My OpSec Lesson
Given rumors around Binance, I think it’s a good time to get back to the source of all the crypto market contagion, Terra, and discuss why operations security (OpSec) is better than logic and beliefs.
If you’re new here, we chose Terra as our Pick of the Month in September 2021. We knew how it worked and where UST was going. I’m saying this because we recommended selling 75% of the position to be on the safe side when we started getting yellow flags. That’s good OpSec.
I was frequently challenged internally about Terra and UST, and as a person who issued a sell recommendation, I was trying to build a logical case for Terra’s potential collapse. I rationalized why it wouldn’t happen, and I still think that if no funny business had happened when Terra was managing its Curve pool, UST might still have been around—for better or worse.
So, a loss of 25% of the position (which meant essentially zero profit on Terra, because by the time we closed the other 75%, the sum was equal to the invested principal) was due to bad OpSec. Instead of rationalizing or believing, the better option would have been to get out, wait the storm out in a safe zone, and re-enter when everything was more transparent and safe.
Binance and FTX are the same concerning OpSec. If you hear FUD about any exchange, it’s time to get out. The better OpSec is having only a minimal amount of money on an exchange if you actively trade or, if you invest, withdraw immediately. That’s what we’ve been preaching from the start, and every report contains this recommendation.
It goes beyond exchanges. In the past several months, I spent at least $1,000 rotating between stablecoins. I don’t have the luxury of withdrawing to a bank account, but at the moment, I’d happily do it if I could, for safety reasons. Of course, that implies trusting the bank, but that’s another story. You can’t be 100% safe with cash anyway.
I decided to bring this up because Terra taught me a lesson: the best OpSec is in flying to safety, even if it’s uncomfortable or costly. Applying logic or rationalization will put you in a risky position for no good reason.
I’ve seen questions about Binance in our Discord, and even though I don’t think it’s in trouble and on-chain data shows it’s well capitalized, it’s better to have your funds somewhere else, preferably on cold storage.
You can get back there anytime, and the cost of doing so isn’t high. The cost is higher when it comes to BUSD, and I know that BUSD is from Paxos, but I followed my own advice of flying out of any asset that is under fire. I’d rather lose some money on fees than all my money on some random event.
Based on the available information, I believe that Binance will be fine, but good OpSec is better than believing.
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Disclosure: The author of this newsletter holds ETH. Crypto Briefing and members of the research team hold some of the Pick of the Month coins mentioned in the table above. Read our trading policy to see how SIMETRI protects its members against insider trading.