good morning friends,
it has been a hectic few weeks and I have not had the time to sit down and write (i feel like i repeat this line a lot these days lol). when i began writing this i didnt feel like coding, so i just went to a nearby cafe, and enjoyed a nice breakfast writing this. (plot twist , it has been over a week since that day, oh well…)
i’ve been enjoying writing exploratory articles, which have been great, but lately infrastructure and operational tasks have been filling my entire time which means that I have nothing interesting to share with you.
i try to refrain from talking about infrastructure stuff, as it’s really not my field, and i do it grudgingly, just to get it our of the way.
people thought that AI was going to reduce work and we were going to be on a beach somewhere while our AI subordinates did all the work for us. or to be given universal basic income because we could no longer compete with AI.
well it turns out, at least personally, that I am working far more than I ever had before.
it seems that the better these models get, the more I have to work. i was just reading some chatter on the webs, and stumbled upon this as i am writing today’s post.
Rob Carver’s methods aside, it takes a ton of work to run and maintain a good system, even one that only generates mediocre performance. i am not even exaggerating. its tons of work…
so i feel compelled to max out the capabilities of these models to advance the vision I always had for my trading business.
it’s like having a wizard next to you, only for a few minutes, that can give you anything that you want. would you ask one thing and go away? i think that most people would feel compelled to ask for everything they ever wanted, and perhaps also that which they didn’t think they want, but would be nice to have. i feel the same with AI right now and the amount of token spend that is currently being subsidized.
I always believed that a productivity multiplier tool isn’t going to remove work but rather by making people more efficient, create a new baseline of what productivity means. i mean why would they stop? people are competitive by nature. it just becomes the norm. i dont think the market will anchor potential to pre-AI capacity for work. the anchor now is on everyone having the same super powered agents to help them in their work.
so i’ve just been fixing things, adding new things, the more i dig the more things i add to my to-do list. almost like a desperate attempt to escape quicksand but instead, I just sink deeper into my work. sometimes we have to find a stick and move laterally instead.
talking about a stick, i’ve mentioned this in the past, but it’s perhaps time to find myself a team of people that i trust, that can work with me on infrastructure so that i can focus on the part of the job i think im decent at—finding new trades and opportunities. but that’s for another day.
if you´ve been following the crypto market, you’ve noticed the explosion in the vols (volatility and volume—sry i made that up) and that it went up a lot as a change of pace from what we’ve seen in the past year or so.
my portfolio did hold up quite well here, considering I’ve been short A TON (gross), through the entire past year. the global portfolio (incl. discretionary, long-term, systematic) currently sits at a gain of 74% for the year.
so far we’ve had a good run these past few years. below are the month-to-month non-compound returns.
the entire summer was hard because there was very little movement in crypto, and being fairly momentum exposed, that meant that i was just watching paint dry (tbf i barely look at charts).
this is what the total crypto market cap looked like during the summer.
absolutely dreadful.
well, it’s the summer, its expected that things dry up a little. you know, normal people do enjoy vacations, not as people like me, who spend their entire summer inside coding and trading.
but it was a good time to build. i track and document all the changes i make to my codebase so we can get this dashboard to tell us how much progress we have made, and most importantly, where we spend our time.
I’ve been building/fixing/maintaining on average 34 features a day…
it has been fun building this infrastructure, but it has taken all my attention span and efforts.
i have a new found respect for systems traders that did this pre-AI. its a LOT of work. people are very naive to think they can vibe code their way into a production ready infrastructure capable of managing their portfolios and they will soon realize that it aint that easy.
ok now enough of the nerd stuff, because out of nowhere, we got this…
everyone’s pretty excited , and tbh, it has been a major move on a large burst of volatility, so i get why. people immediately associate past similar bottoming action with today. CT (aka crypto twitter) is pretty known to be this echo chamber where everyone is parroting everyone else’s feelings. so things heat up—everyone gets excited, things crash—its a failed experiment and sentiment is as low as a cemetery.
there’s been a lot of speculation on why this move happened. look, i am not going to pretend I know, that’s not where I spend my limited thinking time/capacity. but here’s a few things that could have had an impact:
On Aug 19, U.S. treasury announced it would increase its bond buy back operations
U.S. treasury officials indicated they could fund the buybacks out of the ~$1trn TGA rather than by selling bills
President Trump announcing that CTFC is working to bring hyperliquid and perpetual futures to the U.S.
