In a recent podcast, Ansem, a full-time cryptocurrency trader, shared his insights on market dynamics, investment philosophies, and strategies for navigating the volatile crypto landscape. His perspectives offer valuable guidance for both new and experienced traders.
Understanding the Current Crypto Market
Ansem began trading cryptocurrencies in 2017 while working as a software engineer. By mid-2021, he transitioned to full-time trading, leveraging his computer science background from Georgia Tech.
He noted that the market surprised many with a strong rally in October 2023, despite expectations of a bearish Q4. Many altcoins posted significant gains during this period. Bitcoin (BTC) has been consolidating around the $40,000 level, and this sideways movement might continue into Q1 2024. This recent price strength is largely attributed to the anticipation of a Spot Bitcoin ETF approval in January.
The Next Bull Market and Layer-1 Blockchains
Ansem expects continued evolution and competition among Layer-1 (L1) blockchains. He pointed out that L1s like Solana offer features and capabilities that are not yet present on the Ethereum mainnet, such as higher throughput and lower transaction fees, which are attractive to developers.
He believes that as more applications gain traction in DeFi and other sectors, different L1s will compete based on their performance and user adoption. Other L1s, like Celo, also show potential due to their technical innovations.
The Shift Towards Application Tokens
For Ansem, the application layer is the most exciting part of the current market cycle. While NFTs were a key innovation in the last cycle, he is eager to see the development of new types of applications beyond DeFi lending, such as those in social finance, decentralized physical infrastructure (DePIN), and artificial intelligence (AI).
He stated that improvements in technical infrastructure now allow developers to build a wider variety of innovative applications. Projects like Helium and Hivemapper demonstrate that crypto offers more than just speculative opportunities; they provide real-world utility. Unlike an AMM or lending market, Helium's model isn't easily replicated, which adds to its value proposition.
Ansem admitted a past regret of investing in Helium miners instead of the native token, $HNT. He believes that active crypto users should be among the first to explore and promote these new applications.
Leveraging Twitter for Crypto Research
Ansem has been active on Twitter since before he entered the crypto space. In 2017, he used the platform to learn trading techniques from experienced traders. Over time, Twitter became a primary tool for gathering information across different crypto sectors. He curates his feed to follow builders and thinkers who provide deep insights rather than just hype.
Ansem's Core Trading Philosophy
Ansem advocates for a balanced portfolio approach. He recommends allocating 70% to established, large-cap assets like Bitcoin (BTC) and Ethereum (ETH), with the remaining 30% dedicated to more speculative altcoin investments.
For his short-term trades, he combines a strong fundamental thesis with technical analysis (TA). He focuses on events like token launches, major partnerships, or protocol upgrades that could serve as catalysts for price movement.
Making Long-Term Investment Decisions
For long-term holds, Ansem spends significant time researching a project. He must have a clear, fundamental reason for owning a token and intends to hold it for at least six months or longer. If he has a strong conviction about its future, he isn't worried about short-term price drops or sideways movement.
He used his investment in Solana ($SOL) as an example. He started following it in early 2021, aware of its network problems and lack of applications at the time. However, he witnessed the ecosystem grow as new teams began building on it, validating his long-term thesis.
Short-Term Trading Strategies
In his short-term trading, Ansem explores various niches like GameFi, AI, and Meme coins. Here, he relies more heavily on a combination of technical and fundamental analysis (FA). He looks for sectors that are gaining momentum and identifies leading projects within those trends.
He often uses comparisons to historical trends in technological innovation, noting that the first-mover isn't always the ultimate winner—a lesson from the battles between Yahoo and Google or Apple and Microsoft. These examples highlight how the initial consensus can often be proven wrong over time.
Avoiding the Echo Chamber
Ansem warned that investors can easily become trapped in an echo chamber, especially when prices are rising rapidly. Bitcoin itself experienced this in its early days, and Ethereum faced similar skepticism from Bitcoin maximalists.
The crypto market is particularly susceptible to forming cult-like followings around certain tokens, regardless of their actual value or potential. To combat this, he consciously seeks out opposing viewpoints and critical analysis to challenge his own assumptions.
Key Traits of a Successful Trader
According to Ansem, the ability to admit mistakes and remain humble is crucial. Controlling emotions during market volatility is key to making rational decisions.
He emphasized that being able to accept being wrong allows for continuous learning and improvement. Good risk management and maximizing the risk-reward ratio are more important than being right on every single trade. Consistent practice, learning, and adaptation are necessary for success. This involves refining strategies, analyzing market reactions, and keeping a detailed trading journal.
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Achieving Balance: Trading and Life
For Ansem, properly handling losses without letting them affect future decisions is vital. Many traders, after a loss, avoid trading for a week due to emotional reasons, which can cause them to miss new opportunities.
