Crypto: The Unwritten Rules of the Wild West.
After asking on Twitter if you guys wanted an article about how to get alpha in crypto, I was quite surprised by the amount of engagement of that tweet. Which is understandable as crypto is a wild west. It means you need to understand the unwritten rules of this jungle. Everybody was has been in this space for quite some time (before 2020 bullrun), has been making a shitload of mistakes. Including me. It’s fine, it’s a phase everybody in crypto (and in life) will get through as long as you learn and adapt.
And don’t quit. Like most of the 2017/2018 blow off top buyers.
I’ll start the article with some important redpills I’ve learned over the course of 5 years into crypto. There a lot of redpills but I’ll just state some of the most important ones popping up in my head. Everything I’m stating is simply my thoughts and my philosophy. There is no proper blue print in crypto but I’m willing to share mine for educational purpose.
Afterwards, I’ll showcase which tools and methods I use to find my crypto information.
Anyway, enough talks. My coffee is ready. Let’s get into it.
Redpill #1: We are not all gonna make it
As a guy who has been into crypto since april 2017, I’ve learned that essentially you are competing vs other degens who have the same goal: making money. As cliche as it sounds like, it’s still an important element to be conscious off as you will realise you need to be some steps ahead of the market.
Who’s the market you say? It’s retail investors (like you and me) and VC’s (and other institutions). And trust me: you will beat most VC’s if you use the proper tools and resources.
It’s essentially a chess game and some of big names like DefiGod and Tetranode already realised this early on and became quite succesful as an individual. It’s a game in itself and you will need to learn from your mistakes and adapt. Upgrade your weapons (tools to use) and analyse what’s happening. Anticipate narratives. Get rid of biases.
As harsh as it sounds like: ‘we all gonna make it’ is an illusion. You will only make it if you analyse every step you make and more importantly: the steps of market participants.
Redpill #2: Understand risk vs reward
Essentially we are all speculating. Which means we are making bets. The only difference between a casino and crypto is that you can actually make calculated bets. When you are looking into a project, you need to have an own checklist in your mind.
Internal questions about the project:
What they are trying to solve.
Is it something unique instead of another copy cat project?
Who’s behind it?
Which VC’s/angel investors are invested in it?
What are the vesting terms (tokenomics)?
What products do they already have?
External questions about the project:
Is it fitting a new narrative?
What is the marketcap?
What is the TVL (Total Value Locked)?
What is the volume/liquidity?
Talking to the devs/founders: do they sound they know their stuff?
Did they already have a pump and dump phase in the charts (bagholders born and created)
There are many more questions that you can ask yourself when researching but these are the ones that popped up in my mind. All these questions will eventually make you positive, doubtful or negative on a project. When I’m in doubt, usually I compare the external questions with the internal questions. When you put them together, you will realise if it’s worth taking the risk vs the reward.
Project A solves something unique. ‘‘A Decentralized Exchange (DEX) / Decentralized Stablecoin protocol with 0 IL (impermanent loss) made possible by minting stablecoin of project A using minting fees to compensate IL.’’
I just made something up. I’ve no idea if this is something realistic and if the numbers are off (most likely yes) but it’s just to give you an idea. Even though a ‘‘Dex’’ and a ‘‘Decentralized Stablecoin’’ aren’t unique in itself, the concept of removing IL with combining existing solutions could be considered unique.
The marketcap is 10 million. Circulating supply is 5 mil against 50 million total supply. 40 million tokens are all locked for atleast 6 months. Inflation will be 5 million token unlocked because of rewards. It means that circulating supply after 6 months = 10 million. Which means 20 million marketcap in this example.
As it’s backed by big names, you could see this going up a lot, despite seed investors getting in sub 500k marketcap. Tokens are locked and if you want to trade this project, you will be already out before the token unlock happens. If the chart doesn’t scream ‘‘pump n dump’’, you can bet it will eventually happen.
Redpill #3: Investor mindset is usually bullshit if you are active in crypto fulltime
So there are two terms people like to use to describe themselves in crypto: being a ‘‘trader’’ and ‘‘investor’’. If you are reading this and you want to be active in crypto and make money, don’t call yourself an investor. Most people here are not investors and including myself. Why?
It’s simple: most coins have a pump and dump cycle. Actually, every coin has it.
Before you are pulling your pitchforks to say ‘‘haha he stupid, look bitcorn, 12 years full pump hehe xd.’’ Let me elaborate on this:
Yes, there are projects that keep repeating pump and dump cycles over the course of several years (long term). Good examples are obviously Bitcoin and Ethereum. But how many projects from 2012 and 2016-2018 did return to previous ATH and went higher? Hypecoins like OMG, Waltonchain, Vechain, Verge and all the other crap never went back to ATH again since 2017. I don’t have the exact numbers unfortunately but I can tell you it’s atleast above 95%. Try to look at the numbers on Coinmarketcap screenshots from 2017 and compare it with the numbers right now in 2022. It will be a good eye opener for some of you.
Obviously there are projects that will succeed long term. The point I’m trying to make, is that the odds that you have the next ‘‘google’’ in crypto is extremely low. Especially if you are new or inexperienced: it’s difficult to distinguish the horseshit from the legit projects as you didn’t build a reference frame yet.
Most 2017 OG’s (and earlier) who sticked through the bearmarket will recognize this.
Most of use are simply traders competing vs others. Simple as that. Unless you are a boomer with a family and fulltime job that DCA’s into Bitcoin/Ethereum every week/month without looking at the price for years: then yes, sure, you are an investor.
Recognising this is important because you will have to build a mindset that requires you to stay objective and alert with price going up. Again, if the chart is screaming a pump (and you know you are a trader), you will sell atleast a chunk to lock in profits. How much you sell is a blue print you will have to create yourself.
