7 Successful Strategies of Crypto Traders

Traders interviewed by CoinDesk say that crypto winter is over. Here’s how they plan to get ahead in the next phase of the market. Jeff Wilser reports.

AccessTimeIconNov 6, 2023 at 2:01 p.m. UTC
Updated Nov 6, 2023 at 3:59 p.m. UTC
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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.”

This post is part of Consensus Magazine's Trading Week, sponsored by CME.

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.”

5. Trade more than just crypto

Many crypto traders are also stock traders and forex traders, hunting for the best setups wherever they may appear. “Why limit yourself?” says Łaskarzewski. “Why limit yourself to only the crypto market if you can also make money somewhere else?” Łaskarzewski’s firm frequently shifts capital from crypto to oil to Tesla to gold and back to crypto, and yes, the tokenization of RWAs is part of that larger strategy. “The role of tokenization is 100% important,” says Łaskarzewski, adding that his firm will be launching its own RWA token in January, allowing more investors to buy into the fund.

6. Use leverage with caution

Several times in our call Wendy O stressed that none of this is financial advice -- so I’ll repeat that message here -- and added that she doesn’t personally use much leverage. “If I do, something like 2X or 3X, max,” says Wendy. Łaskarzewski agrees, noting that over-leverage is one of the ways that rookie traders get crushed. “They do a 1-to-100 leverage and the market moves 1% in the wrong direction and they lose everything,” says Łaskarzewski.

7. Scalping

An oldie but goodie, and a key part of Nomad Fulcurm’s toolkit. “We have night scalpers and day scalpers operating on different timeframes,” says Łaskarzewski. “Hours, minutes, and quarter-hours.” The basic principle: You identify a range where the price has been yo-yoing -- let’s say it tends to bounce up when it hits $15 and then gets “rejected” (moves lower) when it hits $20. There are a ton of sophisticated metrics (often focusing on volume) that help refine the criteria, but the idea is that you buy at $15 and then sell at $20, rinse and repeat.

Simple in theory, difficult in practice. I know from personal experience, as I tried scalping U.S. stocks every morning for nearly two years. How did it go? Let me put it this way. If it’s easy and lucrative, do you think I’d be writing this article? Or that’s another way of saying, proceed with caution.

Edited by Ben Schiller.

Disclosure

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Jeff  Wilser

Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.


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