Jeff Wilser, a features writer for Consensus Magazine, is the author of seven books including "Alexander Hamilton's Guide to Life," a freelance journalist and content marketing writer with over 13 years of experience. This Node spotlight is excerpted from an article published in CoinDesk's "Trading Week" series.
Let me peel back the curtain. To get a pulse of how traders are thinking about the current crypto landscape, it's instructive to see how this very article evolved. Originally, I had intended for it to be called, "How Traders Find Edge in Crypto Winter."
Except traders had a different message for me: It's no longer crypto winter. "Bitcoin doesn't go up +130% for 10 months straight in bear markets," the trader Adrian Zduńczyk told me over Twitter/X DM. Zduńczyk believes the early phase of a bull market started in January 2023. "Many projects keep referring mistakenly to it as crypto winter or bear market," says Zduńczyk, "while what they mean is a slow economy."
The question is more than academic. For many traders, understanding the macro environment is essential for plotting even short-term moves. It's one of the oldest saws in trading: The trend is your friend. In a climate where prices tend to go up, you're "long-biased" and shorting can draw blood. Vice versa in a bear market.
Some traders have embraced what might be a Crypto Spring, while others are still skittish and scarred by the bear market. "It's tough for traders. We're human beings, we're emotional," says Christopher Inks, who runs the trading group Texas West Capital. Inks says that for many traders who were so accustomed to the sluggish price action of 2022, "there's a recency bias, and it can be hard to get the idea that the bottom is in." Inks, like Zduńczyk, is a believer in a new bull market, as "the fact is that we've been rallying for just about a year now."
And then there are other traders who are indifferent to the direction the wind is blowing -- they'll happily go long or short. "From my perspective, it's always a bull market. Always. We don't care about which direction the market is going," says Paweł Łaskarzewski, who runs the hedge fund Nomad Fulcrum. "Depending on the sentiment we use different strategies, and maybe go more short than long."
So that's the first of two disclaimers: Not all traders trade the same way, have the same strategies, or view the market through the same lens. If they did, by definition, there would be no trades -- every buyer needs a seller.
And the second disclaimer is one you should see a mile away: None of this is financial advice. Please don't buy or sell anything based on a quote you read in an article. Do your own research. Eat vegetables. Wear sunscreen. Call your parents on their birthdays.
With all of that said, here are seven strategies that crypto traders are using right now to find that most elusive and coveted term -- Edge.
1. More breakouts, more signals, more trades
Adrian Zduńczyk, who runs a trading group called The Birb Nest, has a certain set of rules and signals he uses to enter trades, which are often breakouts. Those signals are the same in bear or bull markets, but what changes is now they "light up" more than in 2022. "I buy when there's a confirmed price breakout," says Zduńczyk.
Often these trades fail, as Zduńczyk says his win rate is only 30%. "I lose money for a living," he says with a laugh. But he keeps a tight stop loss (the max he can lose for each trade) and lets the winners run, so his 30% winners more than make up for the 70% losers. That math is the same in crypto winter or in crypto spring, but now he's spending more time in trades as opposed to sitting on the sidelines.
2. The "moonbag" strategy
This one's courtesy of Wendy O, former CoinDesker and host of The O Show. If a project that she's invested in starts to "moon," she begins taking profits and then recoups her initial investment. "Whatever I have left is my moonbag. I own it free and clear," says Wendy. Then sometimes she'll plunk that bag on a staking platform (if available), so she can earn passive income while she waits for it to moon.
3. Correlated arbitrage
Paweł Łaskarzewski, who's indifferent as to bull or bear markets, shares an example of two assets that are correlated in price action. "Tesla goes in the same direction as NASDAQ," he says. You can then draw two price curves -- one for Tesla and one for NASDAQ. "If the spread between them is growing, we can make money on the spread. We don't care if it's going up or down." That same principle can be used for the forex market (such as the spread between the U.S. Dollar and Euro) or in crypto, such as the spread between Bitcoin and something like Solana or BNB.
4. Trading The "Wyckoff Method"
Over 100 years ago, a financial technician named Richard Wyckoff developed a theory that the market moves in cycles, and that understanding these cycles will give signals on when to buy and sell. They're still used by traders and are known as the Wyckoff market cycle. Christopher Inks studies the charts and uses these cycles to guide his setups. "My edge is really this understanding of market psychology," says Inks. "Being able to read price action and volume." Inks says these cycles occur on both the longer horizons (weeks and months) and even on the shorter timeframes (minutes). This helps clarify the direction of a trend, says Inks, "and one of the best things traders can do is trade in the direction of the trend..."
Read about the final three strategies on the web...
– Jeff Wilser
@jeffwilser
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