Trader Doubles Down on Bitcoin Bet Against Ethereum, Accumulating $118 Million Position

A trader has increased their bet on Bitcoin outperforming Ethereum by almost $21 million, bringing the total position size to $118 million. This strategy involves depositing wBTC (wrapped Bitcoin) and borrowing Ether through Aave, profiting from declines in Ether's value against Bitcoin. The trader could also be using the borrowed Ether for various purposes like speculation, hedging, or earning interest.

Trader Increases Bitcoin Bet Against Ethereum to $118 Million

In a bold move that signals a bearish outlook on Ethereum, a trader has significantly increased their bet on Bitcoin's outperformance. Through a sophisticated strategy, the trader has amassed a $118 million position that stands to profit from Ethereum's decline in value relative to Bitcoin.

Leveraging DeFi for a Bearish Ethereum Play

The trader has executed the trade through Aave, a decentralized lending platform. Aave allows users to deposit one crypto asset and borrow another against it. In this case, the trader has deposited wrapped Bitcoin (wBTC) and borrowed Ether (ETH). This strategy effectively creates a short position on ETH relative to BTC.

How the Strategy Works

If the value of ETH falls against BTC, the trader can repay the borrowed ETH at a lower value, thereby profiting from the decline. The trader has deposited 2,648 wBTC, valued at approximately $180 million, and borrowed 35,894 ETH, worth around $118 million.

Multicoin Capital's Position

According to Llamafolio, an on-chain wallet tracking tool, the wallet used for the trade has been linked to Multicoin Capital, a prominent crypto investment firm. Multicoin Capital has declined to comment on the matter.

WBTC: A Bridge Between Bitcoin and Ethereum

Wrapped Bitcoin (wBTC) is a token on the Ethereum blockchain that is backed one-to-one by Bitcoin. This allows traders to leverage Bitcoin's value within the Ethereum ecosystem, including for DeFi strategies.

Historical Context

The trader's position was initially funded in December 2021, with an initial deposit of 1,100 wBTC and 997 wBTC, worth approximately $91 million at the time. They subsequently deposited more wBTC and borrowed ETH, building up their position to its current size.

Profitable Bet So Far

Since increasing their position on April 3, Ethereum has declined by 3% against Bitcoin. This performance has benefited the trader's bet, which stands to profit further if ETH continues to underperform BTC.

Risk Management

The trader's position has a health factor of 1.19, indicating a low risk of liquidation. Liquidation occurs when the health factor drops below 1, which means the trader would need a significant increase in ETH's value relative to BTC to face liquidation risk.

Potential Other Uses

While shorting ETH may be the trader's primary goal, the borrowed ETH could also be used for other purposes, such as speculating on other assets, hedging risk, or earning interest. The ETH has been sent to the centralized exchange Coinbase, obscuring the trader's further intentions.

Conclusion

This trader's massive bet against Ethereum is a testament to the growing interest in DeFi strategies and the sophistication of market participants. The move underscores the growing bearish sentiment towards Ethereum and the potential for significant volatility in the cryptocurrency market. As the market continues to evolve, traders will undoubtedly continue to seek out innovative ways to capitalize on price movements.