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Insilico Terminal Podcast Episode 10 - Scott Phillips
87 Plays28 days ago
In this episode, Scott shares his journey from a TradFi background to finding success in crypto’s early DeFi days. He breaks down momentum effects, on-chain inefficiencies, and how simple systems often outperform over-optimized ones. The discussion covers mid-frequency quant trading, partnering with market makers, and the psychology of trend following. Scott also opens up about burnout, mental health, and his personal story of redemption - ending with reflections on the future of systematic trading, vault design, and finding peace beyond success.
00:00 Intro, Scott’s background in TradFi, pivot to crypto in 2019, and early DeFi summer success
07:08 Momentum effects in crypto, on-chain inefficiencies, and finding edge in smaller venues
20:18 Building systems, market-making hybrids, and why simple signals outperform optimization
26:00 Mid-frequency quant trading, execution costs, and partnering with market makers
35:00 Trend following as a career - psychology, losing streaks and Hyperliquid strategy
43:00 Burnout, mental health, taking breaks, and reflections on trading longevity
48:05 Life story - crime, jail, rebuilding through trading, lessons on risk and humility
52:29 Future of crypto and systematic trading, decaying edges, and institutional arrival 58:08 Vault design, momentum modeling, and cross-asset trend logic
01:12:00 Closing thoughts on money, wisdom with age, and the balance between success and peace
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Transcript
Introduction to Scott Phillips
00:00:14
Speaker
Welcome everyone to another episode of the InSilico Terminal podcast. Today i have with me Scott Phillips um and I like to ask my guests to introduce themselves at the beginning. Who are you? What do you do? How do you describe yourself?
00:00:31
Speaker
yeah All right. um I'm Scott and I am a professional trader and mostly an algorithmic trader.
00:00:42
Speaker
But I've done a lot of different sorts of trading and my expertise is in trend following trade and mostly in TradFi trend following.
Transition to Crypto Trading
00:00:51
Speaker
And I've done that for a long time. And in 2019 or so, I realized that I wasn't adding anything to that process.
00:00:58
Speaker
Like the the returns I could get in TradFi, I've averaged like year, but that's I could give that money to a manager and get nearly that.
00:01:09
Speaker
So I did. and And I pivoted to crypto in 2019 and I built trading systems for crypto, which fortuitously went live right into DeFi summer. And then I had you know a life changing win from that.
00:01:23
Speaker
And then I started a business out of that. And one thing led to another. And and I'm kind of too online and terminally online. So I've kind of been early to memes, early to a bunch of internet bullshit, full stacked hype early.
00:01:38
Speaker
um And now I'm a, my partner, the robot James, who some of you will know, is a prominent guy on Twitter or he used to be.
00:01:49
Speaker
And he and I are building out DeFi hedge fund infrastructure on the Hyper EVM. And we're launching our own basically prop firm trading DeFi vaults.
00:02:00
Speaker
um with another guy called Liquidity Goblin, who's our who's our great friend and execution partner. And yeah, we're going to gamble some of our own money and probably gamble some other people's money too.
Overcoming Past Challenges
00:02:15
Speaker
um How long since you've said you've been in TradFi before, how long have you been in trading in total? or but What made you get into trading in the first place? Oh, this is a hilarious story. So I went broke in middle age and I found myself in 2007, I found myself walking out of a prison gate with all my possessions in a shoebox.
00:02:35
Speaker
And in in a brilliant stroke of complete fucking idiocy, I decided that I would become a professional trader and make it all back, which is like the dumbest idea. possibly yeah and And so I failed predictably and repeatedly at that I top up an account mostly by doing bad things. And then I'd lose that money gambling and then I'd come back and One thing led to another. after like the sixth time of blowing up a small account, I realized needed to get a bit serious about it. And so I started to research systematic trading.
00:03:07
Speaker
And luckily, the first thing that I tried was this shit called trend following, which is a very weak edge. Like trend following is my expertise and trend following is the weakest edge that is still an edge.
Understanding Trend Following
00:03:19
Speaker
So in In TradFi, it works um through diversification. Like you trade 30 or 40 different futures markets. And that's what I did. I traded 35 different futures markets.
00:03:30
Speaker
And I would buy this by the ones that were going up and short the ones that were going long with simple technical indicators like moving average crossovers and breakouts things like that. And anyway, I'd done okay at that.
00:03:44
Speaker
And there's a whole thiss whole big industry of people doing these really retarded systems in TradFi.
Crypto Trading Challenges and Strategies
00:03:50
Speaker
And they call them one-entry, one-stop systems. And they're derivatives of a bunch of early traders called the Turtles, who you're probably too young to have heard of. But the Turtles were these sort of legendary trading figures, like in the 70s and 80s.
00:04:04
Speaker
and and And they're retards. Like the trading systems from the 70s and 80s are retarded. They're exactly what the 70s and 1980s cars, right? Like they're not as good as the one. Yeah. And so anyway, you put these things to crypto and they work.
00:04:18
Speaker
and They used to work. Well, they still work pretty good, actually. um Yeah. You know, so better they're still better than sharp 1.3 in crypto, right? Which isn't too bad. And so the way that they'll work typically is, um for example, buy everything that makes a closing high above that that makes a close above the 20 day high.
00:04:41
Speaker
and then you know sell it on a trailing stop. That's basically how how one entry, one stops systems work. And then I developed progressively more and more complicated systems. And I got on i got on Twitter and and there was people actually running you know proper hedge funds doing that same thing, but making much better money. you know you know very good sharp as And so I started to become friends with them and and they told me eventually how they did their stuff. And we ripped off their ideas from the group chat, like almost all of my trading ideas are ripped off from a group chat, like probably not.
00:05:15
Speaker
um You know, if there's if there's one tip that I can give, you know, newer traders is just get yourself in the best group chat you can and make yourself useful and and don't be a prick and be funny and be smart and be likable. And eventually people are going to tell you how to make money and, you know, in crypto with good alpha.
00:05:34
Speaker
Yeah, but I mean, so with crypto, we see a couple of effects, right? Like it's such a ball ache to put your money in and pull it out of crypto, right? like So the vast majority of people that I know in crypto don't even have a fucking off ramp.
00:05:49
Speaker
Like, you know what I mean? Like it would be unusual for people to have an off ramp in crypto. So that causes... an effect where, you know, if you're up in the casino, no one pulls the chips off the table. They just continue to gamble, right?
00:06:05
Speaker
Yeah. there's There's no actual, there's no actual valuation. So nothing's tethered to any sort of real, like, I mean, sandbox was like $10 billion, dollars fucking Shiba Inu $40 billion. dollars like Like, how the fuck you come up with those numbers? Like those, those aren't,
00:06:23
Speaker
does So what I mean is that with that, the absence of any sort of like you have to actually make money or cash flows or P ratios, and she momentum, which is when things start to pump, there's a statistical effect that they're probably going to continue to pump, becomes quite a dominant effect.
00:06:41
Speaker
And we see other things to getting your money in and out of a chain. Like, i don't know about you, but bridging gives me this unreasonable anxiety like every time I do it.
00:06:53
Speaker
That's it. I mean, it's it's pretty annoying, I would say. I don't really like the process. but I don't like the process. It always just feels like someone's going to take my money or I'm going to hacked here. I'm going the wrong thing or not have gas or have this really like. Yeah, it's very annoying. I don't like the on-chain experience at all. I think the user experience is very bad.
00:07:10
Speaker
So the friction between things causes this effect where when people start making money on one chain, that money tends to wash around and like a hot ball of bullshit money. Yeah.
00:07:21
Speaker
And so we saw that like like that's all that the Solana meme coins were. it was like the same hot ball of money just washing around. We saw it in hyper liquid. I mean, you see. and And so one of the things that that I tell people to look for is you should look where people are making a lot of money that they haven't earned.
00:07:39
Speaker
but Because I mean, that's what crypto is, right? Like, like, if if we're looking at, like, why did I get into crypto? It's because I wasn't good enough to make it in Trapwire. I couldn't get a job. but i't I don't deserve to make eight figures, but but I chose to like that.
