This time, Space invited HighFreedom, a former macroeconomic analyst at a brokerage firm, to share his trading strategies, insights into the macroeconomy, and predictions for the future trend of the cryptocurrency market. Based on years of trading experience, HighFreedom has a deep understanding of Bitcoin, altcoins, and their relationship with traditional financial markets. This conversation also covered the growth path of novice traders and how to build a systematic trading logic.
*All texts are for sharing only and do not constitute any investment advice.
TL;DR
1. About Trader HighFreedom
1) What is the trading strategy?
Make money in a certain direction, that is, during the bull market, by holding Bitcoin and holding it for a long time, you can earn profits from the overall market rise.
Make money from volatility. Under the premise of controlling leverage, when the BTC price falls into a suitable price range, establish a coin-based (Bitcoin-based) long position. When the price is right, pledge Bitcoin to borrow part of the funds. When the price rises, close the coin-based long position to increase the amount of Bitcoin held.
2) Why did such a trading strategy come into being?
After going through several cycles, HighFreedom believes that this strategy is more in line with its own risk preferences and fund management strategies, and can effectively avoid the risk of missing out and reduce holding costs.
In the high-risk, high-retracement market environment of the cryptocurrency circle, the effect is essentially the same as that of buying high and selling low in the spot market. The advantage of the currency-based long strategy is that it can avoid missing out on the main uptrend in the bull market. The disadvantage is that it is a leveraged long position, and there will be a liquidation price, so it is necessary to better control the leverage position risk to a certain extent.
3) The logic of the trading strategy
Core logic: Combining directional returns with volatility returns, you can avoid missing out on the overall market gains and further increase your Bitcoin holdings through volatility operations. Especially during the bull market, volatility tools should be used in a timely manner to optimize your holdings.
Avoid risks: By going long on the coin basis, HighFreedom reduces the risk of selling too early and missing out on the market, especially when the market suddenly rises rapidly.
4) Expected Returns
Long-term returns: During a bull market cycle, this strategy can achieve 3 to 5 times overall returns.
Drawdown Management: HighFreedom expects the drawdown to be controlled at around 20% -30%, and in extreme cases a 40% drawdown may occur.
5) Considerations for implementing trading strategies
Control leverage: Strictly control leverage when trading, especially when the price of the currency is high or the market is volatile. It is generally recommended to control leverage within 50% to ensure a larger safety margin.
Timing: Long positions in the currency standard need to choose the right market timing. This strategy is most suitable for the volatile market during the bull market. In the rapid main rising wave, this strategy is not tried, because when the bull market is at the top or the market is very hot, the cost of leveraged long positions is very high (for example, the funding rate for long positions in BTC in March this year even exceeded 70% annualized), and the profit and loss of this strategy is relatively poor, especially when the spot liquidity is low, so avoid excessively high funding costs.
2. Macroeconomics, U.S. Stocks, and Cryptocurrency Market
1) Why do people in the cryptocurrency circle need to understand the U.S. macroeconomic situation, and what should be their core focus?
HighFreedom believes that there are two types of trading entities in the market: insiders and outsiders. Insiders are usually veterans in the cryptocurrency circle. They usually have more coins than money, and they focus on indicators such as the cryptocurrency cycle, popular tracks, and on-chain data. In contrast, outsiders usually enter the market through channels such as spot ETFs. They are characterized by more money than coins, and they regard Bitcoin as a risky asset, and they enter and exit flexibly according to market liquidity conditions. In the early stages of the market, the participants were mainly insiders in the cryptocurrency circle, and the market size was small, so it was only necessary to pay attention to technical indicators and K-line patterns. However, as the market developed, funds from OTC traders began to pour in, and the impact on the market increased significantly, so it is also necessary to pay attention to the U.S. stock market and the entire macroeconomic situation in the United States. It is similar to BTC being recognized after years of hard work, marrying into a wealthy family, and getting the wealthy family of U.S. stocks.
