Founder and CEO of renowned market maker Wintermute, wishfulcynic.eth, recently posted on Twitter, explaining Wintermute’s business model and why Wintermute’s entry into the market with Binance is often seen as a short-term high point by the community.
Wintermute aligns its interests with the market
He stated that Wintermute’s core business remains trading in cryptocurrencies and that they ventured into the field of venture capital in 2020. They have never been net short on cryptocurrencies, and their cryptocurrency assets make up about 20% to 30% of the company’s net assets, including venture capital and treasury positions. They are interested not only in profiting from market opportunities but also in ensuring the sustainability, evolution, and growth of this sector.
Therefore, it is unreasonable to say that they wish for the market to decline. Although they have made some money from short-term volatility such as Luna’s crash, the closure of 3AC, and FTX’s bankruptcy, it is not enough to offset the losses from their long positions in the medium term and the negative impact of the long-term market downturn.
Wintermute’s business covers CeFi, DeFi, and OTC
Wintermute’s business encompasses CeFi, DeFi, and OTC, and when they collaborate with specific token projects, they aim to engage in all three core businesses (DeFi, CeFi, OTC) simultaneously. Essentially, these activities are “delta-neutral.” In other words, if they sell on Binance, they will try to buy back at the most favorable price across the entire market. OTC trades sometimes take longer to close, especially for illiquid assets, but the ultimate goal is to return to a “delta-neutral” position.
CeFi
This part of the business is largely related to liquidity provision. Wintermute places buy and sell orders (bid/offer) on hundreds of trading platforms. This is a good business when market sentiment is positive and retail investors are willing to trade at cross spreads. When the market is sluggish and all the cross spread trades are done by other proprietary trading firms, it becomes less profitable (and there is a risk of being left behind if too slow or too inefficient). They also have a taker strategy to arbitrage price differences between different trading venues.
DeFi
They provide liquidity in RFQ (request for quote) protocols like 1inch, bebop, and Jupiter, and also engage in arbitrage in AMMs (automated market makers) such as Uniswap. They act as solvers for Cowswap and engage in liquidation on Aave and Morpho. Trading on CLOBs (centralized limit order books) like Hyperliquid is similar to CeFi business.
Wintermute rarely engages in subjective investments. Although they occasionally hold positions, it is not their expertise. Most of their subjective trades are on the long side, such as buying on dips or purchasing locked tokens at a substantial discount. While they also go short, it is rare. This is because the market often continues to rise irrationally, resulting in significant risks for short positions. When they hold positions, the size is not large (within the previously mentioned 20-30% net assets exposure range).
Why is listing on Binance the end for tokens? Wintermute explains
wishfulcynic.eth further explains why prices fall (and why they always fall when Wintermute and Binance enter the market):
a. Macro factors
The price of BTC and ES/NQ futures on the Chicago Mercantile Exchange (corresponding to S&P and Nasdaq). The recent two major drops were directly related to events in traditional finance (DeepSeek and Tariffs). For example, in the case of Fartcoin, the drop in NQ led to a drop in BTC, followed by a drop in SOL and ultimately FARTcoin. He wants to express that the cryptocurrency market is highly related to the overall economy, and the notion that Wintermute + Binance entering the market causes a drop is purely a conspiracy theory.
b. Supply > demand
The stronger the token liquidity, the easier it is to sell. Therefore, when Binance lists a token and market makers start buying and selling, anyone can easily sell and move on to new targets. If you haven’t figured this out yet and attribute your own foolish trades to the exchange and market makers, then wishfulcynic.eth wishes you to have fun and stay poor.
c. Another detail is about the call options in the market-making agreement
It is reasonable for market makers to sell when the token price exceeds the strike price. He believes that the market would be fairer if the amounts, strike prices, and contract terms were all publicly known. He also believes that the crypto industry should be more transparent. However, they cannot disclose these details on their own as it should be decided by the token projects whether to make them public. The same goes for OTC trades, which should be disclosed by the agreement or internal personnel of the token, and we need consensus within the industry to normalize this disclosure.
Wintermute denies stop loss hunting and market manipulation, clarifies the lack of need for it
Lastly, he clarifies that they do not engage in stop loss hunting. He believes that this behavior is too risky, and their current model has been profitable enough without it.
He also denies market manipulation because:
a) They don’t know how to do it.
b) Their core business already requires a lot of effort, and it’s not worth getting involved in those foolish and illegal activities. He enjoys his current life in the English-speaking world and doesn’t want to move to Dubai because of legal troubles.
The on-chain activity is easily explained:
Transfers: It’s just inventory allocation between different exchanges, filling up where there is a shortage.
Appearance of Christmas tree-shaped candlestick charts in AMMs: Arbitrage between CeFi and AMM.
Risk Disclaimer
Cryptocurrency investment carries a high level of risk, and prices can fluctuate dramatically, resulting in a potential loss of all invested capital. Please evaluate the risks carefully.