00:07:54
Speaker
I really, I really have enjoyed that. and And so we when I see someone who's like, stupid or like when I see some dumb fuck who's just put a couple of thousand dollars on a meme coin and then and then now they're worth eight figures.
00:08:11
Speaker
I go, well, I'm dumb and I've got an insane risk tolerance. Why why can't I be that? And I think yeah I think that's the beating heart of crypto is like, why can't I be lucky?
00:08:23
Speaker
Why does it have to be those fucking early Bitcoin guys? Fuck it. What about me? Yeah. it's like at And so whenever you see that start to happen in crypto, that's like that's like a
Market Makers and Trading Strategies
00:08:34
Speaker
magnet.
00:08:36
Speaker
That's an idea virus. that's You mean I can just trade these fucking funny name coins and and if I pick the right one, I'll get rich? Like, fuck yeah, I can do that. why like it just Like anything with skill, like there's a lot of edgy meme coins, right? Like if you if you delve in if you quant things out properly, like this there's a lot of highly predictable factors with meme coins.
00:09:00
Speaker
have you Have you ever done that? but yeah. um Yeah, lots. Gone quantitatively into meme coins? Oh, yeah. Yeah, lots. I mean, so volume is highly auto correlated with meme coins.
00:09:11
Speaker
So ah raise a rise in comparative volume is highly predictive of a rise in prices tomorrow. And we see there's... Okay, let me give you let me give you some let me drop some alpha.
00:09:30
Speaker
I'm listening, I'm listening. I'm writing bell. So shitcoins on average are pretty shit, right? Like it's right there in the name. Yeah.
00:09:41
Speaker
So on average, almost every shit coin that has perpetual futures listed will decline by 90%. Why? Because mostly the people involved will eventually either sell their spot bags or hedge out with perps, right?
00:10:00
Speaker
the but The way that market making contracts for shit coins work is the the industry standard model is to do a seven day. It's a call option based on a seven day TWAP of price that goes for 90 days.
00:10:11
Speaker
So this is the industry standard market maker model. And if you look if you plot the average the average new listing on any tier one exchange, whether it's and it's the same for Binance, even though Binance more egregious, it's the same for Hyperliquid 2.
00:10:28
Speaker
It's in the market maker's best interest to keep to to to keep the price stable for a couple of days. And if pumps are going to happen, and they they happen in the first couple of days. You can make an incredible trade by shorting everything after about every new listing after about seven days.
00:10:45
Speaker
and holding for 90 days, which coincidentally is this same time that the market maker contracts go for because the market makers aren't interested in taking a directional view on whether your shitcoin is a success. They're interested yeah they're in staying delta neutral. So they have to sell X amount to and you you know you can plug it into an options calculator
Philosophy and Execution in Trading
00:11:04
Speaker
and work it out.
00:11:04
Speaker
And and you know those are thinly traded markets and highly. so So that's a really good trade. But if you look at Anywhere where perpetual futures are listed on small coins where they're not listed on major exchanges, those have incredible edges because um if you think about it, there's a bunch of people with spot bags and everyone's wallets are public and they don't want them to know that they're dumping.
00:11:35
Speaker
If they have any exit liquidity available, they tend to go for it. um So you can find third and fourth tier shitcoin casinos.
00:11:46
Speaker
Like Zuzu's one. theres like Like he is who he is. But there is incredible edge for anyone who's who's willing to roll the dice on him, you know, stopping you withdrawing.
00:11:58
Speaker
And there's a number of there's a number of places like that. What else can you do with small shitcoins, Zuzu? what what happens What happens after these 90 day maker contracts, like when they when they run out? They bounce a little bit, but um um it's not. So markets are ah not like an equation where you can solve for X and and plug in. They're like super. Yeah.
00:12:22
Speaker
So we're talking about broad tendencies to go down and you're going to get fucked occasionally. And so if if you're if you're taking a trade, you're probably taking this. There's probably a very unless you're talking about, say, um you know, some sort of market maker like Wintermute or Salini or something like that, like they they probably have two or three losing days a year.
00:12:45
Speaker
like like you and I can't do stuff like that. Like we're just not that good. yeah Yeah. I mean, speak speak for yourself, but no, no, I'm joking. I mean, all the trades that are open, that, that,
00:12:58
Speaker
All the trades, all the opportunities that are very attractive are also attractive to really smart people. Right. Yeah. I think what's important with crypto is coming to it with an attitude of humility and saying, well, you know, I'm not as I've met some of those really smart guys and I'm not as smart as them.
00:13:12
Speaker
I'm just not like I like this. I'm just not. So anything that I can do that has a positive expectancy probably is also going to be shit. And it's also going to be useful.
00:13:24
Speaker
So I think this is a good framework for evaluating trades is your trade should be useful to someone in the market. So, for example, if I was doing you're um if you're if If you're market making, you're providing liquidity to the market, that should be useful.
00:13:43
Speaker
If I'm doing trend following, so most people are buying high and selling and trying to buy low and sell high, right? my In trend following, I'm trying to buy high.
00:13:54
Speaker
and sell even higher. So I'm doing the opposite of everyone else. So I'm taking on risk that smarter people than me don't wanna take. And the same with basis trades like buy spot, sell futures, you're taking on a shitty risk. you know like Like um you know the trade that USDE, the trade that Athena does is is not a risk-free trade, no matter how yeah no matter how they package it or slice it and dice it. Like if they didn't have their ADL agreements in place with Binance,
00:14:25
Speaker
um I mean, they would have gotten cut out on a stretcher a couple of weeks ago. So there's no way to take risk without it being risk free. And I think what you want to do as a smaller trader, especially a smaller trader who's trying to run an account up, is look for the shittiest places you can.
00:14:42
Speaker
You know, like, you know, if you're a casino player, you're not going to find edge at the Bellagio, but you might find you might find a sloppy dealer at some Indian casino somewhere or or even better, you might find one of those, you know, on the border of Cambodia scam towns.
00:14:59
Speaker
You know, that might be a place where you could where you could count some cards. Yeah. and And it's very much like that in crypto. If you're a small guy, like you want to be looking at So we traded on OX. It was OX Fund at that time.
00:15:17
Speaker
And it's now Quanto.Trade, Zuzu's exchange. And everyone I told about trading there said, I'm not fucking trusting Zuzu. Like, he's a fucker. And like, I'm not trading there. It's the fucking guy. he's say And it's like, that's exactly what, that's exactly why you want to trade.
00:15:34
Speaker
Yeah. You know, our share ratio was over 10. Click trade. You know, a man with not any algo, just clicking with buttons and a mouse and a spreadsheet. and what what Why is that? What exactly did you do on the exchange?
00:15:49
Speaker
um We were doing, he was he was manipulating funding rates and we saw that he was he was pinning the funding rate of his own coin. He had some bullshit deep buried in the product disclosure docs and he had it pinned to 760%. we're just doing basis trade on his OX.com.
00:16:06
Speaker
so we're just doing a basis trade on ox dot coin and hedging out the profits as they came. But it was like 780, 760 percent, percent linear was every eight hours was the maximum. But if you compound that out, it's like a huge <unk> it's like a huge yearly return. Yeah. um
00:16:32
Speaker
But the profits were all also in in Ox token, right? you had to So you had to always hedge the OX token. So if you didn't hedge or you used anything else other than OX as collateral, like if you deposited Bitcoin or USDT or whatever, you're absolutely going to get fucked because like hidden deep in that in the product documents was like all the...
00:16:55
Speaker
was just like it It was just like a real one of those really shitty carnival games where where you know it's built to to rip the users off. But but at unless he did this one specific thing, which is you know figure out when he's manipulating the funding in his favor and trade alongside the direction with that and keep your profits perfectly hedged in OX.
00:17:16
Speaker
um So it was operationally annoying. like you had to yeah but But I mean, those are the kind of good trades that you'll find in shitty places. Like you're not finding that on Binance, right?
