BC CRYPTO
Saved by @CodyyyGardner

Options used to be close to irrelevant for bitcoin's price.

Until now.

At current price levels, hedging large option notionals has a major impact on price.

Here's a quick thread on options 👇

 Let's start with the meaning of delta.

Delta is the rate of change of an option's price relative to a change in the price of its underlying.

For example, the price of a 50 delta option will move 50% as much as the underlying.
For practical purposes, think of it as how much of the underlying you have:

- if long 50 delta call on 1 BTC => long 0.5 BTC
- if long 50 delta put on 1 BTC => short 0.5 BTC
- if short 50 delta call on 1 BTC => short 0.5 BTC
- if short 50 delta put on 1 BTC => long 0.5 BTC
An option where the option's strike (i.e. exercise price) is equal to current spot price is known as an at-the-money option (ATM). ATM options have a delta of 50, while deep in the money options have a delta of close to 100.
Can also think of delta as probability. A 50 delta option has a 50% chance of expiring in the money.

For a call, the higher price goes => the more in the money the call => the higher the delta.

Once delta gets close to 100, odds are ~100% the option will expire in the money.
Gamma is the rate of change of an option's delta relative to a change in the price of its underlying.

When you buy an option, you are long gamma.

That means the further in the money the option goes, the faster the option's price will increase.

That's positive convexity.
Can also think of Delta as speed and Gamma as acceleration.
Delta and Gamma together with Vega and Theta are part of *the Greeks*.

The greeks all measure the sensitivity of an option to various changes.

There are other greeks, such as Rho, Volga and Vanna, but understanding these is not necessary now.
Vega is the rate of change of an option's price relative to a change in its implied volatility.

Theta is the rate of change of an option's price relative to a change in time to expiry.
When buying an option, a trader is long gamma (convexity), long vega (volatility), and short theta (time decay).

The option loses value as time passes. A trader who is long an option compensates time decay with convexity.
Imagine an options seller (a dealer) who wants to hedge his delta exposure. By doing so he becomes delta neutral.

Say he sold a BTC call, so he buys bitcoin to hedge. As price goes up, to remain delta neutral, he buys more bitcoin.
The dealer is short gamma. So the more price goes up, the more the dealer has to buy to remain delta neutral, generating on the extremes what is known as a Gamma Squeeze.

Gamma is the key.

Or more precisely, the gamma position of those who hedge their delta (mostly dealers).
When dealers gamma profile is negative, they will buy on the way up, and sell on the way down, amplifying market moves.

Conversely, when dealers have positive gamma, they will buy on the way down, and sell on the way up, dampening moves.

TL;DR Negative Gamma = Violent Moves
This shows why this is relevant now

https://t.co/LJ6eYYRctX

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1/22 Why XRP will beat Bitcoin.

(Video version @ https://t.co/VIHEoHLYpN)

A thread. 👇


2/22 Despite last night's major Bitcoin correction, it still sits at $33k, well above the last bull run's all time high. With XRP currently at $0.28, it may seem rather ridiculous to think XRP will ever become #1.


3/22 However, it's important to compare Bitcoin and XRP not in terms of price, but market cap. That's because there are 100 billion XRP (and will never be more) and 19 million circulating Bitcoin (21 million max). So comparing the price of individual tokens doesn't work.


4/22 XRP's market cap is $12.6 billion. Bitcoin's is $623 (roughly 50x more, 55x if you factor in the 2 million Bitcoin not yet mined). That's a huge lead, but not as big as the 119,000x lead if you compare token price!


