Tuesday, May 28, 2024
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The Art of Timing: A Crypto Crash Trade that Paid Millions

This week brought about a significant reckoning in the cryptocurrency sphere, led by the SEC’s sweeping regulatory crackdown. The shockwaves were felt across the industry, notably shaking the foundations of crypto giants like Binance and Coinbase.

This week saw back-to-back lawsuits announced against Binance first, and then Coinbase, triggering a chain reaction that sent the related asset prices into a downward spiral. Coinbase stock bore the brunt of this seismic shift. After dipping 9% on Monday following the Binance announcement, the shares took a nosedive on Tuesday, plummeting an additional 21% after Coinbase was handed its lawsuit. In a span of just a few days, the stock’s value had tumbled a staggering 28% from the previous week’s close.

Interestingly, amid this chaotic market turmoil, one investor seemed to have orchestrated a perfectly timed trade that capitalized on the unfolding events. Just minutes before the SEC announced its initial lawsuit against Binance, this investor executed a strategy that would ultimately prove highly lucrative.

Here’s how the investor played it, based on data analysis:

On Monday, at 10:36 a.m., an investor purchased a hefty block of 4,806 put contracts with a $50 strike price. At that time, the stock was trading at $61.77. A put option is essentially a wager that the share price will fall below the set strike price. The options were acquired at 18 cents each and by the end of the day, they were trading close to $1. If the investor had closed their position at the peak, it would have resulted in a whopping 460% return.

But the game didn’t stop there. On Tuesday, when Coinbase was served its lawsuit, the value of these options soared to $5.65 each, further pushing down the company’s stock. Had the investor held onto the position past the first-day dip and exited at the most optimal time, the total return on the initial investment of $86,500 could have reached an eye-popping $2.6 million in less than 24 hours.

This event marks the second incident of astoundingly well-timed trades in recent weeks. Another savvy investor was found to have placed a large options bet predicting a stock surge for Equitrans Midstream Corporation. This was just days before a surprise beneficial provision was included in the debt-ceiling deal. As anticipated, the stock did indeed surge, resulting in a lucrative $7.5 million payday for the trader.

While not all investors can rely on such a perfect storm of events to boost their portfolios, these cases serve as reminders of the immense potential for gains (and risks) in the dynamic world of trading and investment. They demonstrate the power of strategic timing, informed decision-making, and a little bit of luck in navigating the tumultuous waves of the market.