I am paid in USDC and have 1.5 years salary on hand because I'm dumb and procrastinated putting it into sensible investments after the last thing it was in dried up. Today, seeing the USDC depeg and realizing that if it evaporates my future payroll also disappears and I'm turbofucked, I opened a $100k long at 7x leverage. If/when I sell the rest of my USDC for something else*, I'll take a 3%+ haircut, which will be offset by the $20k profit if USDC returns to $1 and I sold for no reason. But if USDC falls below $0.85 I lose $100k. I think it's likelier than not that USDC returns to peg on Monday. But it's possible that the irrational market goes really low, wiping me out, and then comes back Monday. So here goes. Gonna be shitting myself all weekend.
Liquidation: $0.8555
Break-even: $0.9694
Profit at $1: $19,609
Truly atrocious timing on the open, I woke up when it was at 94c but as soon as I had finished testing this out with a small position Circle made an announcement that temporarily pushed the price up to 97c and generated so much volume that KuCoin shut down USDC inflows. Every time there's an unusual market event somebody seems to hit the "no buys" button. I should have spaced it out over a couple hours though.
*problem being of course there's really no safe asset to flee into - all the stablecoins are garbage and the offramps I have access to are slow because I mostly used Coinbase
edit: i set up a thing to call my phone if it hits my $0.87 stop loss so I can sleep. i'll post update Monday or whenever i'm out of the trenches. fuck wallstreetbets i need you idiots to keep fighting with me so I don't think about the nauseating amount of capital technically under my control
This is such a godawful trade purely from a risk reward perspective. You're implicitly saying you have a 3% chance of being wrong since your max profit is par and your entry is 97. Even famously successful traders have track records of a less than 50% success rate, which is why any novice trading book would tell you to aim for at least 3:1 risk reward (meaning your stop loss should be at 96, not 86) and you've completely inverted that ratio and then leveraged it by 7. Even if through some miracle your trade worked all you'd be doing is reinforcing all your worst impulses which virtually guarantees you'll keep making this mistake until you inevitably get zero'd. That's before we even dig into the details.
So USDC is attested to by an auditing firm and they release monthly reserve reports which according to their latest numbers show they have 20% of their reserves held in cash at these banks:
SVB just went into receivership by the FDIC and Circle admits they had almost a third of their cash there, Silvergate just went into liquidation, and 2 of them have large unrealized losses on securities similar to SVB ( NYCB and Customers ). EDIT: Signature bank just collapsed too, although it doesn't really matter since the fed is backstopping them, still thought it was funny.
There's a chance SVB depositors are made whole even without some kind of direct intervention but the time scale on which this occurs is uncertain as is the the amount that'll be returned. This was an incredibly stupid trade purely from a risk reward perspective because even if things worked out in the long run there's a real risk you get stopped out purely by market gyrations. At the very least you should have just let your money sit unlevered because a 20% potential return isn't worth a possible total loss.
this doesn't make sense to me - USDC went to 96 again overnight. I set the stop loss at a value where I think it's not going to get triggered by random market fluctuations before Monday's news.
Please note that I'm starting out with USDC holdings (and so risking a possible total loss anyway; I think if there is a crash to 0 it'll be fast and I probably won't have time to get my money out). This is one of those bad investor psychology loss-aversion trades.
Looks like you're in the green on this, so congrats. I'd still take this as a time to reflect on your reasoning since I'm not sure how much thought you put into this trade that you didn't disclose in your post.
appreciate it. I thought it was most likely that USDC would return to 1 today but wanted downside protection in the way of early sale without net loss in most likely scenario. Ran it by my finance friends. Last night's Yellen announcement was silly but whatever, not gonna look a gift horse in the mouth.
In terms of risk reward, since your upside is only 3 points you should only have 1 point of downside. The reasoning for where your stop loss is makes sense but your entry doesn't from a risk reward perspective, meaning you shouldn't make the trade unless you got in at around 89 (3 down, 11 up). I don't know enough about the exchange itself or how withdrawals work, if you're assuming Monday morning they're going to get slammed in a bank run and it'll go to 0 immediately which my intuition wouldn't assume (if tether is still standing despite its obvious indiscretions). If I were in your shoes I would've gotten out at a 3% haircut and just take the tax write off rather than risk it all-or-nothing since this seems like a large enough sum that you're letting yourself get emotionally involved.
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