00:17:29
Speaker
And but I mean, there's good trades on Binance. i mean but what what what do you do What do you do about like the counterparty risk in in those cases with like the MEG-CFUD popping up again last week or so, I think? I feel like every couple of months MEG-CFUD is popping up and then everyone is like they're insolvent, but then they just keep on operating the same way until probably are it happens again. Yeah.
00:17:52
Speaker
um yeah I think you wear it. I think you have to wear the counterparty risk and do it eyes wide open and and be very careful, like withdraw on any sort of suspicion and set up alarms.
00:18:06
Speaker
Like everyone wants crypto to be risk free. like Like that's just, you know, I want a fucking blowjob from Sydney Sweeney, but ah but it's just not a, you know, to be able to make generational wealth from crypto and do that safely and comfortably without taking any counterparty risk. well
00:18:26
Speaker
I don't know. It doesn't really work that. no like it like it it it doesn't i I mean, I'm a big believer in Hyperliquid. I'm a big believer in DeFi
Future of the Crypto Market
00:18:34
Speaker
for DeFi. I think Hyperliquid is the future, by the way.
00:18:39
Speaker
And I think Light is probably a pretty good product too, like in its own way. um But Hyperliquid is
00:18:52
Speaker
at best 15, 20% of a Binance and LIDR is at best 20% of a Hyperliquid. what what Like, I mean, you know, I run i trade on Binance, Bybit, DYDX, KuCoin, BitGet and Hyperliquid.
00:19:10
Speaker
and Yeah. I absolutely maxed out DYDX. Like can't fit another dollar into its bottle. Like like performance goes down. when The more money you throw into something, the performance goes down.
00:19:24
Speaker
And yeah this there's just not an an unlimited amount of money that you can throw into trades. Like finance is still like sadly where it's at if you want to trade size.
00:19:37
Speaker
With like your trend following strategy that you just hit constraints where you impact the market so much that your profits are decreasing. It's not a particularly, is you know, compared to most strategies, it's a high capacity strategy because you're you're spreading it out between 50 coins or 100 coins, right?
00:19:54
Speaker
So so if you've got a if you've got a million bucks on 100 coins, you get like 10 grand a coin and you know, they're mostly higher volatility than you'd want to trade anyway. you probably got five grand position sizes and they go and they wiggle up or down a couple of hundred bucks a day. So it's not it's not a big deal. But at a certain point and that point isn't really that large. Like for DYDX, we started hitting capacity at like 10 million bucks on trend follow.
00:20:18
Speaker
So it's not really not really that large before you're going run into. I mean. So what happens is you need to get better. actually So I'm I'm talking about fairly naive once a day execution.
00:20:34
Speaker
So like, you know, the daily candle goes up and you're going to buy a little bit more of the shit that's gone up and short a little bit more of the shit that's gone down. If you do that naively, like it's quite predictable to go, oh, well, I know there's a bunch of trend followers in the marketplace and a bunch people trading off charts too. And charts are basically trend following in a trench coat.
00:20:57
Speaker
All the effects that you see in in the charts are like derivative of the effect in from trend following, direct derivative momentum effects. So there's a bunch of people who are much smarter than us who goes who go, well, fuck, there's a bunch of dumb asses like me who are going to be buying this shit that's gone up and it's just gone up.
00:21:15
Speaker
So why don't we predictably front run those flows? And you know guys like liquidity goblin just eats lunch all day beyond a certain point when you become big enough when you become big enough to impact the market.
00:21:26
Speaker
And so there's ah there's a number of ways you can deal with that. You can spread your trading out. um You can make reasonable short term predictions of whether or not things are likely to go down in the next in the next couple of hours and and save your buying and so on into all the good times.
00:21:45
Speaker
But really, the sensible way to do it is to just graft a market maker on the top of your trading system. And so you act as a market so that the sensible version of algo trading is basically an unholy mashup of a market maker and some sort of you know continuous prediction mechanism. but what What do you mean by that? How exactly does that work? So let's say you're you're talking about like a caveman system. I'm going to buy everything that makes a new 20 day high.
00:22:17
Speaker
That is either all on or all off. It's very binary, right? And it's unlikely that your view about you know, Bitcoin is like, I'm completely neutral. Now, if I can love it, now I hate it.
00:22:31
Speaker
Like that's just that's not in
Developing Robust Trading Systems
00:22:32
Speaker
reality. So a better version of a trading system would be one that closely models the effect that you think is going to be there. So if I think that if a coin's gone up a little bit,
00:22:44
Speaker
ah it probably is going to go up a little bit more tomorrow. Or if I think it's going to go if it's gone up a lot, I probably think it's going go up a lot tomorrow. That's the effect. If I think that effect is real and i and I know it is, and the reason I know it is because it's true in stocks, it's true in bonds, it's true in in gold, it's true in every country in the world, in it's true in crypto, but on average about two and a half times stronger than than in any tradfire markets. So if i think that effect is if I think that effect is real, I probably want to model model that as a continuous signal.
00:23:19
Speaker
And so what I mean is is a signal that that wiggles up ah or down in a wavy line. And the advantage of doing it that way is, let's say I have a different signal, which is like a basis track. So if I think that high funding cost of carry is predictive of a thing going down tomorrow, which it absolutely is.
00:23:39
Speaker
Like we know that that basis trends are thing. We know that stat up carry factor is a thing. we We know that negative funding rate is highly predictive of price rises and high funding rates is highly predictive price rises.
00:23:52
Speaker
of price declines, right? like So I can model that also as a continuous sort of wavy line signal and I can blend my trend signal and my carry signal together to get a better signal.
00:24:04
Speaker
and And this technique was first um first done by a big hedge fund in TradFi called Man AHL, which has a very good, you know, 30-year track record with a sharp above one.
00:24:14
Speaker
It's a solid idea. And, you know, if you think about every other trade that you know in crypto, you know, like all the things that we've talked about, but this there's a limited amount of things that actually make money.
00:24:27
Speaker
Like they're all basically, they're all, it's not a, you know, it's not a
00:24:37
Speaker
It's not a huge list. is is what I'm trying to say. Like, like however you want to however you want to make the sausage, like the basic things that make money are pretty well known and pretty well understood. You know, there's liquidity provision, there's momentum effects, there's carry effects, there's short squeezes.
00:24:54
Speaker
There's volume is, for example, volume is very predictive of price rises in crypto. Open interest, high open interest is predictive of price rises and drops in open interest are predictive of price falls.
00:25:08
Speaker
um
00:25:12
Speaker
premium, which is the difference between spot and futures and the rate of change of premium are predictive of prices as well, right? Like, like, cause premium is kind of how funding rate is calculated because of the difference. So it's like a forward looking kind of funding rate.
00:25:29
Speaker
So you can model all of those different things into like what was squiggly lines and say, okay, get one squiggly line to rule them all. And that's how much of this coin we should have.
00:25:41
Speaker
and and just hold a big portfolio of like as many coins as you can that have enough liquidity that you're not going to get stuck in them. um And you would do that fairly simply like by by just having a threshold saying, well, I'm going to get fucked on this coin in short squeezed if I hold more than 10% of open interest and I'm more than 5% daily volume.
00:26:03
Speaker
And so you just say, well, I can't fucking trade anything that's that's and bigger than that. And so you, so what,
00:26:12
Speaker
what we call mid frequency quant trading, which is which is what ah what I do, which is. So high frequency quant trading and market making, they're all making predictions like a couple of minutes, 15 seconds to a couple of minutes out, right?
00:26:27
Speaker
and And they're all way smarter than me, so I can't. do that and you've got at the other end you've got like the three arrows capital and you know the guys the venture capital guys making a big portfolio of coins and just punting it right yeah and so in between there's this sort of uncolonized stand where there's a lot of opportunity like the market maker guys and the the reason is because the trades that i do aren't anywhere near as good as the ones that the market maker guys do
00:27:00
Speaker
Right. like Like we'll make money every month or like like or but or every three months, but we'll have losing months. Like the market maker guys, if you if if you told them you're going to have losing months, they'd fucking shit the bed.
