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In the ever-changing landscape of the cryptocurrency market, one trading firm has risen to prominence through strategic moves and daring plays. Wintermute, a London-based crypto trading company, has distinguished itself as a major player by deftly navigating frontier markets and capitalizing on opportunities that many others shy away from. The collapse of Terra’s stable coin, UST, presented an opportunity that Wintermute seized with precision and confidence, solidifying its position as one of the world’s leading crypto trading firms.
As early as 2021, rumblings about the potential demise of UST had begun, with some suggesting that algorithm-based stable coins, not backed by government-issued currencies, were destined to fail. Wintermute’s founder, Evgeny Gaevoy, saw this as an opportunity and made strategic plans to capitalize on any potential implosion.
Wintermute’s approach to trading involves rapid buying and selling of digital assets, executing millions of trades per day to pocket tiny fractions of profits from each transaction. The firm’s profitability relies on market volatility, and they thrive in the face of market fluctuations.
In February, Gaevoy and his wife, Marina Gurevich, who is also Wintermute’s Chief Operating Officer, orchestrated a battle plan to leverage UST’s potential downfall. The team integrated their trading systems with Terra’s blockchain technology, setting up their own servers and running Terra software nodes for real-time access to UST’s transactions and price.
When UST’s price slipped to $0.98 on May 7, Wintermute swung into action, executing an arbitrage strategy with Terra’s design. Buying UST at a discounted price of $0.80 and redeeming it for $1.00 worth of luna, its sister cryptocurrency, allowed them to pocket a profit margin of 10% to 15% on each trade. This daring move paid off handsomely, with Wintermute trading more than $250 million of UST as its value plummeted to about $0.10 per token, resulting in tens of millions in profits.
Wintermute’s success is not limited to traditional trading. They have embraced the world of decentralized finance (DeFi), venturing into various corners of the digital asset market. Unlike specialized trading firms, Wintermute takes a kitchen-sink approach, experimenting with different strategies in DeFi, even in areas considered risky by some crypto firms.
Their involvement in MEV (Maximal Extractable Value) trading, a strategy that capitalizes on the slow settlement speed of blockchain transactions to access arbitrage opportunities, demonstrates their willingness to push the boundaries and seek profits in unconventional ways.
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Wintermute’s success did not come overnight. In 2019, the firm had a modest starting capital of $500,000 and struggled to raise funds from angel investors. However, Gaevoy’s breakthrough with the arbitrage trading algorithms in January 2020 turned the tide for Wintermute. The firm’s revenue surged, and in July, they secured a $2.8 million Series A venture funding round led by Jeremy Liew at Lightspeed Venture Partners.
During the “DeFi Summer” in 2020, Wintermute aggressively traded on decentralized exchanges like Uniswap, riding the wave of new products and users in the decentralized finance sector.
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While Wintermute has achieved remarkable success, it is not immune to market challenges. The impact of inflation and rising interest rates has led to a decline in revenue in 2022, and the firm suffered a significant $160 million hack due to a human error in securing one of their digital wallets.
Furthermore, the bankruptcy of Sam Bankman-Fried’s FTX exchange raised concerns about potential contagion in the market. Wintermute has taken measures to safeguard its funds and reduced its trading volume in response to the market crisis.
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Despite the challenges, Gaevoy and Gurevich remain committed to Wintermute’s success. They assert that the firm is on solid financial footing, with $400 million in equity and $720 million in assets. Gaevoy is even considering launching a financial derivatives exchange, aiming to fill the void left by FTX, but with enhanced fund security through a traditional financial exchange model.
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As they prepare for the future, Wintermute is positioning itself for the next bullish market. Gaevoy believes that making the most of the present is only a fraction of what can be achieved during the next market upswing.
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In conclusion, Wintermute’s emergence as a leading crypto trading firm is a testament to its willingness to take risks, embrace the volatile nature of the market, and venture into new opportunities, even in the realm of DeFi. Despite challenges, Wintermute’s founders remain committed to steering the company through the complexities of the crypto market and are optimistic about the future that lies ahead.