The U.S. stock market has a pyramid-like structure, with risks and returns increasing from the bottom-level money funds and government bonds to the top-level high-risk, high-return dream companies. HighFreedom believes that Bitcoins risk and return positioning can be roughly compared to Russell 2000 and ARKK, with certain fundamentals and growth potential, and is a kind of digital gold. Altcoins are riskier, similar to high-risk stocks in the U.S. stock market (such as GME and AMC).
2) How to judge the direction of this round of altcoin market through the logic of US stocks?
HighFreedom believes that when the price of Bitcoin rises to a certain level, part of the funds in the market may turn to altcoins with higher risks, thereby triggering an altcoin market.
The trend of altcoins depends on the liquidity of the entire market. If high-risk stocks in the US stock market such as ARKK, GME, AMC, etc. perform well, it means that liquidity is sufficient and the altcoin market may also usher in an upward trend. However, the current liquidity is tight, and the performance of the altcoin market may be suppressed.
It is believed that the market has recently experienced leverage cleanup on and off the market. The cleanup on July 4 was mainly the deleveraging process on the cryptocurrency market, while the cleanup on August 5 was the deleveraging of funds off the cryptocurrency market (mainly US stocks), which has little to do with the cryptocurrency market itself. However, there is hope for a reversal at the macro level, and a new bull market cycle may be ushered in in the fourth quarter. However, there are still different views and disputes in the market about the future rise.
3) What are the steps for a novice to learn trading?
Basic learning: HighFreedom recommends that novice traders take the CFA Level 1 exam, systematically learn the basics of the financial market, and master key skills such as macroeconomic analysis and industry analysis.
Deliberate training: Pay attention to market trends every day, analyze the reasons behind the token increase list, and cultivate market sensitivity and trading intuition. At the same time, learn risk management, especially how to control leverage in a volatile market.
Multi-dimensional analysis: In addition to the fundamental analysis of the financial market, you should also pay attention to on-chain data, the fundamentals of different currencies, etc., and build your own trading logic and system
4) What is the Stop Doing List?
Excessive use of leverage: When trading on the chain, the leverage level must be strictly controlled. The cyclical effect of on-chain transactions is obvious, and the behavior of large coin holders should be paid special attention to.
Over-reliance on indicators: With the emergence of spot ETFs, the effectiveness of on-chain indicators may be weakened, and investors need to constantly adapt to new market logic and changes. In the long run, if the macroeconomic logic changes, the indicators that investors pay attention to should also change accordingly.
3. Recommended Traders
1) Fu Peng: From Northeast Securities, he has deep insights into US dollar assets, is good at system analysis, and likes to share his insights.
2) Arthur@CryptoHayes: He has an in-depth understanding of the U.S. macroeconomics. Although the wording used in his article is difficult, his views are worth referring to.
3) Victor@Victor L1 024: Fund manager, cryptocurrency veteran, early miner, and has unique views on the market.
4) Bperson sunong@BensonTWN: A veteran of the last bull market, he provides some key cycle indicators that are helpful for trading.
Conversation Record
FC
Today we invited HighFreedom to talk because we want to build an investment research system within our own fund. We have been looking for people who have worked in traditional financial institutions such as securities companies and have done research to talk and ask for advice on how to build this system. Thats how we met. We talked about two or three times, because we have different perspectives, it is still very rewarding. So today I would like to invite you to talk about your views on the entire market and some ideas for the future market. We think this is the main purpose of this conversation. We think it would be better if you briefly introduce yourself first, and then we can start the rest of the content, okay?
HighFreedom
Okay, OK, host, good evening, everyone. Thank you for inviting me today. I have seen you talk to some friends every week before, and I have listened to them. I feel that the quality is quite high. My situation is roughly like this. I work in a brokerage firm doing macroeconomic analysis. In 2016, when I was still studying in Singapore, I came into contact with cryptocurrencies at that time. So, I have been in this market for almost seven or eight years. You can say that I am a stinky cryptocurrency speculator, or you can say that I am a cryptocurrency investor. I was pulled here today, and we have talked with the host several times. I think the core is that everyone feels that this market seems to be very different from when I first joined this market in 2016 and 2017, and from 2021. So I just want to chat with you today, is that okay?
