Traders interviewed by CoinDesk declare the end of the crypto winter. Discover their strategies for thriving in the upcoming market phase in this report by Jeff Wilser.
Here we provide list of 7 Successful Strategies For Crypto Traders 2024
- More breakouts, more signals, more trades
- The “moonbag” strategy
- Correlated arbitrage
- Trading The “Wyckoff Method”
- Trade more than just crypto
- Use leverage with caution
Allow me to offer you a glimpse behind the scenes. To gain insight into the prevailing sentiment among traders within the current cryptocurrency landscape, it proves enlightening to trace the evolution of this very article. Initially, I had intended for it to bear the title, “How Traders Discover Their Edge amid Crypto Winter.”
However, the traders themselves conveyed a different narrative to me: Crypto winter is no longer upon us. “Bitcoin doesn’t exhibit a +130% surge for ten consecutive months in a bear market,” asserted the trader Adrian Zduńczyk in a conversation on Twitter/X DM. According to Zduńczyk, the early stages of a bull market commenced in January 2023. He opines, “Many projects erroneously label the current climate as crypto winter or a bear market when, in truth, what they are experiencing is a gradual economic pace.”
The inquiry transcends mere academic curiosity. For numerous traders, comprehending the macroeconomic milieu is a vital component of strategizing even their short-term maneuvers. This principle aligns with one of the most time-honored adages in the realm of trading: “The trend is your ally.” In an environment where prices exhibit an upward trajectory, traders adopt a “long-biased” stance, while shorting can prove injurious. Conversely, in a bear market, the approach is reversed.
Within this context, it becomes apparent that the cryptocurrency domain is currently divided. Some traders have warmly embraced what could be termed a “Crypto Spring,” while others remain apprehensive, bearing the scars of the preceding bear market. Christopher Inks, who oversees the trading group Texas West Capital, underscores the emotional aspect of trading, remarking, “It’s a challenging terrain for traders.
We’re human, and emotions come into play.” Inks emphasizes that for many traders who grew accustomed to the sluggish price movements of 2022, a recency bias can cloud their judgment, making it arduous to accept the notion that the market has reached its nadir. In line with Zduńczyk, Inks is a proponent of a new bull market, emphasizing, “The reality is that we’ve been in a rally for nearly a year now.”
Furthermore, there exist traders who remain indifferent to the prevailing market direction; they are equally content with long or short positions. Paweł Łaskarzewski, the manager of the hedge fund Nomad Fulcrum, encapsulates this mindset, affirming, “From my standpoint, it’s perpetually a bull market, always. We’re agnostic to the market’s orientation.” Łaskarzewski adds, “Depending on the prevailing sentiment, we employ diverse strategies and may lean more towards short positions than long.”
These two disclaimers should be noted: Firstly, not all traders adopt the same methods, possess identical strategies, or uniformly perceive the market. Indeed, without this diversity, trading would cease to exist, as every buyer requires a seller.
The second disclaimer should be glaringly obvious: None of the information provided herein constitutes financial advice. Making buying or selling decisions based solely on quotes extracted from an article is inadvisable. Engage in independent research, maintain a balanced diet, apply sunscreen, and remember to wish your parents well on their birthdays.
Having acknowledged these caveats, we can now delve into seven strategies currently employed by cryptocurrency traders in their quest for the elusive and highly sought-after “Edge.”
Here we Explain a list of 7 Successful Strategies For Crypto Traders in 2024
More breakouts, more signals, more trades
Adrian Zduńczyk, who heads the trading group known as The Birb Nest, adheres to a specific set of rules and signals when entering trades, with a particular emphasis on breakouts. These signals remain consistent, whether in bear or bull markets, but what’s altered is their frequency of occurrence compared to 2022. Zduńczyk explains, “I initiate a buy position when there’s a confirmed price breakout.”
Notably, a significant portion of these trades culminates in failure, as Zduńczyk humorously acknowledges, “I make a living by losing money.” However, he mitigates his risk by implementing tight stop-loss orders, which cap the maximum loss for each trade, and he allows profitable trades to continue running. Consequently, his 30% win rate compensates for the 70% of trades that incur losses. This approach remains consistent whether the market is in crypto winter or crypto spring, yet in the present climate, Zduńczyk is actively engaged in more trades as opposed to remaining on the sidelines.
