In this article, we’ll answer your questions like, what is AMM in crypto and find out where market making takes place, how it works, and why it’s needed.
13.07.2022
Alameda is a quant trading firm and liquidity provider that trades over $5b daily across thousands of digital assets worldwide. It has proven experience in OTC quoting and market making, focusing on technology and problem-solving.
In this article, we will get into what Alameda is explicitly doing, how they manage trading strategies, and what you have to do to get noticed by one of the largest market makers in the crypto industry.
Why Is Alameda Crypto Trading So Prominent?
Alameda Research is a cryptocurrency prop trading firm specializing in quant trading, liquidity provision, and OTC quoting. Initially founded in 2017, Alameda is considered one of the top crypto market makers globally.
Alameda is the first “child” of the infamous Sam Bankman Fried, also known by his initials SBF - one of the current driving forces of the crypto market now.
Something unique about Alameda Ventures is that it gives real behind the scenes access to what is happening inside the firm. It is really uncommon for trading companies to share their deals publicly. The biggest yet apparent reasons for it are the following:
- People are terrified about leaking their IP addresses
- Firms worry about everyone else figuring out how they trade
Despite that, Alameda Research has a completely different approach to opening its quant trading experience up. As a result, it has helped them gain reputation, trust, and a competitive edge over the other firms in the market.
In terms of crypto, even when you are walking people through your good trade, they still can't do it as you can because of various limitations on the way to success. For example, trading on Alameda’s level takes extensive infrastructure, network, capital, VIP accounts, and banks - putting all those factors together, there is no point in keeping cards close to the chest.
Alameda Research LTD: How It Started?
“Trading crypto since 2017” - is an eye-catching title you see when first visiting Alameda’s website, referencing the Hong Kong-based trading firm founded in October 2017 by Sam Bankman-Fried.
Alameda Research trading firm started as a response to significant infrastructure inefficiencies in the crypto and blockchain space overall. Additionally, 3 years of experience as a quant trader in Jane Street Capital made Sam see what insane opportunities the cryptocurrency industry held in 2017. He immediately took advantage of the situation by discovering crypto and then developing his own crypto quant trading firm Alameda.
Nowadays, the company has offices in the most dynamic cities around the world like New York, Hong Kong, London, and Amsterdam.
What Does Alameda Research Ventures Have to Offer?
Alameda offers 3 primary services to clients:
- OTC trading
- Quantitative trading
- Market making
So, let’s break down each service more deeply for better understanding.
OTC Crypto Trading: Alameda as an OTC Desk
Over-the-counter (OTC) trading takes place off the regular exchanges. Instead, the transactions happen outside public order books and take place at OTC desks. This separation allows traders to avoid slippage.
Alameda research can source diversified OTC liquidity since it trades over $5-10b daily across thousands of major coins, altcoins, and their derivatives. Thanks to built-in sophisticated trading systems and high-volume trading, the company can easily quote extremely tight OTC spreads and trade competitively simultaneously.
Alameda’s Quantitative Trading
Quantitative trading (also quant trading) is an extremely complex concept that relies on mathematical formulas and models to identify and execute trading opportunities. Quant trading has always been an essential part of the traditional financial market, but it has just become a “thing” for crypto.
Quant algorithmic trading is the firm's primary focus - it helps lay the ground for all operations introduced to the clients. Trading such large volumes of digital assets every day would be impossible without the infrastructure Alameda owns and successfully utilizes. In addition, because of the trading systems and fast-acting team, Alameda can access diverse sources of significant liquidity and provide it to OTC and market-making clients.
Alameda Research Market Making
As a market maker, Alameda provides liquidity for digital coins across all major crypto exchanges, both centralized and decentralized. The team claims to provide support and liquidity 24/7, including holidays and weekends. As for the fees, the trading firm doesn’t charge any. The clients are not supposed to pay onboarding fees, monthly retainers, trading fees, market-making crosses fees, or other additional fees. Alameda Research offers market-making services for ambitious projects, specifically those it invests in. Before projects seek services from Alameda, they need a decent product, broad community, ambitious business vision, clearly defined roadmap, and, most importantly, liquidity.
The whole decision making process at Alameda involves automated strategies and algorithms as well as the real person who observes the performance of the first and “pulls the trigger” when necessary.
