How to better capture alpha in crypto trading?

2024-02-24 10:30

Read this article in 8 Minutes

AI summary

View the summary

Original Title: "On Alpha and Edges in Crypto"

Original Author: Tyrogue

Translated by: Luccy, BlockBeats

Editor's Note:

Crypto researcher Tyrogue starts with the types of crypto alpha and explores how to gain an edge and alpha in cryptocurrency trading, which should be very relevant for those trading cryptocurrencies on-chain and on centralized exchanges. BlockBeats has translated the original article as follows:

By reading this article, you will understand:

· The difference between Alpha and Edge· What is Alpha and how to utilize it?· How to cultivate Edge and establish your own intuition in the field of encryption.

· When to buy at the bottom

· When to short a haram

In the CT (cryptocurrency community), the two words Alpha and Edge are often mentioned, but what do they actually mean?

Simply put, Alpha is the information that you can use to make money. There are different types of Alpha, as well as different Edges required to make money from it. Edge refers to the ability to profit from the market, which is due to the understanding or skill set that participants have that others do not. Edge and Alpha are different sides of the same coin.

Alpha = Operable information.Edge = able to utilize this information.

There are many variations of this, let's break it down.

3 Types of Basic "Alpha"

Time-sensitive alpha

This will be news trading and speculative behavior, which can take a risky position with a high likelihood of success. Examples in this regard include shorting Cronje in 2022 when leaving cryptocurrency, or going long on the recently skyrocketing FTT.

Based on popular psychology, alpha

Whether you are familiar with technical analysis such as chart patterns or knowledgeable about certain fractals related to airdrops, they are both good examples. Despite poor fundamentals, investing in hacker attacks or bankrupt projects can be profitable, and SOL, FTT, CEL, and SRM are all good examples.

Look, LUNC provided good returns during the last bear market. This can also be extended to GCR making large purchases at the bottoms of 10 SOL and 1,000 ETH, as well as 15,700 BTC. Mass psychology is screaming contagion, and worse is yet to come, but it still hasn't arrived (at least not yet).

Intuition

Being able to know, feel, and accurately predict what will happen. This is the most difficult to develop, and many people do not have it. I have seen this in multiple CT (cryptocurrency community) members, such as @outpxce and his understanding of games; @0xJezza and his low-risk ability to accumulate, sell, and enter on-chain transactions; @smileycapital's prediction of prices, increases, and market trends ahead of the crowd; @ZoomerOracle's discovery of new bright spot coins (TIA, ZETA, BEAM) that outperform the market; and @GCRClassic's killer-level views and predictions on the market.

Analyze GCR's views on the market, and you can begin to understand how his intuition is formed: he combines Schelling points with unit bias and market and human psychology to achieve a genius level. He has an intuition established by political forecasting, and most importantly, it is easy for him.

If you have the right intuition, making money should be easy. If you stay in this industry long enough, the best strategy may be the simplest one. Whether it's buying FTT when the market starts to rise in 2023, buying APT when you see SOL starting to recover, or buying when BEAM rebrands, nodemonke goes public, and PANDORA starts to gain escape velocity, being able to quickly change strong beliefs to win is the right approach. Let's take an example:

Example 1: Buy any hacker or vulnerability before they deal a fatal blow to the protocol - GMX. A whale was exploited for $4 million on GMX, which is a bullish sell signal.

Example 2: Short or long based on market trends and use it to profit. There is no doubt that the easiest trade last year was the announcement of Blackrock ETF and the market's reaction to false intern tweets (may his soul rest in peace).

Example 3: Waiting for team's pump or scam (not all projects are scams, but you know what I mean). If you can find a project that won't go to zero and simply buy spot when trading volume decreases and selling slows down, the team will use announcements and promotional factors to stimulate positive price behavior when market conditions are right.

Before AVAX announced its cultural incentive funding, research was done on it, studying Pengus and how they slowly developed into the preferred pfp, studying MC's transformation into BEAM, and many other examples.

However, the most important principle behind all of this is to be flexible and adapt to everything the market offers, which means participating in the current booming market areas. NFTs, leverage, Onchain and DeFi, you just need to go where the money is. Know how to short/long on CEX, where there is capital ready for capitalization, have an ETH or a few bands on every semi-qualified chain and L2, to seize new opportunities when they arise. When you're not at your computer, have a close friend invest for you and so on.

Summary of the posts so far:

· Alpha is the information that makes you money.· Edge is your ability to make money using this information.