The “moonbag” strategy
This strategy is courtesy of Wendy O, formerly associated with CoinDesk and the host of The O Show. When a project in which she has invested begins to experience a substantial surge in value, she initiates a process of taking profits and subsequently recuperates her initial investment. Wendy elaborates, stating, “Whatever remains after this process is what I refer to as my ‘moonbag.’ It’s entirely owned by me, free and clear.” Occasionally, she opts to deposit this moonbag into a staking platform if such an option is available, enabling her to earn passive income while she patiently awaits further appreciation in its value.
Paweł Łaskarzewski, who maintains an unswayed stance regardless of bull or bear markets, offers an illustration of two assets exhibiting correlated price movements. He points out, “Tesla’s price action aligns with the direction of NASDAQ,” implying a connection between their price trends. To capitalize on this, traders can create two separate price curves, one for Tesla and the other for NASDAQ. Łaskarzewski explains, “If the spread between these curves is expanding, we have an opportunity to profit from this differential. Our approach is indifferent to whether the market is trending upward or downward.” This principle can be applied not only to traditional financial markets like forex, for instance, by observing the spread between the U.S. Dollar and the Euro but also in the realm of cryptocurrencies, such as monitoring the spread between Bitcoin and assets like Solana or BNB.
Trading The “Wyckoff Method”
More than a century ago, a financial technician named Richard Wyckoff formulated a theory positing that the market operates in cycles. He contended that comprehending these cycles would provide crucial signals for determining optimal entry and exit points for trading. These principles, known as the Wyckoff market cycle, have endured the test of time and continue to be utilized by traders today. Christopher Inks diligently studies market charts and leverages these cycles to inform his trading strategies. Inks underscores, “My advantage primarily lies in my grasp of market psychology. I possess the ability to decipher price movements and volume.” He notes that these cycles manifest on various time horizons, spanning from longer-term perspectives measured in weeks and months to even shorter timeframes, down to minutes. This comprehension aids in clarifying the trajectory of a trend, and Inks emphasizes that “one of the most effective actions a trader can take is to align their trades with the prevailing trend.”
Trade more than just crypto
A significant number of crypto traders also engage in stock trading and forex trading, actively seeking out the most favorable opportunities wherever they may emerge. As Paweł Łaskarzewski aptly puts it, “Why impose limitations on yourself? Why restrict your endeavors solely to the crypto market when there are profit opportunities to be found elsewhere?” Łaskarzewski’s company frequently reallocates capital from the crypto sector to assets like oil, Tesla, gold, and back to cryptocurrencies. This diverse strategy encompasses the tokenization of RWAs, which plays a pivotal role in their broader investment approach. Łaskarzewski underscores, “The significance of tokenization cannot be overstated.” He further reveals that his firm is on the verge of launching its own RWA token in January, thereby expanding the accessibility of the fund to a broader spectrum of investors.
Use leverage with caution
On multiple occasions during our conversation, Wendy O underscored the fact that none of the information shared should be interpreted as financial advice. It’s a point worth reiterating here. Additionally, Wendy emphasized that she doesn’t frequently utilize substantial leverage in her trading activities. She clarifies, “If I do employ leverage, it’s typically limited to around 2X or 3X at the most.”
Paweł Łaskarzewski concurs, highlighting the perils of excessive leverage, especially for novice traders. He notes, “Rookie traders often employ high leverage, such as 1-to-100, and when the market shifts just 1% in an unfavorable direction, they risk losing their entire investment.” It’s a potent reminder of the risks associated with over-leveraging in the volatile world of trading.
Here’s a classic but effective approach, which constitutes a fundamental component of Nomad Fulcrum’s toolkit. Paweł Łaskarzewski expounds, “We have night scalpers and day scalpers operating on different timeframes, encompassing hours, minutes, and quarter-hours.” The fundamental principle underlying this strategy entails identifying a price range where the asset’s value oscillates. For instance, let’s assume that the price tends to rebound when it reaches $15 but experiences a downward move, or “rejection,” when it reaches $20. While more sophisticated metrics, often focusing on trading volume, can be used to fine-tune the criteria, the core idea is to purchase at $15 and subsequently sell at $20, repeating this process.