Crypto Kings: Volatility is a Feature not a Bug

Here’s a second takeaway from Howard’s conversation on crypto with Sam. It gives insight into how a trader looks at the world. Most of what Sam describes scared us away from crypto back then, and probably still scares us away now too.

After having been at Jane Street Capital for nearly three and a half years, Sam was itching to start his own thing. He sat down and did a bunch of back of the envelope calculations. He concluded the biggest upside came from trying a bunch of things. This was late 2017, and crypto was going crazy. Sam had a strong instinct crypto probably had great potential.

It checked all the boxes. Volatility and retail interest was huge. The industry was growing fast and split between many different venues across the world. No financial institutions were involved yet, so there wouldn’t be much liquidity initially; and the infrastructure was going to be shitty.

Crypto had all the heuristics a trader would look for. A space where the liquidity demanded would be outstripped by the supply. The perfect opportunity.

To see what Sam’s built since then with Alameda and FTX is mind blowing. If only I’d remembered one of Howard’s more famous sayings, “Volatility is a feature not a bug,” perhaps I’d have gone down the crypto rabbit hole much earlier.

Catch the entire interview on your favorite podcast app: Sam Bankman-Fried of FTX on Futures, the Global Scale of Crypto and More (EP.159)

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