00:27:15
Speaker
Like they just don't. and And that's something that we see universally is the smarter the smarter the nerds are. and And you might have seen this like that that once you get to like the super smart nerds,
00:27:29
Speaker
they really don't like taking risk. They really want like, like they have to be really gently coaxed into taking. And you know like you're you're on the DJ inside, right? Like me, like fuck it, like let's support it like let's go like round trip, retardio, fuck it, let's do it again.
00:27:46
Speaker
and so there's So if the nerds who are much smarter than us could take a little bit of risk, if they didn't have tiny, tiny, tiny little nuts then they'd be in a much stronger position.
00:28:02
Speaker
So the the edge in this sort of uncool, we're making predictions on sort of six hours to 48 hours.
00:28:13
Speaker
That's like the sweet spot. and And I can predict fairly well where prices gonna be 24 hours out. But the problem is if I'm predicting prices 24 hours out, and I'm buying and selling a lot and that gets very expensive in crypto.
00:28:29
Speaker
And so if i'm if I'm shit at execution, then it's going to cost me too much. I'm going to give away all the money I make. So it's kind of this chicken egg problem that you can't do it unless you're a market maker.
00:28:46
Speaker
But the market makers don't really want to do it because it's not as good as what they have. And so, I mean, I solved that problem by partnering with with market makers.
00:29:00
Speaker
is the only way that was feasible for me to do it because i'm not smart enough to so so you're you're doing you're doing everything algorithmically right no no manual execution whatsoever and then you can it's like it's a system but the discretionary part is maybe the all the data that you're putting into it that you talked about like all of this open interest rate is um we don't use any discretion at all in the data um because I'm just not trustworthy enough.
00:29:28
Speaker
Like, and and what we find when you're building trading systems is this, it's very difficult to avoid making trading systems that would have worked in the past. But every time that you do that, you fuck it up.
00:29:42
Speaker
Because you find back tests and things that shit that look good in the past. You're not trading the past, trading the fucking future. And the one thing that we know about the future is the future is radically, the future the only thing we know about the future for sure is that it's not like the past.
00:29:57
Speaker
So you don't categorically don't build trading systems with back tests. like Like we built our accounts up substantially without and trading multiple millions of dollars before we ever did a back test on our systems.
00:30:15
Speaker
the The way that you do it is to work out if I make if i have this thing which I think predicts prices, am I making a valid prediction? and And you do that with scatter plots and central plots and you know fairly standard econometric type techniques.
00:30:30
Speaker
But you want to get away from optimizing for things that worked in the past. And so if you're going to say, oh, I want to run it on this coin, but not that coin.
00:30:41
Speaker
I want to switch it off when this happens, because if I switched it off when that happened, it would have worked better in the past.
Life Lessons and Personal Growth
00:30:48
Speaker
Like you're all the way, you're halfway to fuck down already. Like you're almost certainly guaranteed to fuck yourself.
00:30:56
Speaker
So the the way to success in algorithmic trading is to get a bunch of really simple and weak and shitty trades. You get a bunch of trades that look like it's okay, but nothing special.
00:31:12
Speaker
and you blend them together. That's what you do. You blend together a bunch of stuff until it's a fairly reasonably thick soup. And so what you're hoping to do is that, say so trend following works in a bull and works in a big crash And basis trading works while things are steadily climbing and not not when shit goes nuts.
00:31:36
Speaker
um but And you know Short squeezes work when open interest becomes, when derivative becomes more more liquid than the spot. And you you blend a bunch of these and you blend a bunch of these trades together and you get something that's acceptable at the end.
00:31:56
Speaker
And at the end of the day, markets are pretty, like we can only make money if someone is willing to trade at bad prices.
00:32:10
Speaker
And that's just not necessarily an easy thing. Like the things where you get people trading really bad prices, like, for example, like Mean Coins in the Solana ballroom, right?
00:32:24
Speaker
They don't last long. Right? like Like anything that you've seen that's like an amazing trade, like that like the life cycle of those trades is very short.
00:32:35
Speaker
So you want to think of it like a food pyramid, right? you want to You want to, at the base of your pyramid is your fruits and veggies and carbs or whatever. And you want to have a base of what we call risk-premier harvesting trades.
00:32:48
Speaker
And the the things that you would look for in those sorts of trades, you would look for things that have worked differently. across TradFi and crypto, you would look at things that have worked across bull and bear markets. you would think You would look at things that have worked in multiple countries and you would think of you you would look at things that have been known about for at least 100 years.
00:33:13
Speaker
For example, everyone knows that selling options is is an edge, right? like selling options in an edge for an obvious reason that you're selling insurance on the stock market.
00:33:24
Speaker
But um people would obviously like to buy insurance in case their stocks go down and the person selling them that insurance would reasonably expect to make a profit. Like that's that that's the canonical example of a reasonable trade.
00:33:39
Speaker
um You want a number of those reasonable trades and a reasonable trade is a trade like Bitcoin. Like unless you believe that Bitcoin is going to zero and and it or it's a big scam or whatever, you would reasonably think that Bitcoin is riskier than the stock market. Right.
00:33:58
Speaker
And you would reasonably think that if it's a deep and liquid market, which it is now, that it would be priced reasonably close to what's fair. Right. Like because BlackRock, they're not fuckwits. Like you don't have to be you don't have to do the spreadsheet yourself. You just have to you just have to you know trust that all the people at BlackRock aren't fuckwits.
00:34:19
Speaker
And you would have to say that the market is doing the pricing for you, basically. The market's doing the pricing for you. And you would have to say that that Bitcoin is riskier than putting it in the S&P 500. So you would expect to be paid more.
00:34:32
Speaker
And over time, I think that's a very reasonable expectation. It's an expectation that's been true in the past. And it's also true in the past that those early days, super big returns from from Bitcoin will never be repeated again simply because it's not as risky as it was.
00:34:48
Speaker
Right. And so, you know, Bitcoin is a perfectly reasonable risk premium trade basis trades are a perfectly reasonable um risk premium trade.
00:35:01
Speaker
Momentum is a perfectly um perfectly reasonable risk premium trade. yeah um You want to build your pyramid of trading ideas on this base of solid things that you can't fuck up.
00:35:13
Speaker
like if if I was to tell you that I fucked up and lost money trend following, you'd have to call me a fuckwit. Like honestly, it's so stupid.
00:35:27
Speaker
You can't fuck it up. Cause like you just, when everything goes up, you just long a bunch of shit. And when everything goes down, like now I'm ball's short today. Like if you can fuck it up.
00:35:37
Speaker
I'm curious, how the how does the execution work for you when you work with the market makers? Because like, There's like a range between between what market makers do and then just market ordering in once a day when a daily candle closes, I guess. Is it like a T-wop or something like that? Or how can you? Very naive.
00:35:57
Speaker
is Okay. So that the the the truthful answer is if your edge is complicated and attractive, you need to have good execution. So you need to be as good as the market makers.
00:36:08
Speaker
If your edge is stupid, like buying the shit that went up and shorting the shit that went down, you don't have to be good. So you want to start with. So the idea is that especially for people who are starting to trade, you know, you might wish you were really smart.
00:36:25
Speaker
You might wish you had all this great infrastructure. You might wish you had all these You might wish you had all that shit, but wishes if wishes were fishes, you know, you know, here you are, you're dumb fuck and you're on Twitter and you've got a fucking spreadsheet and a mouse. That's your resources.
00:36:42
Speaker
You know, you're at the start of the game. So what do you want to choose? You want to choose the ideas that are so robust and so bulletproof that even if you are a retard market by even if you are a market by retard, that you can still make money.
00:36:58
Speaker
and So, for example, a very, very like retard version of training following execution would be, well, most people are executing 0000 GMT when the daily cut chart candle closes. You probably don't want to do that because you probably you probably don't want to do what the fuck would to do.