Clarity act procedural in the 15th of September
Massive short liquidations
there’s also mini-factors that COULD have been building some effect, but I can’t put a number on how much. for example, let’s call it the Kimchi effect. this kid who allegedly made $40M on Trump coin, and now spends his time posting off context pictures flexing material possessions (the kids call it aura farming or something). but why is it even relevant?
well this kid has been going through the social media virality roller coaster like a rockstar or something. tik takers making viral videos about memecoin trading because of him.
all of this media attention create a false hope of ending up like Kimchi if one gambles for long enough (never stop clicking types). obviously 99.99% of them will never replicate such an outocme, and those who do, will do so by luck. but you know, people buy lottery tickets knowing it’s a losing proposition anyways.
with that we’ve seen apps like FOMO and PUMP (retail memecoin oriented platforms) explode in usage.
these social trading apps are getting kinda of an insane attention (im writing this a week after i started writing this post).
this guy made $7M in a span of a month trading memecoins on FOMO.
obviously a lot of these people make money because they are famous, lots of people follow their wallets, pile into these memes, and push prices higher. but the point is everyone’s talking about memecoins again, and that is net added attention to crypto (debate open on how bad this attention is).
whatever the reason for this recent action, i was not as comfortable as the rest of the participants appeared to be, right off the bat. actually it was a bit of a discomfort these past few days (oh bohooo), because our portfolio was almost at 5x leverage. 5x!!.
this isn’t directional , our portfolio was neutral on a vol weighted basis so that individual positions don’t disproportionally contribute more risk to the book than they should, just because they are more/less jumpy.
although we might be close to net 0 in this metric, it’s unwise to think that we are truly neutral to the market.
there’s a bunch of other things we are STILL not neutral to. the market is composed of many factors that can affect individual assets. it’s not just volatility. it’s not just the market factor. also our forecasts break, model’s assumptions break, etc. when we need protection the most often is when we don’t get it. thinking about these matters in more depth is a quest I will have inevitably to take on to be a bit smarter about the things I really want exposure to.
so considering our positioning, i was happy i left this event unscathed, and even made money.
what has been worrying me is that although the short and long legs are neutral on that vol basis, you never know if the our forecast will under/over estimate some positions, making our portfolio not so neutral when we need it to be neutral the most.
also our positions right now are rebalanced once a day. and as a consequence of that, we also got PIEVERSE on the 26th of July 2026.
I was very short this thing.
I had just woke up, and I noticed that my portfolio was missing a chunk of capital. nothing too concerning but an amount big enough that made me notice something was off.
I give it a closer look, and lo and behold, this weird memecoin called PIEVERSE, is up a ton in the morning. that day I was going to visit my grandmother that lives almost 2h from where I live.
so i had 2 options:
a) pray and hope that this thing don’t blow out of proportions and takes me on a nasty ride
b) intervene in the model and close the position before I leave desk
well, I dont like manual interventions in my models, so I just let it ride. i hold dozens of different positions at any time so this isnt something that is going to take me out. but it was still a nasty unrealized loss at the top.
by luck, it does reverse during that day, and the following day…
but we’re not luck traders here right? or at least try not to. we must manage risk more efficiently.
we’re given a different “hand” for every trade that happens in the market. my ideal system, if I had to ask my wizard, is that my view on the market (forecast, positioning, etc) should be updated as frequently as possible according to the new information that flows into my hands.
imagine in a game of poker you get a new hand but you evaluate the current game purely based on the previous hand. sure you can use information from previous hands to try and calculate the probability of your current hand, but that wouldn’t be the ONLY (or even, more relevant) piece information you’d use right? well thats what I do when I am rebalancing positions once a day. sure its easier to maintain, and hard to mess up, but it can be improved.
so I have built this new module that’s currently under testing in prod, that on a regular periodic interval (say 15 minutes), we compute the current volatility marked by the intraday unfinished price, so that if volatility burst out of nowhere, our models starts reducing positions. I will eventually also start calculating the signal itself on this faster interval, but for now, we will be updating just the risk side of it.
the question that disturbs my nights is what happens in a bull market where these pumps tend to be more sticky? what happens instead of 50% intraday it goes 200% intraday or even more? it’s not unheard off, actually happens a few times a year even during downturns.