If you have the ‘‘HODL’’ mindset while not being a real investor: you will pay for it. And you will also pay for it if you think your shitcoin is the next ‘‘Bitcoin/Ethereum’’.
Again, the odds are against you. I didn’t make the rules.
Admitting you know nothing (vs thinking you are the next Warren Buffet/Michael Burry) is going to cost you less money. It’s simple as that.
Tools to use in crypto: how to be a few steps ahead of the market.
These are the most obvious ones. It’s important to build up your network in Crypto. I’ve been into the space since 2017 and what I learned is that you need to give value in order to gain value from others. So if you are a leecher, trust me, people won’t share anything with you. We all have the same goal so in that regards, people recognize who are the ones that provide value and the ones who are just trying to leech off others.
Whether you are in crypto or not: everybody hates leechers. In a wild west and unregulated jungle, it’s important to have a network you can rely on and trust in a way.
There are a lot of crypto community groups on Telegram/Discord you can join. Most public ones are dogshit though, I recommend small groups with high iq’s. You usually gets added to those when you have a proven trackrecord of giving value (alpha). Grind yourself to the top and make a name in the community.
Crypto Twitter is a weird one. Almost 4chan/biz tier. I used to like 4chan a lot in 2017 as it was an obscure forum with a bunch of grandma’s basement autists pouring out high iq info about coins (see Chainlink, best performing token during bearmarket 2018-2020). Problem is that the forum got flooded by noobs/bots/paid shillers which destroyed the quality of the content posted there. I almost stopped scrolling 4chan for alpha since 2020, wouldn’t advise it if you can’t distinguish the paid shills from the real high iq posts.
Twitter in that regards has the same vibe. It’s different though as you can make a custom list of crypto accounts to follow that actually provide high iq content. Once you manage to make a list of ‘alpha accounts’, you can utilize twitter hard to get info early.
A big disadvantage of not having a proper list, is that Twitter is an echo machine. If you follow and like the same coin every time, you will only get shills that fits your bias. You don’t want that as you unconsciously confirm your bias everytime that way. The algo is made that way as it’s originally made to simply brainwash people into thinking their believes are always right (see right/left wing politics as an example).
Wallet autism is a real thing: tracking wallets of smart money. Sometimes you will find wallets that were early into 100x type of projects. Every single time. Making an excel sheet of these wallets and tracking them is a good way to keep up with alpha really early. There are several nuances on this method:
You can use Nansen to have a dashboard full of ways to track wallets, see what smart money is doing and track big whale movement. You can even track what VC’s are doing. You can click on a token and see an analytic page full of info (big transfers, big sells, big buys etc.). They even have a notification bot system that will notify you.
For me, it was worth it to buy the 1 year subscription as I know that the value I get from monitoring this dashboard is way bigger than the costs. But I’m aware that not everybody can afford it but luckily there is still another method:
Using Etherscan will be your method to use for tracking wallets. It’s dirty work as you need to track everything manually (you don’t have a dashboard with everything already tracked for you like Nansen) but it’s totally free and only requires one thing: commitment. If you are tech wise advanced, you could even build a bot that notifies you when big wallets move funds.
Using an excel sheet for monitoring special addresses is the way I used to work (and actually still do).
4. Follow Developers and smart money accounts
This one could be considered a side path of the social media part I’ve written earlier.
But it’s a very important and underrated one.
What I like to do, is follow big developer accounts on their socials that are very deep into the space. Usually, because they are well connected, they get a seed/angel investor positions in promising projects really early. What happens is that they usually also follow these project socials on Twitter or Github. They always follow the socials of very early projects, really early (obviously as a seed investor) so what happens is that if you track who they are following and their new follows, you can immediately see what’s happening on the radar. Again, this requires commitment and dedication again as you need to check everyday. Twitter and Github are perfect for that.
As I really like this method, I won’t name accounts that I follow for this method purely because of putting this method in danger for myself. But I just gave you a big seed, now it’s up to you to plant it and grow like a big boy.
5. Keep up with narratives
Narratives, narratives, narratives…. If you keep repeating these words, you will eventually laugh. What are narratives in crypto? Who’s making them? Why are they so important?
I still don’t know what to think about it. I’m aware that this is a 2020-2021 thing but at the same time, we had the same thing in 2017 with ICO’s (remember AI powered blockchain 3.0, DAGs and a little bit of Dentist sauce on it?).
How do we keep track of it?
I like to keep up with my TG groups, discord and CT for that. But some informative ‘newspaper’ type of socials are really good at this. I like @TheDailyApe on TG for a DeFi overview. Messari and Delphi Digital newsletters (paid or even non-paid) are good as well to read what’s happening in the space. Disadvantage of these newsletters is that you are usually late to the party as most of the market will be aware of it by the time it’s on their websites.
Predicting narratives will require a good network that you have built through the years and analysing how narratives shift (and work). It’s something you will fail at if you are new and it’s totally normal: give it some time and you will recognise patterns in the market.
There are many more methods and tools to utilize. But for now, I think most important ones are shared. I’ll most likely make a part 2 in the future.
I wanted to finish this article by coming back to a statement made earlier:
‘we are not all gonna make it.’
I still stand by this statement. But at the same time, I realised during the production of this article, that my life got changed because of crypto. Over the years, I’ve met degenerates like myself. We helped each other. Indirectly, your life might be changed because of some anons living at the other side of the world.
Some never came back after 2017.
Some stayed and saw hope in a next cycle.
In a sense, yes:
We all gonna make it.
Loved the article, would love to chat if you're on Telegram (not promoting anything, just want to share ideas): @mattmumbo
Great article and great alpha! Especially point 4, I'll be adding that to my research strategy.