I understand that Ping's performance has weakened significantly this week because what happened on Binance will have repercussions in the days and weeks ahead.
If you've been paying attention, you'll have seen Wintermute publicly claim that Binance ripped them off with aggressive auto-deleveraging (ADL) at unjustified prices, and WM couldn't be the only market maker (MM) to be ripped off.
Market makers hold long spot positions and short perpetual contracts, so they don't lose or gain money regardless of cryptocurrency fluctuations. Instead, they make money by routing trades, arbitrage across centralized exchanges (CEXs), and charging a small commission on each buy and sell, similar to MEV.
If an exchange begins aggressively closing short positions at significantly higher prices, as WM claims, and the price quickly drops, and they can't quickly re-enter the short position, they stand to lose a significant amount. They then face a difficult decision: sit on their losses and hope the price recovers, or sell as quickly as possible, stop providing liquidity, and then get out until people figure out what happened. Whatever decision the market maker makes will result in a bleak book.
WM stated in an interview that they are still waiting to hear if they will be compensated for their losses. This likely means that other market makers are also waiting, as clients as large as WM are crucial to the business. Binance, like any business, must sort out how much it is willing to compensate market makers, ensure the claims are legitimate, and navigate the legal process. Untangling this mess will take time, and WM isn't the only market maker operating on Binance. There are many more.
Those who think last week wasn't a big deal are wrong. It was a major event. Some assets plummeted to zero. We don't know how much MM lost. MM's massive losses mean that in an already illiquid market, with the US president engaged in a trade war with China, book value will continue to thin—not a recipe for a "nice Wednesday." To make matters worse, the remaining crypto participants are now also in trouble, destitute. Many were liquidated in the chaos. There are fewer buyers now than before. The wealth effect has disappeared. Crypto natives have become Haitians.
I agree with WM that what's happening is far more detrimental to shitcoins than it is to BTC and mainstream currencies. Binance has lost a ton of trust and deserves your disdain. I don't know if this was intentional or just a massive mistake.