Dialogue Trader Mason: After reviewing nearly 100 Cryptocurrency Speculation funds in the industry, I found that the characteristics of a good trader are...

After reviewing hundreds of fund teams over the past five years, he found that by doing these four things well, you can excel in trading.

The following text is from my conversation with @ma_s_on_, a FOF investor with years of experience in family office management. This is the 21st issue of #Dialogue with 100 traders, continuously updated, follow welcome.👇

Mason's career began in the golden age of the mobile internet and has been involved in asset allocation in a technology background for the past five to six years.

Mason's interest in the encryption field originated from the bull run frenzy of 2020. That year, they invested a small amount of money in several VCs related to Digital Assets, and the performance was very good, with exaggerated returns.

It was also at that time that Mason met @SevenXVentures.

Mason's background gives him a unique market perspective, which allows him to have the opportunity to insight the market as a whole from top to bottom, and to clearly see how different people participate in the market in different ways, which ways can make money, and how the profit strategy shifts from one direction to another over time.

What do good traders have in common?

When choosing funds and GPs, Mason mainly focuses on three core factors: performance, team, and strategy.

First, let's talk about performance. The fund's performance must have reliable data support. However, in the Secondary Market of the encryption field, information often lacks transparency, so the authenticity, sustainability, and attribution analysis of past returns are important for performance.

"Everyone will say that past performance does not represent the future, but which past performance can represent the future and which cannot, this is the key to consider at the performance level."

Speaking of the team. Including team background, reliability, and communication, etc. Here are three points:

First, integrity is Red Flag. If it is self-operated trading, you must always adhere to discipline, resist temptation, and be honest with yourself; if it is asset management, you must be honest with customers and also provide customer service.

Second, you must be hands-on. Many frens make money and then hire people to do the work, spending more time and energy on business management. This is not good. In terms of team size, the best trading teams, whether self-operated or asset management, have fewer than five core traders, very streamlined, and the leader must be hands-on.

Third, we need to have a global perspective and continue to evolve. When structural changes occur, founders must have the courage to make changes and execute them firmly. This determines the team's ability to resist risks and its development potential.

Finally, there is the strategy. It needs to align with current market demands and industry development trends.

Mason mentioned that there is a big gap between the secondary of the overall encryption field and the traditional secondary, and there is a long way to go in terms of back-end construction, customer system maintenance, strategy complexity, compliance, etc. But looking at it from another perspective, this is also a huge opportunity.

How do good traders continue to improve?

The first thing is to keep in touch with the market and have external information flowing in. But while maintaining communication, one must have self-discipline. It is important to take only a drop from the weak water of three thousand, and not be led by others.

"Traders who perform well and have good performance are very determined. They don't believe in what others say, and only focus on their own field."

The second is to have a higher-dimensional perspective. Looking at the positions of different people from a bird's-eye view, what they are thinking, in the end, it will be found that it can explain many problems that have always been incomprehensible.

In traditional investments, it is often said that many investors in China should use the perspective of the world less and use the perspective of the world more to look at China.

Today, the same sentence applies to the encryption field. We should view the world from the perspective of the encryption field less and view the encryption field from the perspective of the world more. This includes using less of an Asian perspective to view the world and using more of a global perspective to view Asia.

There is another set of keywords: Street Smart. This is a quality that many traders possess.

Traders may be the closest to the essence of things among all professions in the world. They face the most frontline buying and selling and the most real value judgment every year. In their eyes, long-term things may not count for much, and buying and selling orders are the most important.

"There is a type of strategy that can create very scary excess returns, often driven by traders' street smarts. These people often do not have a financial background or a computer background. They just find patterns and go all out on them."

The fourth thing is to learn from good people, because today everyone is a bit confused and many directions are not working out. So if you really want to break through, you need to find some higher-dimensional people to guide you.

How do institutions allocate encryption assets?

The allocation of cryptocurrency assets by family offices actually varies greatly depending on the nature and preferences of the funds.

Personally, for Mason, he would prefer to be placed in Tier 2.

For the secondary classification of Crypto, Mason believes there are four categories:

The first category is the Mining category and the coin-holding category, which means going Mining or buying coins and holding them for a very long time without moving.

The second type is a more technical trading, whether it is looking at the line or the technical aspect to achieve the ultimate Quant.

The third type is a bit subjective and focused on the "value" of speculation. Some people look at the fundamentals, but these "fundamentals" may be different from those of stocks. In short, there are some subjective indicators to consider.

The fourth category is Decentralized Finance, which is singled out because it actually leans more towards the logic of 'product managers.' In Decentralized Finance, the profit you ultimately earn depends on where in the product you can find it, and it's more about understanding the rules of each game inside.

Cryptocurrency Speculation is not the only solution

The industry has always been changing, and the participants at each stage are different, so there is no fixed investment strategy.

What are some good strategies for this cycle? Mason summarized three categories:

The first category is some strategies for strengthening the coin, which can be divided into two subcategories:

1. TVL game, stake, then claim the airdrop, this belongs to risk-free Arbitrage, very comfortable.

2. Quant.

Crypto Quant is Mason's favorite asset class in the encryption field.

First of all, Liquidity is very good, equivalent to T+ 0, you can withdraw today if you invest today, or trade by yourself, worst case scenario, do not trade and Close Position.

Secondly, the scale capacity can be very large, for example, it is very common for a single strategy to run several billion US dollars.

Finally, the expected returns can be high or low and controllable, and risk management is relatively easy, such as setting a forced Close Position line, and closing all positions when the overall falls by 15%.

"In the past few years, funding rate arbitrage has been the most popular strategy in Crypto Quant. It was very exaggerated with an annualized return of three times without any drawdown in 2020 and 2021."

Of course, everyone also knows that this is not sustainable in the long run. The returns of this strategy are also declining now, but even if the returns are declining, they are still very good because there is no drawdown, which is a bit like cash management.

The second is to buy BTC at a discount or Mining. For example, when GBTC had this Discount before, if you bought it, this discount could also allow you to outperform BTC.

The third is some strategies that can outperform BTC in stages, such as CTA. Many traders like to do CTA to follow the trend, which can outperform BTC in the short term, but its weakness is that it has limited scale and capacity.

Mason also recommended some books.

The first one is "The Professional Speculator's Handbook", which systematically explains the entire trading system.

The second is a book about the history of the Central Bank, monetary policy, and banking. It explains what the central bank is doing, why it is doing so, and the benefits and drawbacks of everything it does.

You can start with "The Alchemist", which tells what three famous Central Bank governors did at critical moments in history.

The third is a book about human nature, such as the Ming and Qing novels in China, and the short stories of Maupassant and Flaubert in France.

Often, it is found that the real operation of the world is indeed technical, but more broadly, it is driven by human nature. These novels can help people better understand human nature, not hold too many illusions about it, and can better handle many complex daily interests.

Once again, thank you @ma_s_on_ for participating in the conversation with the trader. The previous Space audio will be updated one after another in the small universe, 🔍 conversation with the trader.