How SBF Used The Kimchi Premium And Other Crypto Arbitrage Techniques To Succeed In The Crypto Space
In just four short years, Sam Bankman-Fried, a 29-year-old former ETF trader at Jane Street, has become one of the most prominent figures in the blockchain industry. In that time, he has perfected crypto arbitrage techniques and either founded or become associated with a number of the top projects in the industry.
Due to its relatively short history of existence, most of the most well-known personalities in the crypto space became involved very early on, in 2011 or in some cases earlier. So, how did Sam Bankman-Fried gain so much influence, when his first crypto companies weren’t started until 2017? Here is one of crypto’s true success stories, how Sam, commonly referred to in the industry by his initials, SBF, used crypto arbitrage techniques to gain strong crypto positions and found multiple cryptocurrency-related projects.
Crypto Arbitrage Techniques And The Kimchi Premium
Back in 2017, SBF launched a crypto research and trading firm called Alameda Research. When he saw how much growth there was in the crypto market related to Bitcoin trading volumes, he realized that this would cause large price differences in different countries and on different exchanges as demand increased faster in certain parts of the world.
This made the market perfect for arbitrage, the process of buying cryptocurrency in one market and selling it in a different market at a higher price, earning the price difference in profit. One opportunity that he and his team benefitted from was the Kimchi Premium.
More On The Kimchi Premium
When prices are quoted higher in Korean Won than in other currencies, this is known as the Kimchi Premium. At the time that SBF benefitted from the Kimchi Premium, Bitcoin was $10,000 in the U.S., but it was being traded for $15,000 on exchanges in South Korea due to extreme demand for the digital currency in Korea.
The fact that the Korean Won is regulated made this arbitrage opportunity difficult to benefit from, but other arbitrage opportunities also arose in Japan, although the premium in Japan was not quite as high as in Korea. By conducting large scale trades through Alameda Research and benefitting from these crypto arbitrage techniques and opportunities, SBF was able to earn impressive returns.
Building FTX
After benefitting from crypto arbitrage techniques, including the Kimchi Premium, SBF continued working at Alameda Research and began building what would become one of the largest and most influential digital asset exchanges in the world, FTX. FTX is described as a crypto derivatives exchange, built by traders, for traders.
Its emphasis on being an exchange built by traders, for traders has positioned it as the exchange for experienced traders, although the company has also been promoting itself toward people with a variety of different experience levels with the crypto market through a number of high profile sports sponsorships including for an MLB sports league, the Miami Heat arena, and more.
So far at the time of writing, FTX has spent more than $350 million on sports sponsorship deals in an effort to expand their business around the globe.
Since FTX’s clients were traditionally professional traders, in another effort to attract more retail traders to the platform, in 2020 FTX acquired Blockfolio, a leading mobile news and portfolio tracking app.
Considering the number of strategic partnerships the exchange has made recently, we can expect it to grow steadily in the future.
From The Kimchi Premium And Other Crypto Arbitrage Techniques To A $900 Million Series B Funding Round
In July 2021 it was announced that FTX had raised a $900 Million Series B funding round, the most raised in a funding round by a crypto project, at a valuation of $18 Billion! There wasn’t a single lead investor in the round, but the round included 60 investors. Some of the notable investors in the round were SoftBank Group, Coinbase Ventures, Sequoia Capital, Sino Global Capital, Paradigm, and Multicoin among others.
In a September 2021 interview with CoinDesk, SBF stated:
“A lot of people on Wall Street are starting to look into crypto. Many of the conversation going on on Wall Street right now are around crypto. Every major finance firm is talking about crypto now.”
The Kimchi Premium, Crypto Arbitrage, and the Growth Of The Crypto Space
These certainly are exciting times to be in the crypto space, and the growth of the industry and interest in it is only expected to increase more and more going forward. Although the Kimchi Premium and other crypto arbitrage opportunities might not have the same draw that they did back in 2017 when SBF was benefitting from them, they still have potential, and there are many other ways to benefit from the crypto market.
SBF’s quick path toward becoming one of the main figures in the crypto industry is a testament to how fast the industry changes. The fast paced movement of the crypto space keeps it always interesting.
We certainly look forward to seeing what the different crypto projects SBF is affiliated with do next and how the increasing interest in cryptocurrencies from traditional financial institutions benefits the crypto market.
As always, please reach out to us with questions, comments, and suggestions! info@vegaxholdings.com
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