Citadel Securities, the largest market maker on Wall Street, is shorting ETH?

Who is shorting ETH?

Recently, an asset allocation table of a mysterious institution was leaked. It is noteworthy that in the multi-strategy investment portfolio, there is a US$3.1 billion Ethereum short asset.

So the question is, who is the holder of this $3.1 billion Ethereum short asset?

BlockBeats has found various sources of this asset allocation table and speculated on the two most likely candidates:

The first is Bridgewater Fund. Some other sources of information are consistent with the asset allocation table, and Bridgewater Fund CEO Ray Dalio has expressed his interest in 加密貨幣currencies and that he is a BTC maximalist, which is consistent with the logic of shorting ETH to a certain extent.

Another most talked-about possibility is Citadel Securities, which we will focus on today.

One big guy fell, another big guy came

If you still remember Black Monday in August 2024, the crash was triggered by Japans interest rate hike.

Japans first rate hike since ending its negative interest rate policy caused the yen to soar against the dollar, and the reversal of carry trades triggered large-scale liquidations. Global financial markets collapsed instantly, with the Japanese stock market plummeting 9% and the Nikkei index triggering circuit breakers twice, recording the largest single-day drop in eight years. The Korean and Taiwanese stock markets were not spared, and the cryptocurrency market was also hit hard. Bitcoin once fell below $50,000, and Ethereum plummeted by more than 25%, directly wiping out all gains for the year.

But the idea that the impact of Japans economy alone could lead to the collapse of cryptocurrency obviously could not convince everyone until some old players revealed the inside story.

As the first generation of crypto king that appeared earlier than SBF, BitMEX co-founder Arthur Hayes posted on social media that through channels in the traditional financial field, he learned that a big player was liquidating crypto assets.

Although the name was not explicitly mentioned, the direction within the community is quite clear: it is Jump Trading and its cryptocurrency division Jump Crypto. Since June last year, the U.S. Commodity Futures Trading Commission (CFTC) has begun investigating Jump Crypto. In addition to facing regulatory pressure, Jump Crypto has also been involved in several controversial incidents. First, the collapse of FTX caused Jump Crypto to suffer heavy losses. In addition, Jump has also been under the attention of regulators for its involvement in the collapse of the TerraUSD stablecoin.

As the CFTC investigation deepened, Jump Crypto’s young CEO Kanav Kariya announced his resignation, and Jump’s official Twitter account also stopped updating, which seemed to indicate that Jump was gradually fading out of the crypto industry.

However, as one big guy fell, another big guy came on the scene.

Yesterday, Citadel Securities announced plans to enter the cryptocurrency market making field. It was like a market relay race among traditional financial giants. Jump Crypto withdrew, and Citadel Securities, which also came from a traditional financial background, chose to take over the crypto market.

Jump and Citadel, as representatives of traditional financial giants, have similar backgrounds and strategies. Both companies started as market makers. Jump has a place in the financial market through high-frequency trading, while Citadel has become one of the worlds largest market makers by relying on hedge funds and equally high-frequency quantitative analysis. When Jump entered the crypto market, it brought with it a strong technical team, hardware equipment and financial support, and Citadel also has these advantages.

The legend of Citadel, the largest market maker on Wall Street

Citadel Securities is one of the largest market makers on the New York Stock 交換. Its daily trading volume accounts for nearly 35% of the US stock trading volume, equivalent to the daily trading volume of the Shanghai and Shenzhen stock markets, and its annual revenue is around US$7 billion. Related reading: Making over 100 million a day, why is Citadel Securities so profitable?

In addition to Citadel Securities market making business, Citadels main business is hedge funds, which manage $65 billion in assets. It is a technical school in hedge funds. While paying attention to the fundamentals of investment value, it analyzes the market through a large amount of information and various mathematical models. It is said that it invests billions of dollars in models and hardware every year.

According to LCH Investments data, in 2022, the top 20 hedge fund companies generated a total of US$22.4 billion in revenue (after deducting fees), among which Citadel, ranked first, achieved a revenue of US$16 billion in 2022, setting a new record for annual returns for hedge fund companies. The latest data this year shows that among all global hedge funds ranked by net income and valuation since their establishment, Citadel still ranks first, and Bridgewater Fund ranks fourth.