00:37:22
Speaker
So just wait a couple hours, wait like four hours, five hours, six hours. And and You probably don't want to market by 100 grand of anything, right?
00:37:33
Speaker
You probably just want to buy a little bit at a time. That's perfectly reasonable. You might not want to pay the spread. So you probably if you're doing it algorithmically, you probably just want to put in a limit order and hope you get filled.
00:37:49
Speaker
And trend following has a natural attraction for these.
00:37:55
Speaker
If you're a dumb trader,
00:37:59
Speaker
You're trading 100 coins. You're trading trendfully. And let's assume a hundred a million bucks notional, which isn't going to be true. and And you're trading 100 grand and you're going to be – you're trading a million bucks. It's going to be 10 grand a coin for 100 coins.
00:38:15
Speaker
And every day you're going to be buying a little bit more of 50 coins and selling a little bit of 50 coins. You're going to be upping and downing it like 200 bucks and on each coin.
00:38:27
Speaker
And 200 bucks isn't going to see you get fucked too badly by the market makers. You're going to be tipping your friendly neighborhood market maker. you You're just not going to be bending over for it. so So this is what I mean by you want to choose edges that are so big and indisputably obvious.
00:38:45
Speaker
I see. That you can fuck up the execution. Mm-hmm.
00:38:52
Speaker
Or if if you're retard and doing the manual training, you can use the terminal and have a bit so you much better advanced execution. doing that and Save a couple of basis points.
00:39:04
Speaker
Yeah, I mean, there's that. How did ah October 10th impact your system? did it Did it impact it at all or you protected against? Can I show screen? Are we doing video here? I don't know, actually. um We're doing video, but I don't know if you can show your screen to me.
00:39:22
Speaker
You just have to describe it like visually. Yeah, we're allis we're up about 7% over that sort of week. you're short the things that are already going down, most things started to go down before 10.10.
00:39:38
Speaker
Right. ah And this happens a lot. In fact, this happened before the lunar crash. This happened. You know, we've been doing this a long time. So we've been through all of the seminal fuck you events, the three hours capital, the lunar, the fucking every other a
00:39:57
Speaker
FTX. FTX. Yeah, it was a horrible day.
00:40:03
Speaker
But the systems made money then because because the market was already going down before a crash. Right. because And why? Because smart people are selling out ahead. Like the rat the smart reps are already off the ship. Generally.
00:40:15
Speaker
And you know right now, if we go down today, you know our system is 90% short. like The way it is. like And we'll get back a lot when that trend reverses.
00:40:27
Speaker
But because I'm a complete idiot, I also have substantial spot bags because I'm a conviction holder. So I'm like, yeah, I'm making money, but I'm also getting fucked. So I've got like that unique combination of unique combination of emotionally the things that are making me money today, I can't point to and say, oh, that's me. I'm so good because of that.
00:40:52
Speaker
But the one thing that I can point to that's definitely me is my full stack conviction on hype is definitely absolutely costing me money today. So it's like,
00:41:04
Speaker
it's like a weird kind of situation that, that, and trend following is a hateful thing to do. Like it, it, the it app what it feels like is because you lose money like you your win rate on track i didn't tell you this your win rate on trades is around 20 right so you lose it because most of the time the market is just chopping and you're you're basically yeah most the time you're gonna get in fuck business
Future of Trading and Opportunities
00:41:32
Speaker
so so what it's like is being is being like a battered wife like every day you know hubby comes home and punches you in the face
00:41:40
Speaker
three drakees pun and And then like but fucking three times a year, he comes home with flowers and chocolates and then and And then it's time to suck a bit of cock, right? like Like that's the way it is with training. and in glass i'll be i do How do you deal with that mentally? Or is that just something that came to you with all the years of experience and working with that? or I just had the weight of the world um sucked it out on me.
00:42:04
Speaker
Like, i just you know you're running at 20% win for like, I've been doing this since like 2012, right? So it's all I know.
00:42:15
Speaker
Like really, like it's yeah like we're just used to losing all the time and you expect to lose. It's very comforting. like like ah Like it's that like first time on the on the gallows meet. Like, you guys are you guys are surprised when you lose money in crypto. Like you're on fucking business you dickheads.
00:42:33
Speaker
Like I was losing 80% of trades. Like, and it's it's better than that when you, when, when you can do better edges than trend following when you have better execution.
00:42:44
Speaker
But the idea is that trend is so forgiving that, you know, you can run it from a spreadsheet. You know, there's, um, um, There's a guy called Rob Carver who has a bunch of books that are very good. They were like my second or third iteration of production systems. My third iteration of production systems was straight out of this guy's book.
00:43:05
Speaker
This guy called Rob Carver, wrote a book called Systematic Trading. That trading, that system with some very minor modifications for crypto. That's so like, that's a good system. That's better than that's better than almost any of the quant funds in TradFi.
00:43:23
Speaker
Like that's good. and you know like you can you can make money in crypto just because it's risky yeah are you still running any other like trend following is your main thing then are you still going on to other venues and like doing meme coins and all of that stuff i have to give all that up because uh while we're watching this defy default um yeah and I find the focus from being an entrepreneur running ah running a reasonable sized company, like we got like 50 people working for us and- Whoa.
00:44:00
Speaker
Yeah, it's a it's like a it's like a reasonable sized company, right? And and and Robot James and I run it. And the focus from trading, trading gives you this sort of like insane, hyper vigilant, you have to be on Twitter to do it in crypto, like completely unproductive for any sort of management work.
00:44:21
Speaker
So i I can either do one or I can do the other. And um yeah like um ah bought a house last year and and it was being built and I wanted to like not pull out of savings or out of my my trading account. So I just gambled the money. like i just and i just you know wake up every day and, and you know, I gambled really heavily in meme coins and bunch of other shit. and And I just hustled up that money. out it It's a wonderful feeling to be able to discretionarily trade and, you know, trade a couple million bucks out of thin air when you're right.
00:44:57
Speaker
But you can't do that when they you can only do that when when you know the sun's shining and you know everyone's in in fucking happy places in crypto and and it never lasts long. And you've got to be very careful to count your money away from the table. And you know and you know you you' got to be kick and it seems it seems me anyway, insane when I when i sit down and i go okay I'm going to wake up today and I'm going gamble.
00:45:23
Speaker
And like after two or three months, and the 24-7 pace of it, the seven days a week in crypto, I'm ready for the mental asylum in three months.
00:45:36
Speaker
Many such cases. Oh, dude, I mean literally ready for the mental asylum. There was a stage last year where I would have booked myself into a mental hospital if I could.
00:45:47
Speaker
my It was like, oh my God, I just can't trade anymore. I'm like, yeah. as How did you get out of that? Just by taking a break or? Yeah, I had to, I tried cutting my work down and not trading and just doing little bits and that wasn't cutting it.
00:46:06
Speaker
So I had to have a full month where I woke up. I wasn't on him i was on an email, wasn't on the internet, wasn't on Twitter. I would spend a month like resting like rest was the job.
00:46:19
Speaker
And my brain, I couldn't think my brain would like, you know, it's really scary when you use your brain. Yeah. And then your brain tends to mashed potato and then you fight. Yeah. And the feeling is like you can't, you can't, it's a you know, burnout is really difficult.
00:46:35
Speaker
Like, You can't think your way clear clear of mental illness, right? You just have to like put all the tools down and come back to it when you're ready to. And you know fortunately, I've got business partners and who can keep the business running and let me take my golf and. and now Yeah, it's very scary. I've just very scary. Yeah, i've I've just been to to Tokyo and I got food poisoning for a couple of days.
00:47:02
Speaker
And obviously, like I felt really bad physically and whatever, but i also got a lot of brain fog. I just stayed in the bed and was on my phone all day and couldn't really do anything. And it just like noticeably noticeable decay of your mental performance is very, very scary thing.
00:47:17
Speaker
Very scary. because what What can you do that? Like, and you know, you're not out.
