Why is it common for market makers or Binance to enter at short-term highs? Wintermute CEO discusses key aspects of market maker business with you.
The founder and CEO of renowned market maker Wintermute, wishfulcynic.eth, recently posted on Twitter, explaining Wintermute’s business model and why the community often sees Wintermute’s entry with Binance as a short-term high point.
Wintermute aligns its interests with the market
He stated that Wintermute’s core business is still trading cryptocurrencies, and they entered the venture capital sector in 2020. They have never been net short on cryptocurrencies. Cryptocurrency assets account for approximately 20% to 30% of the company’s net assets, including venture capital and treasury positions. They are not only interested in profiting from market opportunities but also hope for the continued existence, evolution, and growth of this industry.
Therefore, it is not reasonable to say that they want the market to decline. Although they made some money from short-term fluctuations such as the Luna crash, 3AC closure, and FTX bankruptcy, it is not enough to offset the losses from medium-term long positions and the negative impact of the long-term market downturn.
Wintermute’s business covers CeFi, DeFi, and OTC
Wintermute’s business covers CeFi, DeFi, and OTC, and when they collaborate with specific token projects, they aim to utilize all three core businesses (DeFi, CeFi, OTC). 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 point in the entire market. OTC trades sometimes take longer to close, especially for illiquid assets, but the ultimate goal is to return to “delta neutral.”
CeFi
This part of the business is largely related to liquidity provision. Wintermute places bids/offers on hundreds of trading platforms. It is good business when the market sentiment is positive and retail investors are willing to transact at bid/ask spreads. However, when the market is sluggish and other proprietary trading firms are the only ones doing cross-venue trades, it is not as profitable (and they might get taken advantage of if they are too slow or uninformed). They also have a taker strategy to arbitrage price differences between different exchanges.
DeFi
They provide liquidity on RFQ (Request for Quote) protocols like 1inch, bebop, and Jupiter, as well as arbitrage on AMMs (Automated Market Makers) like Uniswap. They are solvers on Cowswap and engage in liquidations on Aave and Morpho. Trading on Central Limit Order Books (CLOB) platforms like Hyperliquid is similar to their CeFi business.
Wintermute rarely engages in subjective investments. Although they occasionally have some positions, it is not their expertise. The majority of their subjective trades are long positions, such as buying on dips or purchasing locked tokens at a significant discount. They rarely engage in short positions because the market often continues to rise irrationally, resulting in significant risks. Their holdings are also not large in scale, as they are limited by the aforementioned 20-30% net asset exposure range.
Why is listing on Binance considered the end for tokens? Wintermute explains
wishfulcynic.eth further explains why prices decline (and why they always decline when Wintermute and Binance enter the market):
a. Macro factors
The price of BTC and the 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, NQ’s drop led to BTC’s drop, which then affected SOL, and ultimately Fartcoin’s decline. He wants to emphasize that the cryptocurrency market is highly correlated with the overall economy, and the idea that Wintermute + Binance entering the market leads to a decline is just a conspiracy theory.
b. Supply > demand
The stronger the token’s 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 trading to exchanges and market makers, wishfulcynic.eth wishes you to have fun and stay poor.
c. Another detail is about the call option in the market-making agreements
It is reasonable for market makers to sell when the token price is higher than the strike price. He believes that if the amounts, strike prices, and agreement terms are transparent, the market will be fairer. He also believes that the crypto industry should be more transparent. However, they cannot disclose this information on their own as it should be decided by the token projects whether it should be made public. The same principle applies to OTC trades, which should be disclosed by the agreement or internal individuals of the token, and we need to form a consensus within the industry to normalize this disclosure behavior.
Wintermute denies stop-loss hunting and market manipulation, clarifies it is unnecessary
Finally, he clarifies that they do not engage in stop-loss hunting. He believes that this behavior carries high risks, and their current profit model is already successful without the need for such actions.
He also denies market manipulation because:
a) They don’t know how to do it;
b) Their core business already consumes their energy, and it’s not worth getting involved in 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 activities part can be explained as follows:
Transfers: It is simply reallocating inventory between different exchanges based on which side has insufficient inventory.
AMM Christmas tree-shaped candlesticks: Arbitrage between CeFi and AMM.
Risk warning
Cryptocurrency investment carries a high level of risk, and the price may fluctuate dramatically, resulting in a potential loss of the entire principal. Please carefully assess the risks.