this time we got lucky with it, and probably with the intraday rebalancing mechanism we’d have lost more $ than letting it ride like we did, but we cant play with fire for too long and not expect to get burned.
so that’s something that has taken some of my attention aswell.
now, returning to our portfolio positioning chart, you may be wondering, but hey…
… you just said you are neutral (on a vol basis) why are you now carrying a long tilt.
well… that’s my own portfolio construction preference, a topic not for today. but the premise is, if you’re willing to take on additional risk, be sure that you get paid for it, and there’s a strong reason for it. not just because you want it ofc.
on the discretionary side, I have sold most of my hyperliquid directional bet back in May when I wrote this post.
but i still do carry a decent discretionary position on hype as a long-term bet, and we also added even more on the 2nd of August. (here’s the chart for internet clouts, buying the absolute bottom)
but now, as our exposure takes a directional tilt long, this positions starts coming into the territory of the “target” we had decided to sell hype at, when we wrote this back in March.
but back then what I had decided was based on the insane allocation I was holding compared to my portfolio and i did sell the majority of the stake back in May, so the stake is now much smaller.
I’ve become increasingly more willing to hold hype. i have come to the conclusion that I will probably always have a chunk of it in my long-term portfolio. not only hype, but other top perp dexes that are coming up. on top of the main thesis of perps being a superior instrument for speculation, if it wasn’t for perp dexes, I’d probably not be able to trade crypto at scale right now, so you can see why I am very bullish this sector.
Trump mentioning hyperliquid on the press conference was kind of insane. that is one for the crypto history books perhaps. but more important is what’s ahead.
there seems to be this institutional alignment to bring perps into the U.S.—one of, if not the largest market in the world, currently sidelined from trading perps. obviously there’s people that bypass these regulations and still trade on hyperliquid, whilst residing in the U.S., but those are a fairly sophisticated minority that can evade the problems inherent from that activity. I am more excited about the general public which hasn’t yet had the access.
what does this mean for hype, lit, variational, extended, and other centralized exchanges?
well there’s an insane revenue potential that hasn’t yet been tapped. all of the volume that will come into perps markets will increase revenue of these protocols and thus their valuations. how much of this is priced in already, it’s a question for later.
and if that thesis is right, that means we will have a large pool of winners, that we are going to be able to hedge our shorts with, when the time comes to be short again. my systematic book has been fairly allocated to the winners of this niche and now extremely well positioned to capture that side.
my focus going forward is to onboard more strategies into my book, that harvest different high-demand sectors in crypto, and continuously trend to a “no-view” (aka market neutral) stance, as I want to harvest as much as possible from this niche, which I believe will continue to gain adoption into the future.
I am not a big CrYpTo BeLiEvEr , hence the dipping my toes into the market neutral pool, but i do see some of the advantages of the innovations that were created by this space, such as decentralization, perpetual futures, stablecoins, etc.
also it’s a great place to speculate on due to all the volatility, uncertainty and risk. for a small trader, imo, there’s no best place to be on. it’s really hard to be here for the long run, but i do believe in the bet i have made, and that will pay off the longer the horizon.
i am not looking at few months at a time, i am looking at 5 years ahead. I expect to do fairly well in those horizons.
everything else in this niche, I am not that very bullish on. it’s mostly new trash created to speculate on said trash. like a never ending self absorbing loop of propping up trash, so that the next fool can buy my trash off of me for higher prices. yes sure , retail does seem interested in the space once again, and will probably force prices higher, but that’s not my point. what are we really creating here other than more ways to shovel money into the pockets of those that are lucky enough to exit the trash pyramid nearest to its peak?
I am a trader, and if there’s a market with opportunity to help price it more fairly, which i believe is at the core of what we do, I’ll be there, and get paid accordingly. if there’s an opportunity to invest in a legitimate net positive project to the space, I’ll also be there.
but don’t wait for me to join those who claim that this space as a whole, as it stands today, is the future of finance, because imo it isn’t, and I am positioned accordingly.
there will be many more Kimchi’s , and other winners that will be created from this sector. but i’ve been around for a while and there’s no better illustration than the good ol’ plane filled with red dots…
slow and steady.
cheers.
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