FC
How about you talk about your own trading logic first? What does your trading strategy look like?
HighFreedom
OK. I think everyones risk preference, acceptable profit and loss ratio, capital position, etc. are different. Let me talk about my situation first. After several rounds of bull market, the most suitable operation logic for me is to make two kinds of money in the bull market. The first is to make money from the direction. The money from the direction is that you know very clearly that you are in the process of the bull market. It is very simple to make money from the direction. Dont move the pie, no matter it goes up or down. The second is to make money from fluctuations. There is a very simple way to make money from fluctuations. I think the price has risen enough, so I clear the spot and wait for it to fall back and add more. I keep doing this to reduce my holding cost. This kind of currency-based logic is more suitable for me, that is, to make money from fluctuations.
Judging from all aspects, I think if the price falls to a good position during the bull market, I will go long in the currency standard. When the price goes back, I will close this part of the position. In this way, during the bull market, I will do one thing to make more and more big cakes, and strive to sell them at a good price at the top of the bull market. This is basically the idea. So it is more of a currency-based logic.
Another question is why it is so complicated, with long positions in the currency standard and opening contracts. The thing is, everything has its pros and cons. What is the advantage? There is no so-called risk of missing out. Because after experiencing several rounds of market changes, you may find that this is how the market is. You know that the bull market has not ended and is still in operation, so if you unload some spot, the risk of missing out is quite large. The rise of this market, if backtested from historical data, can basically complete a 20% to 30% increase in one to two weeks. This is even more true for Bitcoin, so sometimes you unload the leverage and unload this part of the spot, it will be very embarrassing, and you will miss out all of a sudden. I have been holding for a long time, and it has been fluctuating for a long time, but it suddenly rises. So, in a word, the most suitable operation logic for me is to go long in the currency standard, make almost all the money from the direction, and make some money from the volatility if I can, but forget it if I cant make money, just lie down. Thats the situation.
FC
You mean going long on the currency basis, finding a relatively low point, and then continuing to open long positions, right?
HighFreedom
Yes, for example, some time ago, it may have fallen to 50,000, and the lowest should be 48,888. After the spot price in the currency circle fell, it may slowly feel stable. If I have a big cake when it is 52,000, 53,000, or 54,000, I will pledge this big cake and borrow, for example, 0.5 big cakes. In this way, the leverage ratio is about 50%, and the liquidation price may be around 20,000 before the liquidation. After it goes up, slowly close it, and the big cake seems to become, for example, 1.05 big cakes, so that you may make some money from fluctuations. This is the operating logic, long on the currency standard. Most people use it less, and most friends also use U standard to go long, but I am used to using big cake as margin.
FC
Understood. If thats the case, for example, what amount of capital do you think is more suitable for doing this?
HighFreedom
I think it might be easier to get to the million level, but it also depends on everyones expected return in this market. If you hope to get a hundredfold return, then I think this operation is completely unsuitable. This operation is more like when you feel bored and have nothing to do with Bitcoin during the bull market, you must go long when there is a good opportunity to make more and more money in your hands. So after such an operation, for example, when the price is 50,000 US dollars, you open 50% more, and it rises to 60,000 US dollars, which is actually a 20% increase, so the money we earn is 20% of the 50%.
After all these operations, your entire position has changed from one big pie to one point and one big pie, which is only ten points. So I think it depends on everyones expectations. I can do this with 100 yuan. Its just that some friends with 100 yuan may not only think that a two or three times, three to five times is enough after a bull market, but it may not be enough at all. Thats the situation.
FC
I see. So what is your expected return?
