Right Decision, Wrong Week
Process over outcome, the gambler's fallacy in reverse, and the peace of mind I hadn't had in 18 months
Hey friends,
After I wrote this post making the case for selling hyperliquid to rebalance my portfolio, just a week later, AFTER holding for 1 year and 5 months, HYPE pumps yet another 50%.
Story of my life innit?
I have been on vacation this week, which has given me a bit of time to sit down, think and write about things. These days, with how good AI has become for coding, when I am at my desk, I barely stop to do anything other than code, so it’s hard to write something without getting distracted by the thought of what I could be building instead. After all, I am a paid to trade, not to write.
One could look at my hype rebalance and say that I did it a week too soon. And that’s fine man, trust me, I feel it, I am the one who missed out on a decent pump (not really as we’ll discuss).
But it’s a slippery slope to start thinking like this. The next time you have a trade like this where you have a lot of confidence in, but you may be wrong, you will always be making the case for holding just another week, or another month, the pump is just around the corner, because you remember what happened in this trade where you missed out. That’s where your mind gets you into problems.
I am not a gambler here, although at times I might joke that I am one. I trade based on estimates of expected value. Those estimates may be noisy and flawed, but they are the thing I hang on to when deciding if my money is worth this risk.
That feeling of having missed out on a pump, and being mad about it, it’s a gambler’s fallacy. The gambler who thinks that his big win is just around the corner, so he sticks around too long next time for far more risk than they can/should bear.
Now I had no expectation of value, and that was a fact for a while. My thesis on the investment had played out, and I was happy having rode that from $2 where it opened all the way until I rebalanced at ~$42.
Now, is that a reason to completely sell an investment? No! That’s why we dont sell stocks despite assuming they are fairly priced most of the time and all we’re getting paid for is the leftover risk premium associated with that exposure. The same idea here. Assuming that I am getting paid for risk premium, then I don’t want 60% of my exposure to be that 1 single bet. That adds a ton of idiosyncratic risk that I was no longer comfortable holding.
So I rebalanced it back to a target of 10% of my whole portfolio.
When hyperliquid was at $2, $10 even $20 and everyone were dismissing it, that was the opportunity to take extract some alpha on that because I knew the market was either mispricing it or I was deeply wrong about it.
Those are the opportunities that I want to be involved in for as much as I can, without betting the farm, although here, I literally bet the farm. Those opportunities where the potential to make multiples of my initial risk is there. But these come around only so often. Taking risky bets just to make a small speculative gain at best, is not how I do business, or at least in this magnitude.
Now, how much have I missed out?
On that post, I also mentioned that the systematic portfolio was going through a bit of a drawdown as crypto was bouncing off the lows and it was a good time to add the leftover cash from the HYPE rebalance, back into the portfolio.
From the 12th of May, 2026, I bumped the total systematic portfolio AUM by 42%.
As I did that, the portfolio went back up above all time highs, with the new funds added near the bottom of the drawdown.
Now this is a portfolio I hold a lot more confidence in as it’s diversified across a few strategies, bets on genuine persistent effects across markets, and I know should do well over a long time horizon. It’s something I built, something I understand.
Will it be equal to HYPE’s performance in the short-term? If HYPE continues this trajectory, obviously not. Also I am not running this at 100% vol as hype is running at. It’s more controlled, focused on aggressive growth but with downside protection. It has its own risks, obviously, and it’s not a guarantee that is going to continue to pay in the future. Everything we do in finance are at best estimates and bets on persistence, we never know for sure, and anyone who tells you that they do is either lying, or just another naive fool, in an industry of liars and fools.
The risks that my systematic portfolio carries, I have much more control over, and I know where they come from. It’s my job to think about them every day and to carefully build mechanisms to lessen their impact when/if they materialize.
A 60% bet in a single thing was fun, I am happy I had the guts to step up to the plate when it was time to do so, it grew my portfolio significantly to a point where I can trade for a living comfortably, without having to take extreme risks anymore.
Exiting where I did gave me the peace of mind I honestly haven’t had for 1 year and half. Every day I woke up to check if something catastrophic hadn’t happened yet.
Now I’ve been on vacation, just executing the positions in the morning, and going on with my day, not caring for if the market is up or down. That’s the way to trade. At least MOST of the time. There will be times to be glued at my desk where I am doing a trade that requires constant monitoring or a regime where leaving means missing out. That is part of the job. But for what I do, boring, systematic trading, most of the time, the default state is just letting the models do their thing.
Will I take a massive bet like this again?
You can bet I will.
My job is to take risk, and my risk appetite scales with the potential of the opportunity at hand.
But right now, I don’t see it.
So I stick to what has worked for me.
Have a good week!
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