He advises setting specific times to completely disconnect from the markets to maintain a healthy balance with family and mental health. This could mean not checking charts on weekends or during designated hours each day. Having a strict schedule and maintaining relationships outside of trading are essential for long-term sustainability.
Common Trading Mistakes to Avoid
Ansem identified several common errors:
- Over-positioning and All-In Bets: Investing too heavily in a single prediction can lead to significant losses if the trade goes wrong. Diversification and maintaining a long-term core portfolio is a more sustainable strategy.
- Misusing Leverage: Trading with excessive leverage or concentrating too much capital in volatile altcoins without proper risk management can result in devastating losses.
- Emotional Attachment: Becoming overly attached to an asset and holding onto it regardless of changing market conditions can lock in losses. Taking profits is key, no matter how strong one's belief in the long-term potential.
- Failure to Re-assess: He suggests objectively evaluating each position by asking: "If I sold everything today, would I buy back 10% of this asset?" If the answer is no, it might be time to reduce or exit the position.
The Value Proposition of Crypto
Ansem addressed the common perception that cryptocurrency is a scam. He argued that over the past decade, crypto has proven its intrinsic value. Bitcoin is increasingly seen as digital gold, and stablecoins provide a vital tool for remittances and accessing financial services in countries with underdeveloped banking infrastructure.
He sees DeFi as a genuinely innovative aspect of crypto with significant potential to advance finance, and thus it should not be dismissed. While decentralized exchanges (DEXs) like AMMs have been successful, he acknowledges they still have room to improve in terms of speed and cost compared to centralized exchanges (CEXs) like Binance or Coinbase. He expects more innovation in the DeFi space, potentially bringing it closer to par with its centralized counterparts.
The Role of Rules and Intuition
A cornerstone of Ansem's strategy is his 70/30 portfolio rule. He also stresses the importance of maintaining a trading journal and adhering to pre-set rules, as indiscipline can lead to costly errors.
Understanding one's own emotional responses in different market conditions can lead to better decision-making. While intuition can sometimes play a role—prompting immediate action on a perceived opportunity—it should never replace proper analysis. However, for experienced traders, a well-honed intuition can be a valuable tool.
Perspective on the Cosmos Ecosystem
Ansem remains bullish on $ATOM but acknowledges that the Cosmos ecosystem can be challenging for investors to understand due to its vast diversity of independent, interconnected chains.
Unlike Ethereum, there is no single chain within Cosmos that serves as a primary investment vehicle. When making decisions, he considers where capital is flowing within the broader ecosystem and tries to identify which projects are likely to attract investment.
A Framework for Crypto Valuation
Ansem admitted that valuing crypto assets is challenging because the industry is still in its early stages. Traditional metrics like P/E ratios are often not applicable, as value is primarily driven by a protocol's growth potential.
He employs a comparative valuation approach. He compares different cryptocurrencies based on their market capitalization and potential market share. For example, if Ethereum has a $250 billion market cap and Solana is at $10 billion, he might consider Solana undervalued relative to Ethereum, all else being equal.
He often engages in pair trades, taking a long position on one asset while shorting another, to capitalize on these relative value opportunities.
Due to speculative溢价 (speculative premium) and unpredictable market behavior, he finds it difficult to predict specific price targets. Instead, he relies on technical analysis to identify trend changes in real-time. He believes understanding the market psychology reflected in price charts is crucial for successful trading decisions.
Frequently Asked Questions
What is Ansem's recommended portfolio allocation?
He suggests a core-satellite strategy: 70% in large-cap, established cryptocurrencies like Bitcoin and Ethereum for stability, and 30% in more speculative altcoins for growth potential.
How does Ansem use Twitter for crypto trading?
He uses it as a research and learning tool. He follows experienced traders and builders to gather diverse insights and stay informed about developments across different crypto sectors, carefully curating his feed to avoid pure hype.
What is a common mistake new traders make?
A common mistake is becoming emotionally attached to an investment and failing to sell, even when the market or fundamentals change. It's crucial to objectively reassess holdings and take profits when appropriate.
How does Ansem value cryptocurrency projects?
Given the inadequacy of traditional metrics, he uses a comparative approach, analyzing the market cap and potential market share of one project relative to another to identify what might be overvalued or undervalued.
Does Ansem use technical or fundamental analysis?
He uses a combination of both. For long-term investments, fundamentals are paramount. For short-term trades, he relies more on technical analysis to time his entries and exits, while still ensuring there is a underlying fundamental catalyst.
What is the most important trait for a trader?
Risk management and emotional control are more important than being right on any single trade. The ability to admit mistakes, learn from them, and stick to a disciplined strategy is crucial for long-term survival and success.