Data source: LCH Investments

Citadel founder Ken Griffin is worth $45.9 billion, ranking 22nd on the Forbes 400 list and 31st in the world. He even boasted, We do produce money.

The CEO of Citadel Securities, a market maker, has a name very similar to the richest man in the cryptocurrency world, Zhao Peng.

Compared with the experience of Citadel founder Ken Griffin, Zhao Pengs resume can hit the sweet spot of every Asian: he entered the childrens class at the age of 10, was admitted to the Department of Mathematics of Peking University at the age of 14, and then went to the University of California, Berkeley to pursue a doctorate degree.

Zhao Peng joined Citadel in 2006, and quickly rose to prominence with his outstanding mathematical talent. By 2017, he had taken the position of CEO and became one of the most trusted people of founder Ken Griffin.

In the four years that Zhao Peng has been CEO, he has increased Citadel Securities net trading revenue fivefold, an almost unimaginable growth rate. Under his leadership, Citadel Securities has not only taken a stronger position in the market, but also achieved unprecedented profitability.

Zhao Pengs name has become synonymous with the proud children in the overseas study circle more than a decade ago. Related reading: Citadel Securities CEO Zhao Peng: The pinnacle of Chinese on Wall Street, life started at the age of ten

According to the recollections of the international students at that time, while eating Maoxuewang in an old Sichuan restaurant in Chinatown, the international students talked about Zhao Peng with saliva splashing: On the landmark Lakeshore in Chicago, he bought two luxury apartments facing Lake Michigan and connected them, with a total value of over 10 million US dollars. They all hoped to become the next Zhao Peng.

Citadels secret move with Sequoia and Paradigm

Citadel officially entered the cryptocurrency market much later than its competitors. After all, Jane Street and Jump Trading began to establish digital asset businesses in 2017 and 2021, respectively. It seems that due to regulatory issues, Citadels connection with the crypto market has been underwater.

In 2021, there was a very popular event in the cryptocurrency circle. A 1787 version of the U.S. Constitution was auctioned at a Sothebys auction. At that time, 1,700 crypto players formed a decentralized organization called ConstitutionDAO, and raised a total of $43 million through social media to auction the U.S. Constitution, and derived the PEOPLE coin.

But unfortunately, they did not succeed in bidding for the Constitution. The highest bidder was Ken Griffin, the founder of Citadel.

In 2022, the billionaire accepted the first external investment for Citadel Securities, completing a $1.15 billion financing at a valuation of $22 billion. The lead investors were old acquaintances in the crypto industry, Sequoia Capital and Paradigm.

Sequoia Capital partner Junrui Lin will join the board of directors of Citadel Securities, and Paradigm co-founder Matt Huang said that he will work with Citadel Securities to expand its technology and expertise to more markets and asset classes, including crypto assets. Despite this, Griffin still claimed to the media at the time that Citadel Securities was not involved in cryptocurrency trading for the time being in order to avoid regulatory issues.

However, such an answer obviously did not conceal the fact that Citadel had already quietly laid out its plans. It was from that year that Citadel officially began to test the waters in the encryption industry and established a dedicated encryption business department.

First, Jamil Nazarali, head of global business development at Citadel Securities, was transferred to become the CEO of Citadels crypto business, and began to cooperate with another top market maker Virtu Financial, fund giants Charles Schwab and Fidelity on digital asset trading and brokerage business.

Then in June 2023, they officially launched the cryptocurrency trading platform EDX 市場s, which they jointly launched. Jamil Nazarali served as CEO. The trading platform focuses on non-custodial and retail investors, and the trading targets are limited to Bitcoin, Ethereum, Litecoin and Bitcoin Cash.

In addition to Jamil Nazarali, Citadel has also cultivated many elites closely related to the cryptocurrency circle. For example, Brett Harrison, the former president of FTX US who left due to conflicts with SBF over management issues, also served as the technical director of Citadel Securities and brought many technological innovations to the company.

