How I'm Playing This Market

This is definitely the most difficult period in markets thus far

Gmeow, here’s a q2 update for how i’m adjusting my playing style for crypto markets. It’s been a very tough year, and the game has been getting exponentially more difficult since 2021; this article serves to help me structure down how exactly i’m playing this, and I hope in the writing of this you can get some insight too.

long disclaimer inc, rest of the post is below:

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It’s the best month of May for the market since 2000s - yet, it feels exponentially more difficult

From zerohedge on X

Last month was the best month of May for markets in the past 25 years. While intuitive (crashing prices = more room for upside), capturing it seems to be a different monster entirely. In fact, if you ask me, it doesn’t FEEL like it’s the best month of May - there seems to be a massive dislocation between what sentiment, and what the market has returned since Liberation Day (April 2nd);

This is because we’ve been observing levels of uncertainty and volatility in the markets unseen since, well, the last time Trump was elected. Trump is basically uncertainty incarnate - he chooses to tweet market-moving news on Friday nights when markets are closed, he tells people that “it’s the best time to buy” (and the stocks actually move up), and everyone is just sitting on the edge of their seats waiting for the next Truth Social bomb (everyone gets a tariff!)

Words cannot really describe how shaky the markets have been. I remember on Liberation Day, most people were calling for new lows - many macro traders were firmly bearish and felt that it was Great Depression v2. Smart money everywhere was calling to be in cash - I bet that if you went back in time and told these people that S&P would V-reversal back post April, few would actually believe you.

And if you look into our very niche internet bubble, we can see that it’s difficulty squared. Why do I say this? If you look at the spaghetti chart of different tokens that have outperformed Bitcoin (I probably missed quite a few), you can actually see quite a few high profile names that have done well. On the surface, it may actually look like it was pretty easy to outperform, right?

Well, no - this chart measures the returns since April 2nd. However, many forgot that prior to April 2nd, many tokens drew down 60-80%. Take Hyperliquid, for example. From February to April, Hype basically had a 60% drawdown to $10~ before it rebounded back to ATHs.

My point is as such: Volatility is immense right now. Hyperliquid is by no means a niche, obscure name - yet despite being such a popular long, investors would likely have suffered a sizeable drawdown in longing this. The returns shown in the spaghetti chart forget to account that no one times the bottom, and that in this era of investing, path dependency is a bitch.

Case in point: Myself; I bought Hype at $18, thinking it was a pretty value buy. I had no idea of knowing that it would bottom at $10 - I was just thinking that below $18, it was a pretty fair buy and was willing to DCA downwards. Of course, it went to $15 - I was fine. It went to $12 - I was fine. And then Jelly-Jelly hit it - if you don’t know what happened then, here’s a link to a short synopsis by Coindesk. And then it went to $10, and at its lows of $9, that was a -50% drawdown I took, on a $6 billion market cap token.

Now, I know that many of you reading this are going like “yea, but it’s crypto, you gotta expect a 50% drawdown” - well, when you’re sized heavily into a coin, expectations and seeing it happen are two different things. The past month has forced me to re-visit how I’ve looked at the crypto markets thus far, and re-evaluate how I have to invest moving forward.

This article is sort of a letter to myself as well, to internalize what I’ve learnt and how I will approach the markets in a new manner.