Four Key Factors for Trader Success

Over the past five years, an experienced FOF investor has conducted in-depth research on hundreds of fund teams and summarized four key points for successful trading. This investor was responsible for asset allocation at a family office with a technology background, and his interest in the cryptocurrency space began during the bull market of 2020. His unique background enables him to gain a macro perspective on the overall market, understanding the strategies of different participants and the evolution of ways to make money.

Common Characteristics of Excellent Traders

When evaluating funds and general partners, the investor mainly focuses on three core factors: performance, team, and strategy.

Performance

Fund performance requires reliable data support. In the cryptocurrency secondary market, information transparency is often lacking, making the authenticity, sustainability, and attribution analysis of past returns crucial. The key lies in identifying which past performances can represent future developments.

Team

Team evaluation includes aspects such as background, reliability, and communication skills, focusing mainly on three points:

1. Integrity is the bottom line. Proprietary trading requires adherence to discipline, and asset management must be honest with clients.

2. Lead by example. The core trading team should remain lean (usually no more than five people), and the leader must be personally involved.

3. Global perspective and continuous evolution. In the face of structural changes, founders need to have the courage to make decisions and execute them firmly.

strategy

Strategies need to align with current market demands and industry development trends. It is worth noting that the secondary market for cryptocurrencies still has significant differences from traditional secondary markets in terms of backend construction, customer management, strategy complexity, and compliance, which also signifies huge development opportunities.

Methods for Continuous Improvement for Traders

1. Keep external information flowing in while maintaining independent judgment.

2. Cultivate a high-dimensional perspective and understand market dynamics from a global viewpoint.

3. Develop "Street Smart". Excellent traders often capture market patterns and create significant excess returns.

4. Learn from the excellent, seek high-level guidance to break through bottlenecks.

How Institutions Configure Cryptocurrency Assets

Institutional allocations to cryptocurrencies vary based on funding characteristics and preferences. This investor personally prefers secondary market investments, categorizing them into four types:

1. Mining and long-term holding
2. Technical Trading (including Quantitative Trading)
3. Subjective trading based on "fundamentals"
4. DeFi Investment (more akin to product manager thinking)

Current Well-Performing Investment Strategies

1. Currency-based Enhancement Strategy

   • TVL Games (Staking and Airdrops)
   • Quantitative trading (especially funding rate arbitrage)

2. Buy Bitcoin at a discount or participate in mining

3. Stage-wise strategies to outperform Bitcoin (such as CTA trend following)

Recommended Reading

1. "Principles of Professional Speculation": A systematic explanation of the trading system
2. Books related to central bank history and monetary policy, such as "The Alchemist"
3. Literary works that explore human nature, such as Chinese Ming and Qing novels and French short stories.

These readings help to understand the technical aspects of market operations, as well as the human factors behind them, providing important insights for dealing with complex interests.