Alameda Research Investments Activity
Since its foundation, Alameda Research has made 178 investments, most of which belong to Solana-based projects. Why? Alameda's research founder believes in Solana’s fast transactions and ecosystem scalability despite recurring outages. Rumors are floating around about Sam’s direct contribution to the foundation of Solana. People are creating conspiracy theories only to understand his engagement in this blockchain.
In 2021 SBF made a bet on Solana with a crypto investor, Coinmamba, who then took a bearish position on Solana’s native token. Sam responded by proposing to purchase Coinmamba's position in SOL.
This series of tweets has become legendary in the crypto masses. In November 2022, Solana reached its ATH - platform’s native tokens were traded at $258. At the time of writing, the price of 1 SOL equals $39, according to CoinMarketCap.
Through the active investment activity, SBF strives to expand the Solana ecosystem - more than 25 deals out of 166 were based on or connected to the Solana blockchain. But, having known how persistent and confident Sam is about the growing Solana ecosystem, there will be much more.
The most recent investment the trading firm made was on May 30, 2022, when Merge raised a $9.5M seed round led by Octopus Ventures, Coinbase Ventures, Alameda Research, and Hashed.
As reported by Coin98 Insights, Alameda Research has raised nearly $1 billion in private and public fundraising rounds for firms such as Polygon, STEPN, and Near over the first 2 months of 2022.
A complete table of deals, with dates and money raised, can be found here.
Alameda Research Team
At the time of writing, the team of Alameda Research counts ~25 employees. In this section, we will look closely at 3 most notable people related to the trading firm.
Sam Bankman Fried
Sam Bankman Fried, the founder of crypto trading firm Alameda, has also founded one of the biggest crypto exchanges of today - FTX. Before starting his own trading firm, Sam worked as a quant trader in Jane Street Capital. Being into cryptocurrency for only 5 years, Sam is now ranked 60th with a net worth of $24 billion, as stated in 2022 Forbes Billionaires List.
Since running its FTX exchange takes a lot of time and attention, in 2021, Sam stopped handling Alameda’s day-to-day operations and delegated control of the cryptocurrency trading firm to 2 co-CEOs: Caroline Ellison and Sam Trabucco.
Caroline Ellison
Caroline Ellison has been a part of Alameda Research since early 2018. Having graduated from Stanford with a degree in math, she joined Jane Street and worked as an equities trader with Sam Bankman Fried.
Sam Trabucco
As for Sam Trabucco, he started working for Alameda Research in 2019. Before joining the firm, Sam worked as a trader on Susquehanna International Group’s bond ETF desk. The trader graduated from MIT, receiving a degree in mathematics and computer science.
Sam Trabucco is one of the most reputable and influential traders in the crypto market. His tweets and comments are known for shifting crypto prices and manipulating the market.
Alameda Research Portfolio
Alameda Research has been investing and trading in almost all sectors of the cryptocurrency industry since 2017. Here is a list of liquid tokens by industries that Alameda Research has invested in:
Solana and FTT, the native token of FTX exchange, traditionally lead the company's investment portfolio.
Even though Solana has always been the favorite Alameda's ecosystem, the team also puts a bet on projects based on Polygon, Ethereum, BSC, Fantom, Avalanche, and many other blockchains.
The infographic below shows the distribution of projects by blockchains they support.
Without a doubt, Alameda trades on lots of exchanges, but a great bulk of Alameda’s trading volume comes from 7 platforms, one of which is BitMex. BitMex is the most liquid perpetual swap & bitcoin exchange, and it is one of the top 3 dominant venues Alameda trades.
Based on the BitMex leaderboard, Alameda LTD occupies 14th place with ฿1696.70 profit.
The Star Is Born - Alameda FTX Exchange
The most significant incentive behind the FTX exchange is a premier exchange for trading crypto and stock derivatives. The infamous Sam Bankman Fried found it. Since Sam is a trader himself, the main idea behind the development of the FTX exchange was to build a platform “by traders for traders.” The thing he noticed was that all existing platforms lacked something. By something, he meant big spreads and inconvenient trading tools/interfaces. Imperfections on other trading platforms inspired him to create an exchange that traders like him could efficiently utilize.
In July 2021, FTX raised $900 million at an $18 billion valuation from over 60 investors - this has become the largest raise in crypto exchange history.
