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Crypto Report Says ‘Alameda Gap’ Is Gone After Bitcoin Rally, What This Means

In its most recent research newsletter, crypto research firm Kaiko alluded to an ‘Alameda Gap,’ which has been massively impacting the Bitcoin and crypto market for some time now. However, that seems to be in the past, as Kaiko stated that the gap no longer exists. 

What The Alameda Gap Is About

According to the report, the ‘Alameda Gap’ is the gap in liquidity that existed after the collapse of the collapse of the defunct crypto exchange FTX and its sister company Alameda Research. Alameda was one of the most prominent market makers then and provided massive liquidity to the market. 

Following Alameda’s collapse, this liquidity gap is said to have persisted as market makers “waited on the sidelines for sentiment and trading activity to recover.” Now, the market looks to have moved past this, as Kaiko revealed that, as of last week, the market depth has almost fully recovered and is back to its pre-FTX average. 

The research firm added that the Bitcoin 2% market depth is up 40% year-to-date (YTD) and briefly surpassed its pre-FTX average of $470 million. This increase is said to have been mainly due to the surge in Bitcoin’s price, which has risen faster than the market liquidity since the SEC approved the Spot Bitcoin ETFs in January. 

Bitcoin is up about 50% YTD and has already hit new highs since the beginning of the year, including a new all-time high (ATH) of $73,750. Meanwhile, the improvement in liquidity is also evident in the fact that the cost of trading has declined on the three major US crypto exchanges: Coinbase, Kraken, and Bitstamp. 

How Bitcoin Is Outperforming Gold

Kaiko also highlighted in its report that the Bitcoin-to-Gold ratio, which measures both assets’ relative performance, is inching closer to its ATH, which it last hit in November 2021. Interestingly, this increase means that BTC is outperforming Gold, even though both assets have recorded ATHs these past few weeks. 

Furthermore, funds linked to these assets show how Bitcoin has outperformed Gold. Kaiko noted that Bitcoin ETFs have attracted $11 billion since they launched in early January. Meanwhile, the largest physically-backed Gold ETFs (SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) have registered outflows during the same period. 

Kaiko suggested that this could mean that investors were moving towards Bitcoin as the “new global store of value.” Interestingly, the CEO of Jan3 and Bitcoiner, Samson Mow, while giving reasons why Bitcoin will hit $1 million, also mentioned that people will start demonetizing Gold and substitute it for BTC at some point.  

Bitcoin price chart from Tradingview.com

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Alameda Research Accused Of Bribing Chinese Officials To Recover $1 Billion In Exchange Accounts

During the trial of Sam Bankman-Fried, the founder of crypto exchange FTX, shocking revelations emerged from the testimony of former Alameda Research CEO Caroline Ellison. 

According to a TechCrunch report, Ellison testified that the crypto trading firm paid Chinese officials to unlock their Alameda trading accounts on OKX and Huobi in China.

Judge Lewis Kaplan clarified that Bankman-Fried was not charged with bribery in this case. Still, the evidence was presented to demonstrate trust, confidence, and motive between Bankman-Fried and Ellison.

Alameda Research Former CEO Exposes Hidden Payments To Chinese Officials

According to Ellison’s testimony, while Bankman-Fried was CEO in 2020, the accounts valued at approximately $1 billion were frozen. 

In November 2021, Bankman-Fried claimed that a colleague, David Ma, who had connections in China, found a way to unfreeze the accounts. 

Ellison, who had become co-CEO of Alameda by then, made crypto transfers totaling around $100 million to $150 million to reopen the accounts, unaware that the payments were made to Chinese officials. 

Ellison stated that Bankman-Fried and Sam Trabucco instructed her through a Signal chat to make the payments.

Before the accounts were reopened, Ellison revealed that Alameda employees explored various strategies to unlock the accounts, including involving lawyers and government officials. 

Ellison testified that they even considered using Thai prostitutes to open accounts on the exchanges to facilitate fund transfers, but these efforts were unsuccessful.

One Alameda trader, “Handi,” resigned in early January 2022 due to her objection to paying bribes to Chinese officials, as her father held a government position. 

Courtroom Clash

Ellison testified that Handi had a heated argument with Bankman-Fried about the matter, during which he allegedly told her to “shut the fuck up.” A month after Handi’s resignation, Trabucco asked in a Signal chat if Handi’s father had immediately reported them, to which Bankman-Fried responded with “lol.”

Ellison shared a list with prosecutors containing notes, one of which referred to a payment of “150m from the thing?” about the money transferred to regain the accounts. 

Per the report, Ellison explained that she did not want to explicitly state in writing that the payment was made to China to unlock the accounts, fearing that it could be leaked and used against Alameda Research in court.

Bankman-Fried’s defense lawyer, Mark Cohen, attempted to strike Ellison’s statement about avoiding written evidence of the payments, but Judge Kaplan overruled the request.

The trial continues to uncover new details and allegations, shedding light on the actions and motivations of the individuals involved, and the cryptocurrency community eagerly awaits further developments and the subsequent outcome of the trial.

Alameda Research

Featured image from Shutterstock, chart from TradingView.com 

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How An ‘Inconsequential’ Mistake Saw Bitcoin Crash To $8,000

Bitcoin is known to be a very volatile digital asset as its price is often wont to rise and fall unexpectedly, and sometimes without a clear reason. One of these instances of the digital asset flash-crashing was back in 2021 when the price of Bitcoin had fallen 87% on some exchanges in a matter of minutes. However, the mystery behind this flash crash has been unveiled two years after it first occurred.

Former Alameda Research Engineer Spills Secret

Alameda Research is the sister company of the now-defunct FTX crypto exchange run by Caroline Ellison who served as CEO until it collapsed. Following the bankruptcy, employees at the trading firm have, at various times, come forward to tell stories of what took place at the company. This time around, an ex-engineer Aditya Baradwaj is telling the story of how a simple mistake caused the company to lose tens of millions of dollars.

Baradwaj took to his X (formerly Twitter) account to reveal how an Alameda employee had unwittingly triggered a Bitcoin flash crash in 2021. According to him, the error was a result of two trading systems operated at the company.

The ex-engineer explained that Alameda had semi-systemic strategies in which a complex automated trading system was controlled by model parameters set by traders. The second was manual trading which would be done when the former could not execute a trade due to a number of reasons.

In the case of the trader who triggered the flash crash, they had to manually enter a trade to sell a large tranche of BTC using Alameda’s manual trading system. However, the trader had failed to realize that the decimal point in the trade was off by a couple of spaces, which meant that they were selling the BTC at much lower prices than the current price.

The result of this simple error was Alameda selling off a sizable portion of BTC at pennies on the dollar which resulted in a flash crash on multiple exchanges. The crash was most prominent on the FTX and Binance exchanges, where prices fell from $65,000 to $8,000 in a matter of minutes.

Covering Up The Bitcoin Crash

The aftermath of the flash crash, according to the ex-engineer, involved Alameda rushing to put in place sanity checks that should have been available before any manual trades were executed. He notes that this was not out of the ordinary as they were always waiting for things to break before fixing them at the company.

“That’s usually how things worked at Alameda – we would wait until something broke, and then rush to fix it,” he said. Baradwaj also referred to FTX founder Sam Bankman-Fried saying that the utility gained after the events outweighed the costs incurred from poor risk checks and hacks.

He also pointed to Binance commenting on the flash crash with a statement that blamed a bug in the trading algorithm of one of their institutional traders. “I guess Caroline had made some phone calls,” Baradwaj said, referring to Alameda’s CEO.

Bitcoin price chart from Tradingview.com (Bitcoin crash)