00:47:24
Speaker
You're not plowing a field or something. You're making money with your brain. Right. yeah and then yeah And then you notice, like and if I'm noticing that my my cognitive power is diminished, like like I notice in other people way before they start to notice. when It's probably worse than you think. Way worse.
00:47:41
Speaker
Yeah. as if If I'm noticing it, I'm already fucked. so So for me, one of the things that I notice is that when I feel I'm at 80% of my cognitive load, I'm already at 110. So i have to it's like down tools there. At that moment, I have hard rules where I just switch off the internet, unplug the laptop.
00:48:00
Speaker
i
00:48:03
Speaker
I get away. i just I just run away. Yeah.
00:48:09
Speaker
good Good choice, probably. i think that's and I think that's one of the really difficult things. like it's what
00:48:18
Speaker
You know, as someone who's traded a long time, both discretionarily and and and systematically, most people shouldn't trade. like Like trading was a terrible choice in my life.
00:48:31
Speaker
like if i was Like if I wasn't extremely lucky, like if you ran this simulation 100 times, I'd go broken money, right? Like, I mean, if you think of... What else would you have done? What was your other choice ah apart from trading?
00:48:46
Speaker
um I was, you don't know the story.
00:48:54
Speaker
I don't think so. No, you you said that you've been in in in prison and came out and then you decided to come. I was in my twenties. I was pretty much what you call a career criminal. So I did every sort of crime you could possibly imagine.
00:49:05
Speaker
like Like every sort of crime you could possibly imagine. funny You know, Randy Crew and i and I wasn't like a fuckwit at it. I was like the seven habits of highly successful criminals. I was really good at it. Amass serious wealth doing it. And I just kept going to jail.
00:49:18
Speaker
Like I just kept going to jail all the time. It was just like a normal thing. Like getting arrested and going to jail was like it just a normal part of life. It was just like one of those things. And then um I went into my last jail sentence in 2006 and it was like very obvious that the next one was going to be for like 15 or 20 years.
00:49:36
Speaker
Like we have a wing criminal system in Australia. Keep getting away with shit. And I was taking the piss. and And then I went straight. I just realized, well, The universe is trying to tell me you probably should straighten up and fly right. and Trading is not – what I mean to say is anyone who's who liable to make it trading is probably going to be successful no matter what they Like, I'm the sort of guy you could throw me out of a moving taxi in my underwear and in any city anywhere in the world.
00:50:08
Speaker
And in six months, I'd have my life together. and in and Like, i'm that I'm literally that guy. um yeah they say there's yeah You know, i've been I've been broke a couple of times. I've been rich a couple of times. Like, like it's it's all okay. but
00:50:25
Speaker
but I'm just a guy who's going to bounce. like Like the people who know me know I'm just a guy. I'm just a guy who's going to take that in a stride. um Most people aren't like that.
00:50:36
Speaker
You know, most people would be much better. Like if you if you're if if if you're going to be a trader, you should be a trader in a job working for someone else. Like that's really what you should be doing. Like.
00:50:48
Speaker
Yeah, I just read the worst contrarian article just about that, I think. He's one of my really good friends. Yeah, he was talking about the exact same thing. Like if you're making it in trading, you can be successful in lots of other things that are like way less risky and easier to be successful in.
00:51:03
Speaker
If you're the kind of person that is going to be successful anyway. I know these dumb fucks in in Thailand, like armies of them who are, you know, i'm making 10 to 50 grand a month in everything from fucking SEO spam to e-commerce and all kinds of like grifty sort of low-grade things. like Like, I mean, most people who are going to be good at trading would be much better at doing some sort of some sort of entrepreneurial thing.
00:51:36
Speaker
um Yeah. A higher probability of success anyway.
00:51:40
Speaker
um I love WC. I've known him since, fuck, I've known him for like 12 years now. Oh yeah, um I also wanted to get him on, rescheduled it already, but I fucked it up a great guest player. Yeah, I think it'll be it'll be cool as well. He's so insane. he yeah I like his articles, they're very insightful.
00:52:04
Speaker
He sews razor blades into the toes of his sneakers in case he gets kidnapped. He's like that. What? yeah That's crazy. he's great He's great. But now you just gave away secret.
00:52:20
Speaker
Oh, no. You just grabbed that boy. hey say He's a very, very likable young man. I like him a lot.
00:52:32
Speaker
i'm I'm wondering, and since we've talked a lot about different strategies now and what you can do in the market and how is it looking and how it's easier in crypto than it would be in TreadFi or anything like that. What do you think about the the future of of systematic trading of strategies and anything like that in crypto as returns are decreasing and edges decaying and stuff like that? What what is like your view and your plan for the future? It's fairly obvious what's going to happen, right and don um What's going to happen is that the very attractive yields and stable coins that are available right now are going to compress.
00:53:09
Speaker
And, you know, the yields from doing simple dumb trades are going to go down over time. now And the moment that TradFi turns up here in in force, like um it's going to be on a probably 10 year path to being like a slightly riskier version of the stock market or or swallowing the stock market hole and all trade fly moves on check.
00:53:37
Speaker
that's That's a potential outcome. Like the hyper liquid dream scenario, right? yeah I hope that happens. You wouldn't want to bet on that. Well, I am betting on that. But but not but someone who is smarter than me wouldn't bet on that.
00:53:55
Speaker
But that could happen. Like, I think that's a bit with good convexity like that. that So if TradFlare comes in here, all of a sudden we've got a bunch of smart people competing for the same trades.
00:54:07
Speaker
So is crypto still riskier than the stock market? I think it is.
00:54:15
Speaker
um Should you be paid more than the stock market? for doing something riskier than the stock market, I think you probably will be paid on average and noisily more as long as it's riskier than the stock market.
00:54:29
Speaker
And I think as long as, so I talked to my TradFi friends um and they won't touch crypto. Like they're like, oh fuck all year, another FTX, they don't understand the DeFi, they hate it. As long as they hate it, we're in good shape, right?
00:54:47
Speaker
We got the toys all to ourselves. um When that starts to change, I think it'll probably change in two ways. I think it'll change slowly and then very quick. um Because and why do I think that?
00:55:01
Speaker
Because that's the way it changes in most things. You know, one minute Internet was having the Internet at home was kind of a niche thing. And then the next thing we're living our whole lives on it. One minute.
00:55:14
Speaker
well one minute phones weren't even that important. And and then the next thing, it's like the most important thing you aren't like. that's the That's the way of shit, right? um
00:55:28
Speaker
Yeah, i um I think the goal is to get enough capital that you can that
00:55:38
Speaker
you don't have to try 100 exit anymore or 10 exit.
Current Projects and Systematic Strategies
00:55:41
Speaker
I think you know right now you can make what we can make 50 to 100 percent in crypto and do that fairlyly so fairly sustainable in bull markets and bear markets.
00:55:53
Speaker
I think if you're a professional trader in crypto, you should be making between 50 and 100 percent a year without doing stupid stupid risk taking stuff. And you should be doing it at a sharp ratio of at least 1.5.
00:56:06
Speaker
um Probably two if you're any good. And so um will that be sustainable? No. But if you halved it, would it still be good enough?
00:56:18
Speaker
Fuck. 20% a year is like better than George Soros in his prime, right? Like that's exactly what George Soros did. Warren Buffett didn't do like 20% year. Like if you've got as long as you're not stuck on the outside with no capital, as long as you've gambled your stake into something meaningful,
00:56:38
Speaker
Yeah. 10% a year on stables looks pretty good if you're not going to get it stolen, if you've got proper institutional custody. So you think the window of opportunity is closing, like the famous Dejan Spartan tweet where he's like, you need hyper gamble yourself after college.
00:56:56
Speaker
it's I mean, I'm interested in what you think about it. yeah What do you think? I mean, the as as someone with ah with a lower capital base, I would like to believe that is not the case. But if I look at it logically, I think it's there is no way around that really. Like the opportunities are probably, they're going to shift maybe. i think it's still probably a huge advantage if you've been in crypto for a long time, if you've been in markets for a longer time.
