, near the peak of the bull market.
It’s been slightly more than a year but it certainly feels like a decade has passed. As I’m writing this, I feel slightly nostalgic thinking of the good vibes and optimism during that time. In comparison, the past few days has been crazy.
Who else could have predicted the astonishing speed of FTX’s capitulation? An exchange, that by all metrics, seemed to be doing very well. Countless seed investments and the subsequent distributions to the markets, while hedging with perps launched on their system, at the same having trading information worked through by Alameda.
It’s amazing that they even fell at all. If only they didn’t get greedy. Greed certainly humbles everyone. I won’t try to place the blame solely on either Sam or CZ, I find both to be at fault, with Sam arguably having the bigger share by default of not being able to do a proper book-keeping. (all you had to do was flourish and build with exchange fees and more seed rounds, jfc)
I’m writing this to share the lessons that I’ve learnt in the time that I’ve been here. Perhaps a little late, but I’ve always been tweeting out the occasional safety messages.
I keep a list of lessons learnt on my discord server that I update whenever I learn a new one, and I suggest you do too. It’s been relatively untouched so far, which is good.
I’ll try my best to keep this to a short read and condense down the lessons I think are important to this recent fiasco.
Don’t trust in cult figures and don’t marry the bags
There were many defenders of Sam and FTX, believing too blindly in the strength of his exchange, average retails who were clueless of the situation, or just big traders who had nowhere else they could comfortably deploy their size.
Granted, nobody but insiders could have guessed at how bad the situation was, but it’s been shown so many times that institutes and figureheads tweeting “everything is fine” has usually been the biggest red flag on CT.
But at the end of the day, if there are early signs of troubles, pull out. You’ll usually see them coming just by following smarter big accounts on CT. Then it’s a matter of whether you choose to front-run the pack.
There is simply no R/R in being a hero. Losing a few days or weeks of yields in whatever CEX or farms to secure your capital will always be worth it. Your idol will never send you a DM to personally refund you for the faith and bravado you’re trying to present. I’ve seen too many cases.
Dani and Wonderland
Do Kwon and Luna
Zhu Su and 3AC
SBF and FTX
Learning to accept your losses
I’m not saying that your funds in FTX are lost. But the information from CT sources points to the fact that Binance will most likely not do a full acquisition of FTX, although that would be detrimental for the market and eventually Binance itself.
Pray that someone could step in and users are reimbursed. Maybe even Singapore’s Temasek although never at a losing deal.
But if not, try to mitigate the losses. If unable to, accept it.
Move on, find an avenue of recovery and rebuild. The silver lining is that you’d probably have a long amount of time (even longer now with this fallout) to recover before any significant bull market comes along.
Self-custody
Yes, keep your funds in your wallet.
IMO, the only time funds should be outside is if you’re farming something, or utilizing it somewhere.
I personally never have my funds on CEX other than a small amount of stables to push out emergency gas fees if required. Any purchases are usually done by sending stables over, buying the token, and sending it out immediately.
I think even if you’re a big trader who needs to deploy in the millions and got caught with your pants down on FTX, what happened to your size and risk management? If you’re trading in millions and that’s your entire net-worth, what are you doing trading your entire net-worth at one go? Even a 50% trading size is crazy to me. An established trader who should have proper risk and size management who have still hurt, but at least the majority of their net-worth would either be in their wallets or in banks because they aren't trading EVERYTHING AT ONCE.
Keep your shit in your wallet until it’s to be used. Transfer fees are cheap AF off main-net, there is simply no excuse.
What happens now?
It is not in my place or knowledge to provide financial advice. What I can do is to provide risk management.
If you’re still in stables that are not USDC, DAI or even USDT, it’s time to swap them out.
If you’re using volatile tokens as collateral for borrowing, it’s time to repay them.
If you’re having stables in farms that may not be solid, pull them out.
I’m not calling for a doomsday, but I don’t see a reason to risk my hard fought treasury for a few days or weeks of yields.
This is what I’m doing with the exception of certain ones I find to be safe or within my risk appetite.
All I can say is to connect the dots and to plan out the scenarios.
There are creditors, big ones, that may suffer from the backlash. We’ve seen what happened during the 3AC liquidation period. Contagion is a scary thing.
One last liquidation perhaps? Or a golden opportunity to load up at range low now for the fearless? I’ll leave you with 3 quotes that I’ve learnt from respected friends on CT.
“Strong views, loosely held” — Nick Drakon
“You don’t have to eat a fish from it’s tail to the head.” — Shuenny
“Hentai” — DegenSpartan
As usual, stay safe and this time, stay alive. Things will get better.