HighFreedom
I think after one cycle, the worst case scenario may be three to four times, and the best case scenario is four to five times. High returns are definitely what everyone wants, but it’s hard to say in my case. To make up for alpha, you can only use a small position to make up, or a large position to protect beta. Speaking of retracement, because my operation just now is leveraged, if the leverage is opened halfway up the mountain, in the process of accelerated decline, my entire net value will accelerate the decline, and the maximum retracement may be controlled at around 40%, which is the most undesirable situation. But after a few rounds, the old leeks are okay, and the opening position is generally okay, not so extreme. I think I am used to retracements of 20 to 30 points, and it’s not a big problem. That’s it.
FC
Understand what key skills you think you might need to have your trading strategy. In addition to timing.
HighFreedom
I think the first thing is to control leverage. This is the most important point after eight years of experience. Because we may also talk about it later. From the perspective of various assets in the world, the assets in the crypto market are high-risk or ultra-high-risk assets. It can bring you several times or even dozens of times the return. But at the same time, its retracement is also very large. Friends who may have experienced the last round, such as the 312 situation, if the position of the double-long pie is not right, it will also be carried away, and the full position is long. It stands to reason that the two-times long pie should be the currency circle. People will think that you are too conservative, but in such extreme cases, it will also be carried away. So I think the main thing is to control the risk, which is also one of my lessons. For example, if I have 100 pie, I only open it to about 40% at most. In extreme cases, I really think the position is very good, open it to about 50%, and ensure a very low liquidation price. I think this is the most important thing.
Second, this strategy has its limitations. As you have heard, the essence of long positions in coin-based contracts is to borrow coins from the market. For example, the market is relatively cold now. The annualized rate of doing coin-based contracts in Binance may be seven, eight, or nine points. I think this cost is completely acceptable. But if it reaches the peak of the bull market, such as in March this year, it is not appropriate to do long positions in coin-based contracts and leveraged contracts on Bitcoin. Because at that time, the highest funding rate for long positions on Bitcoin in Binance was more than 60% or more than 70% annualized, which is very high. When it goes sideways, your wear and tear is too great and you cant bear it at all. So I think one is to control the position and the liquidation price, and the other is to see when to do it. It is basically impossible to do this when the market is very hot. Thats about it.
FC
Understand. Because I talked a lot offline about your understanding of the traditional market, or the emergence of ETFs. You also talked a lot about some changes in our industry, so I think we can talk about the specific logic of your trading strategy. I think the first factor that affects the price of this cycle, I remember you mentioned before that there is an on-site and off-site factor, right? I think we can talk about this first.
HighFreedom
OK, no problem. Speaking of this, let me tell you about my growth experience, which also happened to build my own analysis system. In 2016 and 2017, I was still studying in Singapore in 2016. At a dinner party, everyone was discussing ESO and 49 super genesis nodes. New friends may not have heard of what I said, and everyone was very excited at the time.
I started to participate at that time. I think the feeling at that time was that the market was relatively small. Basically, only people in the pure cryptocurrency circle were playing with this thing, and there was basically little money or people from other markets outside the market. So I think it was a very simple market at that time. Simply looking at various technical indicators, K-line patterns, such as momentum, volume, trading volume, MACD, etc., as well as daily lines, EMA, Vegas channels, etc., these are enough. Basically, this was the situation back then.
As for the last bull market in 2021, I feel that it is a bit insufficient. If you only look at these things, it is useful, but slowly it is not enough. Because we had limited time last time, I have always had an impression of the last bull market. If you have participated in it, you should remember that the last round was a double top. There was a top in April 2021, which was about 64,000 to 65,000. I remember it was April 14th. In the second half of the year, there was another top in November, and a needle was pulled to 69,000. In fact, there was an obvious situation that time. What was the situation? If you look at it from a surface perspective, the most commonly used website for people to look at data, if you often use glass node, what will you see actually?
