• Alameda Research, a quantitative trading firm run by Sam Bankman-Fried, was assumed to be one of the top firms within the industry, but a recent report has revealed that the firm suffered from financial troubles as early as 2018.
• The report claims that Alameda lost large sums of money in 2018 due to a failed xrp trade which resulted in the company’s assets being cut by over two-thirds.
• Prior to Alameda Research, SBF worked for Jane Street and traded international exchange-traded funds (ETFs). He then launched Alameda in Sept. 2017 with Tara Mac Aulay and the firm was making money through crypto arbitrage.
Sam Bankman-Fried’s (SBF) Alameda Research had been viewed as one of the top quantitative trading firms and market makers in the cryptocurrency industry. However, a report recently published by the Wall Street Journal (WSJ) has revealed that the firm was struggling financially as early as 2018.
People familiar with the matter told WSJ that Alameda was already losing money by 2018 and a massive loss from a failed xrp trade during mid-2018 cut the company’s assets by more than two-thirds. This sheds light on the façade of Alameda Research as a top quantitative crypto trading firm, and reveals the truth behind the firm’s early financial struggles.
Before Alameda Research, SBF worked for Jane Street, a trading firm focused on international exchange-traded funds (ETFs). He then made the move to work for the Centre for Effective Altruism as the Director of Development in 2017. Shortly after, SBF launched Alameda Research with co-founder Tara Mac Aulay and the firm was making money through crypto arbitrage.
According to SBF, opportunities for arbitrage stemmed from countries like Japan and South Korea as bitcoin (BTC) was trading for a premium in those regions. This “Kimchi premium” in South Korea saw BTC trading at 30% higher at times and in Japan, it was trading 10% higher. Reports have highlighted Alameda making millions from crypto arbitrage, but the recent report from WSJ has shown that not all of their trades were profitable.
In addition to the failed xrp trade, Alameda was also dealing with a lack of liquidity in some of its trading pairs and the company was unable to access enough capital to expand its operations. On top of this, Alameda was also facing increased competition from other market makers.
Despite these financial struggles, Alameda has managed to stay afloat and has become one of the leading quantitative trading firms in the cryptocurrency industry. SBF is also the founder of cryptocurrency exchange FTX, which has seen a surge in popularity in recent months. FTX’s success has helped Alameda Research stay afloat and it looks like the firm is well on its way to becoming one of the top market makers in the industry.