FTX has grown quickly since its founding in 2019, becoming one of the most respected cryptocurrency exchanges in the world in less than 4 years.However, according to FTX's global volume monitor, the exchange is ranked 4th, falling behind such global leaders as Binance, Bybit, and OKX.
How are Alameda and FTX connected?
First of all, both were formed by one person - Sam Bankman Fried.
Second of all, Alameda is a huge liquidity backup for the FTX exchange. Usually, when launching, projects lack liquidity and have to put a lot of time and effort into acquiring it. FTX exchange, on the other hand, didn’t face such a problem because the liquidity was and is being provided by one of the biggest crypto trading firms on the market - Alameda Ventures.
What makes FTX unique?
Compared to other old and already established cryptocurrency exchanges that are reluctant to embrace new trends, FTX is eager to implement as much as it can to diversify the existing range of crypto derivative products. Not to mention their decision making, the team is very responsive and fast in giving feedback.
- FTX Leveraged tokens
Leveraged tokens are tokenized margin positions on standard ERC 20 tokens that can give you leveraged exposure to cryptocurrency markets. For example, take BTCBULL, a 3x long BTC token. For every 1% BTC goes up in a day, BTCBULL goes up 3%; for every 1% BTC goes down, BTCBULL goes down 3%. By the way you also can use this information in a price prediction market, like Zephyr to make your forecasts more accurate and earn at a higher odds.
Compared to regular margin positions, leveraged tokens don’t require you to manage collateral, margin, or liquidation prices. Leveraged tokens are just like normal ERC20, which means they can be withdrawn from the account and sent to another platform that supports them (Gopax, BitMax).
FTX exchange is fueled by its native token FTT which can also be used as a margin.
- FTX Indices
FTX exchange offers 3 key indices: the altcoin index, midcap index, and shitcoin index. The altcoin index expresses how all altcoins did today - the index covers 9 altcoins with a high market capitalization (Bitcoin Cash, EOS, Ether, Litecoin, XRP, and a few others).
The midcap index tracks 24 coins with the medium-market cap using a weighted average of their prices. By trading a MID-PERP the investors can get diversified exposure to 24 different coins with only one future.
The shitcoin index, in turn, tracks 58 low market cap coins. These indexes serve as an excellent risk management instrument allowing traders to diversify their risks over a basket of tokens rather than focus on just one or two assets.
- FTX Tokenized Stocks
Tokenized stocks are digital assets that represent the price action of publicly traded firms like Google, Twitter, or Tesla. Tokenized stocks are traded in the same way as other spot markets because they are spot tokens, like BTC/ETH/FTT/etc. Tokenized equities can also be used as collateral for futures trading on FTX, with a collateral weight of 0.85 (total) and 0.80 (initial). To trade tokenized stocks on FTX, you must complete KYC level 2. In addition to tokenized stocks, FTX lists tokenized futures based on tokenized equities.
Why Is Bitquant the Best Alameda Alternative?
We can’t deny that Alameda Research is one of the best choices regarding market making. Competing with Sam Bankman Fried's leadership and the firm's reputation built over time is extremely hard.
As previously mentioned, Alameda Research is operated by a team of young and aspiring traders. So, investing in early-stage crypto projects is not rare and even consistent.
But the thing is, if you want Alameda to provide your coin/DEX/CEX with liquidity, tight spreads, and significant trading volume, you have to keep up with the company's demands.
Alameda Research's portfolio is driven by liquidity. Most of the ventures the company invests in are fully or particularly connected to liquidity (DEX, Lending, Aggregator, Asset Management,...). Serum and FTX are 2 liquidity centers Alameda focuses on. Serum is a Solana-based DEX running with a central order book.
Alameda Research prioritizes liquidity because the team understands its importance and effect on customer experience.
To conclude, the “to get noticed by Alameda” winning recipe is liquidity plus Solana. Pretty high requirements for a crypto startup. Fortunately, there is another way to get a market maker.
BitQuant is a dedicated market maker and liquidity provider for both centralized and decentralized crypto exchanges and tokens. Learn more about our services and solutions by visiting our website.
If you already know what exactly your crypto business needs or feel unsure at this point, schedule a call with us, and we will find a way to help you.