00:57:23
Speaker
I mean, because eventually, even if you're not smart, but still you gain the experience to be a bit comparable to someone like that. But yeah, as a new person, it's like, I mean, i feel like 2021 was the the peak of the alt season that we're all looking back towards. We're all waiting for this happening again. And that will like never happen again.
00:57:42
Speaker
and it's like a unique thing that was a once in a lifetime opportunity. God, it was good. Yeah, and that is probably like, I don't think that will come back. No no matter if like we're making the rates to zero again and whatever, unless we get another COVID side event or something like that.
00:57:58
Speaker
but i I like Jezebel.eth. He's a very smart guy. um And he's he's big on the long degeneracy thesis. yeah He's got a very good idea, which is being early to the new thing.
00:58:16
Speaker
And I think early to the new thing is where you see a lot of edge. Like if you were yeah in those early days of memes, if you early on recognized that hyperliquid was much better, like an order of magnitude better than then fucking DYDX.
00:58:35
Speaker
if you you know If you're early to the new thing and right and with conviction, I think that's its own type of magic too. I think that's probably, If I was starting with a small stack, that's something that i i I'd put a lot of thought into, like being being early and being right in size.
00:58:57
Speaker
Yeah.
00:59:00
Speaker
That's good advice, I guess. so
00:59:05
Speaker
um I have one more question about your your your product that you're launching, your your vault. If you can explain a bit more about how how that works or how it's going to work. yeah um You deposit USDC.
00:59:18
Speaker
ah We put that money and in a vault on Hyperliquid. It's not one of the Hyperliquid vaults. It says ERC 4626 vault. And we take trades with it. and but What does that mean, youc whatever number you just said? It's a standard for the DeFi vaults.
00:59:34
Speaker
um and so But it's not a hyperliquid vault itself. it was a hyper It's vault. It's its own token. So USDC is a one to one mint with this token TLP, which is Trend Liquidity Token.
00:59:47
Speaker
And as we gamble and make money, ah token goes up. If we gamble and lose money, the token goes down. So it's not, ah it's a tokenized hedge fund.
00:59:59
Speaker
And the types of trades that we're talking about are more advanced than the sort of simple Ape, buy the shit that's gone up and short the shit that's gone down. What we find when we look closely at momentum effects, which are the dominant effect in crypto, is that Momentum works bigger on the big shit.
01:00:18
Speaker
So what I mean is that trend following works better on Bitcoin than it does on Ethereum, better on Ethereum than Sol, better on Sol than XRP and so on and so on and so on. Until about a third of the way down the universe, when you get down to little shit coins, they look like they pump, but they really don't.
01:00:34
Speaker
so any so you So we have negative trend effects. So what we're doing is very closely modeling those interactions in ways that make sense so that all the predictable things that affect how much something is going to trend, we've got modeled.
01:00:53
Speaker
And it turns out that you can get very, very good returns. but when When you say that it works better on on bigger stuff, like it works better on Bitcoin than Ethereum, is that like in the return percentage wise or like how long the trend lasts?
01:01:06
Speaker
No, in a return percentage wise and a risk adjusted return. Interesting. I see. So um it looks like the small coins trend further further and faster, but that's not actually the pace when you adjust for volatility because those small coins wiggle around all over the place. Right? Like if you if yeah change it so you're measuring apples for apples, Bitcoin trends much better than Inchi.
01:01:30
Speaker
Much better. And Ethereum trends much better than nearly all them too. And it's very, very, very predictable. and And this is kind of enough of a secret sauce that you can turn trend following from a sort of a sharp one.
01:01:44
Speaker
Trend following is a sharp 0.5 trade in TradFi. It's a sharp 1.5 trade in crypto. And then... you model these interactions properly and it goes to somewhere close to sharp 2.5.
01:01:56
Speaker
And sharp 2.5 is starting to get into into the rarefied air of holy fuck returns. You know, Rentech was like a sharp 2.1. so So, and um of course, we're not as good as Rentech.
Advice on Success and Redemption
01:02:07
Speaker
We're just taking more risk because crypto is risky.
01:02:09
Speaker
But still, we're we're talking about sustainable returns over five years of between 50 and 100% a year with no brackets. and So if if ah you're doing like the top 50 coins or something like that, right?
01:02:23
Speaker
ah we do We do a large universe, but but but we model the interactions fairly closely. Why don't you just, ah if Bitcoin is so much better you know of a profile than the other coins, why don't you just like only trade Bitcoin with more leverage instead of all the other coins?
01:02:41
Speaker
This is a really good question because if you're only trading Bitcoin, even though Bitcoin works better, there are times when you would have missed hype, for example.
01:02:51
Speaker
I see. Okay. Or you missed the Solana bull run. And yeah when you choose Bitcoin and say, okay, Bitcoin's what worked best in the past,
01:03:05
Speaker
Now you're implicitly saying what works. Now you're taking a bet and your bet here is what worked in the past is going to work in the future. So now now you're taking a fuckwit bet. Now you're betting that Bitcoin's still going to be the one crypto when Ethereum's still going to be number two. And like those aren't bets.
01:03:25
Speaker
Those are bets that make a fuckwit out of you, right? Like, and, you know, trading is this infinite game. You know, so you build 100 bridges and then you suck one cock.
01:03:40
Speaker
You're not a brick builder anymore. If you're not a brick builder, you're right.
01:03:48
Speaker
and And this is trading. Like if you, if Bitcoin goes sideways at 100K for 10 years and hype goes to $1,000 and you've completely missed it, you're a fucking cock sucker.
01:04:04
Speaker
Because you took the bet and the bet was wrong and it's all on you and you're fuckwit. Trading is an infinite game and infinite games are very different. thing Like if you're trying to gamble generational wealth and hyper gamble and then get the fuck out and retire to your farm with your trad wife before it all falls to shit, that's a very different game than an infinite game.
01:04:29
Speaker
You know, where you build 100 bridges and then you suck one cock. Right? Like that's a completely different game. You just end up being a cop sucker. time And that's it.
01:04:42
Speaker
how How transparent is the the strategy that you're running? Like how how do you balance the transparency of having like a public wall with like... Everything's public. Giving up your ads. how Our trades are public and this is a problem.
01:04:55
Speaker
This is an inherent problem. If people can see what you're doing, they can try and fratting you for us. the initial way around it is to be better at executing them. So by staying in the market all the time. So if you're in the market and you're making markets all the way levels up and all the way levels down, you're sitting as a market maker, it's kind of hard, not impossible, but kind of hard to see what you're doing.
01:05:22
Speaker
So it requires a certain level of technical sophistication to see see which way your quotes are skewing. And then to front run your trades, they have to not know just what you're doing now. They have to be able to predict it a little bit out in the future.
01:05:39
Speaker
So your defense against people being smarter than you and faster than you is to be smarter and faster than them. Right. so
01:05:52
Speaker
Hyperliquid, there's no infrastructure advantage. Like the guys who are co-located in Binance with the VIP9 market making setups, they have an information advantage. They have a speed advantage. they have a You don't have that in Hyperliquid, right? Like it yeah it's a latency based thing.
01:06:08
Speaker
So you can be competitive. Well, we can be competitive on Hyperliquid. Like we have we have very good market making infrastructure. and And how did we get world class market making infrastructure?
01:06:21
Speaker
Well, I found the guy with the best stuff that I could find. I didn't invent it. I'm not that smart.
01:06:34
Speaker
like I mean, if you spend any time and around the the good market makers, you know, they're just like it another they just at another level and the infrastructure is full on and like everything about it is full on. like it's a very um it's it's a very It's a barrier to entry that you should welcome because it means the fuckwits can't come along and eat your shit.
01:06:53
Speaker
True. Yeah. So we go back to to the beginning where it's just about being in the right group chats, basically. Yeah. you got to I mean, and I think this is a wonderful thing about crypto where you know I don't think anyone's really more than two steps.