In the first half of 2021, I defined it as the spot top, which was a point where long-term holders in the serious currency circle continued to sell. But the top in the second half of 2021 basically had nothing to do with the currency circle, and it had little to do with the chain. The top in the second half of the year was due to the off-market factors that year, when a large amount of liquidity was injected, and it was injected to a very high point. The Nasdaq index was also soaring, the US dollar liquidity was also rising, and the big cake was also rising. So I simply defined the top above 2021. The top in April was called the spot top, and the point in November was called the contract top. There was basically no spot at that time, and it was all done by off-market contracts.
So my feeling is that since the late stage of the last round, some people outside the market have gradually started to try to dominate and participate in this market. This round is even more obvious. You may also know a landmark event. On January 11, after the spot ETF of US stocks passed, the Bitcoin market finally built a bridge with the big river of US stocks.
Actually, after talking so much, I think the current situation is like this: there are two types of participants in this market. The first type of participants is called insiders. I think the insiders are probably the friends who are listening now, our old leeks and old coin circle people. What are the typical characteristics of this group of people? The first is that they have a lot of coins. You can see that the spot ETF in the United States has been in operation for more than half a year, and it has bought less than 5% of the pie, which should be 4.7% or 4.8% of the pie, less than 1 million pie. 94% of the pie has been dug out, and 20% of the pie has been lost. Basically, at least a conservative estimate is that about 60% of the pie is still in the hands of people in the coin circle. So the first type of participants in this market are insiders. What is another typical characteristic of this group of people? It is that they have a lot of coins. What is the other characteristic? They have little money. Relatively speaking, of course, I am just saying relatively, relative to whom? Relatively to the second type of participants, that is, people outside the market, people who come in through spot ETFs. Their money is all compliant money. It is not allowed to buy some U in Binance and then buy coins. Basically, they use US dollars, Hong Kong dollars, Australian dollars, Japanese yen and other currencies. This is how they do it. What are the typical characteristics of this wave of big money? They have a lot of money. These funds are large-cap actively managed equity funds, which are often large-caps of tens of billions or hundreds of billions of US dollars. These people have a lot of money, but another characteristic is that they have few coins. So I think the current market is composed of these two types of participants.
So in this case, these two types of participants are forced to look at what they see. People in the market may pay more attention to the original cycle of the currency circle, the original period, the situation on the chain, long-term and short-term holders, etc. People outside the market are more likely to define Bitcoin as a risky asset. When liquidity is overflowing, when it is in excess, they rush in. When liquidity is not good, Im sorry, risky assets will all retreat and fall. So I think this is basically why when we talked that day, I felt that we should look at it both inside and outside the market at the same time, so that we can see it more relatively, objectively and comprehensively. This is probably the overall situation. I hope everyone can understand.
FC
OK. So have you seen the situation inside and outside the market? Especially the newcomers outside the market, how much do they configure, or what is their entire configuration logic?
HighFreedom
I understand. I think this is very clear. After the launch of the US spot ETF, the definition of Bitcoin now and in the future is relatively clear. Now Bitcoin can be defined as a growing digital gold. You talk to those people outside the market about layer two, charging some inscriptions, playing some local dogs, etc. They dont understand and wont listen to these things. You talk about lightning network and lighting, they dont care and dont understand. The only thing they can understand and agree with is digital gold, and it is a growing digital gold. This also explains why in their eyes, Bitcoin is now more like a risky asset with higher risks. After all, its volatility is high, and the plate is far less than that of gold. It now accounts for about 7% to 8%, so it is a growing asset. So sometimes people will discuss, what exactly is the big cake? My understanding here is very simple. Bitcoin is a growing digital gold. At present, it is a risky asset with high growth attributes, but at the same time it also has high risks. On the US stock side, I happened to draw a pyramid that day.
