Should STRK be sold? Seeking inspiration from Wintermute's market-making style

Original Author: Karen, Foresight News

Hard work pays off, and Starknet's airdrop has settled.

After receiving the airdrop, should one sell STRK? Today, we will seek insights from the market-making style of STRK market maker Wintermute. As a highly active market maker in the cryptocurrency space, Wintermute creates liquidity and efficient markets on CEX, DEX, and OTC platforms, providing liquidity for over 50 exchanges and trading platforms, including Binance, Bybit, Coinbase, Kraken, Bitfinex, Bitstamp, Uniswap, and dYdX.

According to Wintermute's official website, by the end of 2023, Wintermute's cumulative trading volume reached nearly $3.7 trillion. Wintermute is present among the market makers of blue-chip tokens across various fields, such as OP, ARB, WLD, BLUR, DYDX, and APE. The community believes that Wintermute's market-making style is characterized by high opening prices, selling off, wash trading, accumulation, and subsequent price increases. Additionally, the market-making process involves not only direct trading in the secondary market but also simultaneous efforts across multiple fronts, including news and market trends.

After cross-referencing the weekly and monthly charts of OP, ARB, WLD, BLUR, DYDX, APE, and other non-Wintermute market-making tokens in similar sectors, I found that Wintermute's market-making style is influenced by various factors and cannot be determined solely by the performance of a few tokens. Factors such as the token's sector, market capitalization, the bull or bear cycle during the token's issuance, Wintermute's market-making share, and trading strategies all play a role.

This article will explore the market-making participation of Wintermute and the performance of OP and ARB tokens, both of which are in the Layer 2 space, to identify patterns that may help users make informed decisions regarding STRK.

OP

Wintermute faced some challenges and controversies during its market-making process for OP. A few days after the OP token was launched, Wintermute disclosed a FUD message stating that when Wintermute initially received a loan of 20 million OP (with an initial supply of 2^32 (4,294,967,296)), due to an internal error, the team provided a Gnosis Safe multi-signature wallet address deployed on the Ethereum mainnet instead of the pre-prepared Optimism address. Subsequently, Wintermute agreed to receive an additional 20 million OP while providing 50 million USDC as collateral and exploring fund recovery options. Although Wintermute later recovered most of the OP, some observers questioned Wintermute's true motives and purposes in market-making for OP.

Due to factors such as early scientist rushes when the Optimism token launched, severe delays in the mainnet and RPC after the airdrop claims began, and the errors in Wintermute's market-making, the OP price fell from around $2 shortly after launch to about $0.5 twenty days later, a drop of 70%. After several rounds of price increases and consolidation, the current price is around $3.8. The durations of the three wash trading phases varied from 1 month, 4 months, to 6 months.

OP Price Trend, Source: CoinGecko

ARB

Before the ARB airdrop claim opened, on March 23, 2023, an address marked as "Wintermute" by Arkham, starting with 0x cce, received 40 million ARB from the Arbitrum Foundation (with a total supply of 10 billion ARB).

A few days after the airdrop, the Arbitrum Foundation initiated the AIP-1 proposal, suggesting the introduction of a decentralized autonomous organization structure, ArbitrumDAO, and applying for a funding allocation of 750 million ARB tokens. However, the Arbitrum Foundation had already transferred 750 million ARB tokens on March 17, with the transfer address being the administrative budget wallet mentioned in the AIP-1 proposal at the end of March.

The opening price of ARB was around $1.5, but due to governance chaos, lack of trust and transparency, delayed responses, and FUD sentiment triggered by token sell-offs, the ARB price fluctuated around $1.2 for the next two weeks. After the overall market rose above $160 million, it continued to decline, fluctuating between $1.3 and $0.75 for the next seven to eight months, before steadily rising since December last year, currently priced around $1.8.

ARB Price Trend, Source: CoinGecko

STRK

Before the STRK airdrop, Wintermute acquired 2 million market-making tokens (with a total supply of 10 billion STRK), while Flow Traders and Amber Group also acted as market makers for STRK. After the token launched, STRK reached a peak price of $7.71 on Binance and $3.5 on OKX, before gradually declining and fluctuating between $1.6 and $2.

Today, StarkWare announced an update to the lock-up schedule for early contributors and investors. Specifically, the originally planned unlocking of 134 million tokens on April 15 will be adjusted to only unlock 64 million tokens. Subsequently, 64 million tokens will be unlocked monthly until March 15, 2025, followed by 127 million tokens each month for the next 24 months until March 15, 2027. The 580 million tokens held by early contributors and investors will be unlocked by the end of 2024, originally planned to be 2 billion tokens. By the end of 2025, an additional 1.4 billion tokens will gradually unlock, and another 1.5 billion will unlock by the end of 2026, with 380 million unlocking by March 15, 2027. As a result, STRK has surpassed $2.1.

Considering that nearly 74% of the STRK airdrop has already been claimed, it can be understood that the selling pressure should have been significantly alleviated. Additionally, since the number of tokens Wintermute is market-making for STRK is relatively small compared to its market-making share in OP and ARB, the impact on the market may also be smaller.

It is worth noting that the address of the Three Arrows Capital liquidator "Teneo: 3AC Liquidation" also received 134 million STRK this month, making it the ninth-largest holder of STRK. This is also a noteworthy event, as it may indicate that during the liquidation process of Three Arrows Capital, its assets are being redistributed or processed. Back in March and November 2021, Three Arrows Capital invested in StarkWare's $75 million Series B and $50 million Series C funding rounds, respectively. In 2022, the liquidator Teneo controlled assets worth $35.6 million, including fiat currency and StarkWare tokens.

Overall, in terms of price performance, both OP and ARB experienced declines within 10 to 20 days after launch, followed by fluctuations and significant increases after several small peaks. Additionally, it is important to note that both OP and ARB faced FUD crises after their token launches, and they were in a market cycle transitioning from bear to bull, which positively influenced their overall price performance.

For the STRK token, if we refer to the performance of these two Layer 2 tokens that Wintermute participated in market-making, there may be some short-term opportunities. If one has not sold their airdrop tokens previously, now may not be an ideal time to sell.

Of course, when making decisions, it is also essential to pay attention to market trends, understand current market hotspots and capital flows, and develop suitable investment strategies based on one's risk tolerance and goals. Additionally, considering the volatility of the cryptocurrency market, it is advisable to adopt a long-term investment strategy to avoid being disturbed by short-term fluctuations.

If you missed the Starknet airdrop or want to explore other opportunities in the Starknet ecosystem, you can check out the "Starknet DeFi Spring" program launched by the Starknet Foundation. This program will last for six to eight months and will distribute 40 million STRK to DeFi protocols participating on Starknet. Participants will have the chance to receive both the platform's own token airdrop and STRK incentives, effectively achieving two goals at once.