01:07:09
Speaker
Like, I don't think there'd be anyone you know in crypto that's not two hops away from the people that I know. like i think I think if you wanted to get a meeting with anyone in crypto, you'd probably get a meeting with Kobe, right? Like eventually it might take you a little bit, but you'd you'd be able to do it, right?
01:07:23
Speaker
Yeah, maybe. i don't i' I mean, it depends on him, but like it it i it wouldn't be impossible. Yeah, crypto is very tight. Like you it's a small world. and yeah And if you're not a fuckwit, because there's a lot of fuckwits in crypto too, right? like like I am a little bit. I am a little bit.
01:07:42
Speaker
I'm an asshole online, but but like to a reasonable degree. i'm ah I'm really an asshole online, but but I'm. You know, there's a lot of people who say one thing and then do another when it comes to money crypto Twitter, and I'm just not one of them. Like, I'm an asshole, but but I'll do what I say. And and and i think you guys are I think you guys have a reputation of being like that. And I think, you know, the people stick around realize that you just can't.
01:08:10
Speaker
Crypto is too small to to shit where you eat, right? Yeah. I mean, many people still do it. Like, many people forget about what other people have done and whatever. It's like a short memory. But like if you stick around, reputation is very valuable.
01:08:24
Speaker
I agree with that. Yeah, it pains me that there's people like Kuk.
01:08:30
Speaker
Yeah, did did like I just read about the the mega youth guy defending his allocation. i think that's, I don't know. And Kasekai is like really a known bad actor.
01:08:40
Speaker
Like he is, he is known bad. He's not, there's no,
01:08:47
Speaker
I don't I don't know why you would choose choose like that hill to die on, to be honest. like We were talking about Mitch, right? Like Mitch was an a perfect example of a known good actor. Like, like Mitch was an asshole, but like when he said he was for your coin, he was for your coin. Like he round tripped all those things that he said he had conviction on. Right. Like,
01:09:06
Speaker
Didn't he also do like some scamming though? I'm not really sure. I well i wasn't too much into that. If you you're going to copy trade Mitch, like i I attracted copy traders when I was doing it too. know um Because I was building my house at the time and I paid for my kitchen from copy traders because...
01:09:25
Speaker
like like if you're successful didn't in that meme in that meme era if you're successful people will just like i had like 243 people copy trading me i'm like and i would do shit like get on streams and accidentally leak my wallets like accidentally
01:09:43
Speaker
but but pipe from i paid for my kitchen off these bucks right yeah like and uh so i bought
01:09:52
Speaker
um With a buddy mine, Antoine, we bought, do you remember Mitch launched a coin and then he abandoned it? He launched Mitch coin on PubFund and then he abandoned it. I bought up all the supply with with some buddies and then um sent Mitch 1% of the supply and people were like, Mitch's wallet has bought Mitch.
01:10:17
Speaker
I just sold right out into that. Yeah. For me, that's not crime. That's all in the game. Like, that to me, that's just money ain't got no owners. Money only got spines. Yeah. Like, if you are going to try and trade against me in that mean coin era and in that on-chain world, and you're going to try and outsmart me, I'm going to take all your money because I'm smarter than you. Don't hate the player, hate the game.
01:10:42
Speaker
yeah I mean, that's totally fine. But Kuk's not doing shit. He's just starting project and then rugging. Like that's yeah it's not how you play the game. That's just being a cunt.
01:10:53
Speaker
Yeah. There's many people like that. There's many people like that. And there seems to be very little consequences. I mean, it's kind of the part, you know, if if you're creating a permissionless financial system, then that everyone can take part of. You can't really kick people out of it.
01:11:10
Speaker
Everyone can basically do what they want. And then this is kind of like also part of the consequence. But ah I think it's a bit sad sometimes that there's not more social backlash stuff like that.
01:11:20
Speaker
I feel so too. And I also think that over time, this sort of grifty aspect of it will get washed away. I think more people are also just going to jail and stuff like that. Like the the regulators won't let stuff be like this forever.
01:11:35
Speaker
Yeah, hope so. like Like, I mean, I've been to jail. I've been to plenty jails. And i believe me, those little motherfuckers are going hate that. Like, that is just Like, I mean, I hate a jail and I'm a fucking gorilla.
01:11:48
Speaker
So, like, I'm sure. It's going to be terrible day for staying in jail for those guys. um I'm really interested since you've given a lot of good trading advice already so far, but since you have like a lot of life experience in different domains, as you could say, do you have any like life advice that you can, that you can give people any, any wisdom that you have gained throughout your adventures? I've made a really, really big mistake.
01:12:16
Speaker
And, and when I was young and when I was 25, I was, I'm 51 years old now. And when I was 25, I was worth 10 million bucks. And by the time I was 30, I was worth negative million bucks and I was in jail.
01:12:30
Speaker
And which the mistake that I made is ah really bad mistake is that won the game and I kept playing. I'd won the game.
01:12:41
Speaker
like Like I had 10 million bucks, like the tune of the century. It was a fucking lot of money back then. yeah Like back then it was a lot. Yeah. It wasn't enough to retire.
01:12:53
Speaker
i could do anything. It wasn't just retire. I could do anything I fucking wanted. Like no one stood in my way. Like there was nothing that was like if if i wanted to if I wanted to charter a plan and get all my buddies to go somewhere, we'd just fucking do it and don't worry about it. It was like it it was that kind of life.
01:13:08
Speaker
um And then I kept playing even though I'd won and I reached what I had and what I needed. what I didn't have and I didn't need. And that is the mark of a very stupid man.
01:13:19
Speaker
And I was very stupid. And that's that's like profound stupidity. And when I went broke and I tried to come back from that, I thought I'd just be on top again. And it was just like a long climb back.
01:13:33
Speaker
was like really humbling. like And because I behaved like such a fuckwit when I was young and rich. like I was a fuckwit. As you do. Yeah. I was like, I was really, and it was before, it was before the internet and social media. Right. So yeah um there was no real, people weren't saying, oh, he's acting really badly online and pressuring me. He's stopping. they were like, people were enabling me.
01:14:00
Speaker
and so And yeah, I deserve to go. So um my life advice is that karma is real in the long run.
01:14:12
Speaker
It may not seem like it, but in the long run you get what you deserve. And the best way to get a good outcome, sadly, is to deserve a good outcome.
01:14:23
Speaker
So that's been my experience is is I have a good outcome now. have ah i yeah I have a really nice life and I have a life that I wouldn't give up. and And I feel like I got a good life by deserving a good life. Yeah.
01:14:40
Speaker
I feel like you you should write a book or something. I think your your story is very impressive of like going that far up and then going back. Like very few people make it and then lose it and then make it again and keep it.
Closing Reflections
01:14:51
Speaker
I think that's that's quite impressive. Yeah, we haven't done the keeping part yet, but we're on that. I mean, you' it feels like you you're you're wiser you're wiser now this time. Yeah. it's um yeah Life is cool too. And, you know, if I did fuck it up again, and if I did go broke,
01:15:10
Speaker
What, I've only got another like 20 years I have to sit through anyway. Like, what the fuck? And that's another thing that I can tell you is that having been rich and poor and in the penthouse and in the shithouse, definitely better to be rich.
01:15:26
Speaker
Definitely. like It's like 50% better. It's not a million percent better, right? Yeah. Yeah, I get that. I get that. But I think you need to experience it for yourself before you really understand that. If someone had have told me that when I was 25, I'd tell the fuck off.
01:15:43
Speaker
So yeah. Yeah. I guess um you get smart you get older and you get you should get wiser if you're doing things right.
01:15:54
Speaker
But then you get older and you're too late to do anything about it. Right? Like I'm too soon old and too late smart. know Yeah. User's wasted on the young.
01:16:06
Speaker
Really? I mean, I guess like at least I can like learn something from you, from your wisdom and the other listeners as well, and maybe make some less mistakes. um right What a great place to see. I'm sorry for wrapping it up.
01:16:21
Speaker
No, no, that's fine. but I really enjoyed the talk. Thank you for coming on. was great to talk to you.
01:16:29
Speaker
Goodbye.