Daily observation 7/11

It's been a while since the last time I had a look at on-chain volume (last 24h)

  • Only ETH & BSC do $50M+ in volume
  • Whales prefer to use Arbitrum instead of Optimism, both clearly ahead of Metis
  • Harmony, Moonbeam & Evmos seem dead

I really like it!

7 Things I've Been Thinking About Lately In Crypto

By @route2fi

Thoughts about trading, DeFi, diversification, DCA, thinking in bets & the illusion of retirement

  1. About trading:
    You have to find your own way to trade. You can’t blindly follow standard trading rules and expect to outperform. You must find an effective way to do what others don’t.
    You can trade stocks, forex, commodities, crypto, etc. Recently I’ve found an edge in crypto because there are inefficiencies that you can take advantage of. For example, when the news about Andre Cronje got out on Twitter that he wanted to focus on other things than DeFi (March 2022), it took at least 10-15 minutes before $FTM, $YFI ++ started to move down. In retrospect, this is one of the easiest shorts I’ve ever taken on Fantom. For me, this was a scalp short, but looking at how bad the market ended I should probably just keep it for months. My point is, that crypto is not as efficient as the stock market. When news breaks out in the stock market you can be sure that this is already reflected in the price seconds later.
    Crypto has a lot of retail interest, and tbh there are a lot of idiots in crypto. By that, I mean people that just buy a random dogcoin and hope it goes to the moon. There’s a stark contrast between the smart people on CT and the people that follow Tik Tok influencers and BitBoy for crypto advice. Btw, I’m not referring to myself as one of the smart people here. I’m referring to GCR, Cobie, HighStakesCap, HsakaTrades, CryptoCred, Light +++. Could prolly mention 50+ more here.
    There is an advantage for the people that actually try to stay up to date on crypto and that are actively seeking alpha. As crypto matures I think the market will be less inefficient, and that it will be harder to trade (in the future). That’s why we need to take advantage of it today.
  2. DeFi season part 2:
    In retrospect, August 2021 to January 2022 was just insane for DeFi. You could buy a token and it would go up + you would get yield from farming.
    Absolutely not sustainable, but mega fun to be a part of. Tons of forks of the rebase tokens $OHM. You could buy it and hold it for a week and literally be sure that you would earn money. Why? Because everyone else was buying it. Retail was crazy after it.
    Just look at the screenshot below. “Potential number of lambos”. We should’ve understood that this was the top of the cycle, but human greed got us.

Will we see something similar in the future?

Yes, because human greed will never change.

3) Diversification:

Do you really need to diversify a crypto portfolio? I’m all ears for diversification across different asset classes, but for crypto alone?

Here’s a correlation matrix between different assets for the last 30 days. For example, $ETH has a 0.92 correlation to $BTC, which means they traded almost identically.

I added some of the bigger assets out there, and the lowest correlation in this period was 0.7.

In my opinion, a portfolio with 20 different coins doesn’t make sense at all. In fact, I don’t believe in bag-holding at all for crypto unless there’s a strong trend (but I prefer to call that trading). This leads me to the next point.
4) Dollar-Cost Averaging
There are two camps on crypto Twitter. The long-term investors vs. the traders.
The long-term investors will say that the only thing that works is to hold tokens and DCA every month. Traders on the other hand believe that the narrative changes too quickly to hold tokens long-term. I agree with some parts of both camps. The only tokens in crypto I would be comfortable holding long-term with a DCA strategy are $BTC and $ETH.
Look at the top 100 crypto list from 4 years ago:
How many of the tokens are in the top 100 today? 10? 15?
You get my point, the probability of your favorite crypto tokens surviving long-term is small. So it really makes no sense to DCA into them unless you want to take a risk on them coming back.

  1. Find like-minded people:
    Make an alliance with people in the space that are naturally curious and that have the same goals as you do. Look for people with high intelligence, the hunger to succeed, and relentless energy.
    Make friends with founders, builders, and other people who know more than you do. This is how you learn. Meet once a week over Zoom to discuss ideas, or just chat on Discord/Telegram.
    This will give you 5x as many ideas and may shorten your research process.6) Crypto is a game of probabilities, but most people treat it as gambling
    Let’s do a very simplified exercise to illustrate how you can get +EV (positive expected value) on your bets.
    Think about $BTC long-term and let’s make 4 scenarios:
    I. $BTC will reach new ATH this year
    II. $BTC will continue sideways in 2022, but make ATH in 2023/2024
    III. $BTC has played its role, it will go down and stay there
    IV. $BTC will go lower this year, but make ATH in 2023/2024
    Now, let’s make some probabilities for each outcome:
    I. Probability: 10%
    II. Probability: 40%
    III. Probability: 20%
    III. Probability: 30%
    $BTC is sitting at $21K at the moment.
    What would be the best trade right now given the 4 scenarios?
    I. Buy
    II. Buy
    III. Sell
    IV. Buy
    Buying is the best outcome in 80% of the scenarios.
    I. 10% probability for a 230%+ upside
    II. 40% probability for more than 230% upside long-term
    III. 20% probability that $BTC will never come back
    IV. 30% probability that we will lose money short-term, 230%+ upside for making money long-term.
    For III you could make an invalidation point of let’s say 20%. In other words, you sell if $BTC goes below $16,8K
    Summarized, you have an 80% probability of a 230%+ outcome, and a 20% probability of a 20% loss.
    Worth the risk, right?
    This was a very simplified example.
    You might disagree with the scenarios and the probabilities, I just wanted to show how you could think in bets.
    If you want to learn more about this, check out this great Substack-article by @cobie which inspired me: https://cobie.substack.com/p/probabilistic-thinking?s=r
  2. The illusion of retirement
    A lot of us dream about retirement from the 9-5. I’m sure that’s why most of you got into crypto in the first place. But the truth is that there is no retirement. Our human brain is not hard-wired to do anything.
    Staying up to date in crypto is actually hard work, but for me, the difference is that I get to do what I love. I honestly spend more time “working” now than I did in my 9-5, but this is what I want to do. Travel is fun, but you can only do so much before you’re getting tired of it and want to go back to your routines. I don’t see being in crypto as work, so there is no retirement. You play until you lose enthusiasm, then find another game (for me, I’ve been into poker, forex, stocks, casino, odds betting, etc.). You play, you gamble, you trade, you invest. It’s a way of life.
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