5/22 Bitcoin's primary advantage is its early adoption. It caught on earlier and became the front runner of crypto. Don't underestimate the power of being first. It gives a massive advantage. But it doesn't GUARANTEE being the winner long-term.
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Jos\xe9 Maria Macedo
José Maria Macedo
@ZeMariaMacedo
While my time investing in crypto and previously playing poker has gotten me used to experiencing large daily personal net worth volatility, it's never a pleasant experience

Short thread (by my standards...) with some ramblings that help me get through it 👇

1/10 Imo, some DeFi projects represent 10-1000x upside opportunities

Obviously, like all of crypto, it is extremely risky and can go to 0. That said, given the magnitude of potential outcomes, it just doesn't have to succeed that often to make it a massively +EV bet

2/10 As with all early stage tech, realising these outcomes will require 4-8 year holds

Unlike early stage tech, crypto investors will have liquidity, i.e. the possibility, and thus the temptation, to sell

This is both a blessing and a curse

3/10 A look at any of the best performing public stocks will show you that you cannot have 10-1000x upside potential without volatiliy and occasional large drawdowns

Crypto, as early stage tech, is much riskier than established public companies and thus even higher vol too

4/10 Obviously, one should take advantage of this liquidity as it allows for rebalancing. Most importantly, it also makes outcomes less binary and thus less volatile than traditional VC

However, one should not let the liquidity take advantage of us
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Nick Chong
@n2ckchong
We're in the phase of the market where there's a lot of retail inbounds but not enough education about the Ethereum ecosystem and DeFi.

So, let's break down the basics of some of the top protocols.

First on deck: Aave (@AaveAave), an Ethereum-based money market protocol.

A 🧵


TL;DR: Aave is a protocol through which any user anywhere in the world can take decentralized loans by collateralizing their assets.

Aave also allows those will idle assets to earn a relatively safe return on capital from lenders, whose rates are determined by a curve.

1/ For years, most crypto assets had no indirect or direct utility.

Users would hold BTC, ETH, and other assets (including many ERC-20 tokens) with no expectation of a native yield or dividends.

ETH, for instance, was long just an asset for transaction fees, as was Bitcoin.

2/ If users wanted to borrow against their assets, they were relegated to centralized platforms—which were few and far between years ago.

3/ Aave, formerly ETHLend, is a protocol allowing users the ability to lend and borrow on-chain, without KYC and untransparent fees.

Users can deposit a variety of assets as collateral, then use that collateral as ammo to borrow other assets to be used in DeFi or beyond.
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Stears Business
Stears Business
@StearsBusiness
The CBN's official reason for its recent cryptocurrency restriction is that cryptocurrencies are anonymous and used for money laundering, terrorism financing, and tax evasion. Let’s dig into what the facts say.

A THREAD #Nigeria #Bitcoin

1/21

We’ll break up the allegation into two. First up, “cryptocurrency is used for money laundering.”
Cryptocurrencies have been used for illicit activities but so too have official currencies. So the CBN's argument must be that cryptocurrencies make the situation worse.

2/21

But as things stand, significantly more illicit activities are conducted with regular money than with cryptocurrencies. According to the UN, between $800 billion and $2 trillion is laundered globally every year, mostly in cash.

3/21

Meanwhile, the entire global value of cryptocurrencies is currently $1.4 trillion. Chainanalysis, the leading crypto-analysis company helping governments track criminals, estimated that 1.1% of all cryptocurrency transactions are illicit.

4/21

So, if the government is trying to clamp down on money laundering and terrorism financing, they are better off spending their energy on their naira accounts.

5/21
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Nick Chong
Nick Chong
@n2ckchong
If you've been following DeFi or Ethereum over the past few months, you've likely heard the term "flash loan" mentioned again and again.

This new DeFi primitive has been at the core of a number of economic exploits and arbitrages.

A thread on the basics of flash loans - 👇


Most DeFi loans take place across days, weeks, or even months.

You can deposit Ethereum into Aave, then withdraw stablecoins for yield farming in Yearn, for instance.

On-chain loans have garnered much traction, with total debt outstanding moving toward $2.5 billion.

While popular, DeFi loans are not capital efficient: to account for custodial risk and volatility risk, you need to put up 130-150% of the value of your loan in collateral.

If your collateral slips below the threshold, you're liquidated, resulting in a fee anywhere from 5-13%.

Flash loans are much different than longer-term DeFi loans.

Flash loans are non-custodial, take place over the course of one block, and require no collateralization.

That's to say, the coins you borrow never appear in your wallet.

When taking a flash loan, you can direct the coins to any protocol and function, as long as you pay back the loan + interest fee within the same transaction.

So what the hell? What are flash loans used for?

More often than not, arbitrage.
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