However, Griffin himself has always had a rather contradictory attitude towards cryptocurrencies. At first, he publicly stated that he was cautious about cryptocurrencies and believed that they had no real value. In a recent interview, he admitted that he regretted not investing in Bitcoin earlier. If he could see a clearer value, he might have bought these assets earlier.

The reason why Citadel Securities entered the crypto field is not as complicated as we thought. The political right stance further deepened his connection with the crypto world. After Trump was elected president, especially his support for the crypto industry, many traditional financial giants, including Griffin, have seen the huge potential of crypto. Like most of the giant whales in the crypto industry, Griffin also firmly supported the Republican Party during the 2024 election. In the past election cycle, he was one of the top five donors to the Republican Party, second only to Elon Musk.

Citadel’s business has expanded from the stock market to the cryptocurrency world

Let’s go back to the topic we discussed at the beginning of our article. Why is the institutional asset allocation table that holds “US$3.1 billion in Ethereum short assets” suspected to be from Citadel?

In addition to its recent activities in the crypto industry, Citadel’s name is always closely associated with “short selling.” There are many rumors about their short selling in the market.

As early as during the stock market crash in 2015, there were rumors that overseas short-selling forces were one of the culprits that caused the A-share market to plummet. At that time, the China Securities Regulatory Commission checked many accounts and suspended a number of trading accounts suspected of affecting securities trading prices or other investors investment decisions.

Among them is an inconspicuous company: Sidu (Shanghai) Trading Co., Ltd. This Sidu company, according to the National Enterprise Credit Information Publicity System, is a wholly foreign-owned enterprise, and its shareholder is Citadel. After five years of investigation and negotiation, Sidu finally agreed to pay $100 million to reach a settlement agreement with Chinese regulators. At that time, a well-known overseas financial blogger Zerohedge revealed that Citadel was closely connected with the Federal Reserve and often held secret meetings. It was actually a tool for the Federal Reserve to control market stability. They used high-frequency trading and other means to push up the US stock market.

Looking back at 2021, when Robinhood banned retail trading during the GameStop (GME) stock market crash, Citadels name once again appeared at the center of many doubts. Retail investors believe that Citadel manipulated the showdown between retail investors and institutions through its financial support for Robinhood. Although Ken Griffin denied these allegations at the hearing, the close connection between his company and Robinhood still makes these allegations difficult to quell.

You know, Citadel Securities is not an ordinary market maker. Its relationship with Robinhood is ostensibly that of a client and a supplier, but behind the scenes, Citadel provides a large amount of order flow for Robinhood. All of this was exposed in the GameStop incident. Since Citadel paid Robinhood tens of millions of dollars to execute these trades, it naturally became the black hand in the minds of retail investors.

In fact, Citadel’s short-selling operations over the years have already made it an “invisible manipulator” in the market.

Even in 2023, Terraform even accused Citadel of possibly being involved in the short-selling of UST, which eventually led to the delisting of UST in May 2022, and demanded that Citadel Securities provide some key trading numbers. Even though Citadel strongly denied any direct connection with the collapse of UST.

No wonder the trend of GMEs stock price is so close to that of ETH, a community member pointed out that Citadel Securities plays an important role in this, such as using the same strategies and methods to make markets. Indeed, since July 2024, the trend of ETH has been almost the same as that of GMEs stock price.

Top: ETH price trend; Bottom: GME price trend

It is no wonder that Citadel Securities was recently suspected of being one of the institutions that shorted ETH.

But then again, as a top hedge fund, it is possible that they hold a large amount of ETH spot while shorting ETH to hedge risks. From this perspective, this may be a good thing. After all, the spot they hold is the main position, and shorting is only a supplementary strategy. The purpose is to ensure the steady appreciation of assets.

This also indirectly confirms the widely circulated ETH big change of dealers rumor that Wall Street giants are gradually building positions and becoming new crypto dealers. The game and competition between crypto market makers are still continuing.

This article is sourced from the internet: Citadel Securities, the largest market maker on Wall Street, is shorting ETH?

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