Speaking of this, lets look at how the US stock market funds view the world. First of all, lets draw a pyramid for this world. This cannot be projected on the screen, so I will describe it to you orally. This pyramid looks like this. The bottom layer is some things with very large capital capacity, but relatively speaking, the returns are very low and the risks are also very low. For example, some American Yuebao and various money funds. They buy some overnight interest rate repurchases and some short-term treasury bonds. Now the high interest rate basically has a return of 5.1%, 5.2%, 5.3%, and 5.4%. This type of so-called money funds and money funds are definitely the bottom of the pyramid. Going up one level, for example, there are things like US treasury bonds, short-term treasury bonds, medium- and long-term treasury bonds, and long-term treasury bonds.
The next level up is stocks, which are also different. What is the bottom level? Buffetts favorite things, such as Coca-Cola, Unilever, Goldman Sachs, and JPMorgan Chase. Do you think this company has a dream? There is no dream. It is just a leader in the industry with strong ability to make money, the so-called cash cow.
What is the next level? The dream-driven ones, such as the typical American big technology companies, the so-called Mega 7, or the seven brothers and seven fairies. What are the characteristics of these seven stocks? They have very strong cash flow and good fundamentals. For example, companies like Google and Apple are making huge profits. But what other characteristics do they have? Compared with Coca-Cola, they have certain dreams and can still point to the future of mankind. This is the target of this type.
Going up one level, we talked about it the other day, for example, what is Russell 2000? It is 2,000 small companies in the United States. Some of these companies are making money, some are losing money, and they are in all walks of life. They don’t have such strong and stable cash flow, but these companies may dream a little bigger, so it is a thing with weak cash flow and strong dreams. What is it if we go up one level? If you haven’t bought US stocks in 2021, everyone will more or less remember that the most popular thing that year was not Nvidia, Apple, or these things. What was the most popular? Cathie Wood. Her fund, she has launched many funds, and her most famous and largest one is ARKK, that code.
What is ARKK? It is a typical dream enterprise for mankind. It includes telemedicine, implantable chips, super nuclear fusion, etc. We may think that these will take 50 to 100 years to realize, but it may be difficult to realize them in 10 to 20 years.
Going up one level, you may have heard of this guy who came out some time ago, the Rolling Kitty. What did this guy lead everyone to rush for? Stocks like GME, and later AMC, mini-stocks of US stocks. It is not much different from PEPE and Dogecoin that our brothers in the currency circle are rushing for. It has no fundamentals. I have just said so much. In fact, lets review it again. The lower the things are, the greater the capital capacity, but the lower its risk and the lower its return. The higher the things are, the smaller its capital capacity is, and its return is relatively higher, but the retracement may also be greater. So what is this thing? This is the entire market in the United States. Our big pie is integrated into this market, so we have to think about which layer of the big pie should be placed in this pyramid? I dont think there is a completely clear person who can say that I will put it here, and it is here. I think everyone is still exploring and groping, but I think it is difficult to put it in the layer like Apple and Google. I think it is also difficult to put it in the pure air like AMC and GME. I think its position is probably somewhere between Russell 2000 and ARKK. It has fundamentals, is digital gold, and is a very good growth asset.
Digital gold has a dream. But do you say it is pure air or pure garbage? No, it is a treasure, a good thing. It has certain risks, but it has certain fundamentals. So I think this is the perspective of American market participants on Bitcoin. In the last round, our feelings would be different. Those market participants regarded Bitcoin as a hype thing with extremely high risk preference and great volatility when there is excess liquidity, similar to AMC or GME. But this round, their cognition has gradually changed, and they found that this thing is a good thing, with fundamentals, and is a good digital asset.
Digital gold is still far from growing up, so after talking about so much, I think this is an overall market structure, which is an off-site pyramid. With this thing, I think we should talk about the next thing. The logic is also very simple. How to do it? The less money, the less dreams people have. They can only do some money funds and short-term US bonds. If you have a little more money, I will have some dreams and do some technology stocks. Only when I have money and dreams can I rush up. So this is my understanding.
We may also talk about the issue of interest rate hikes and cuts later. Regarding the interest rate hike and cuts of the US dollar, I remember a metaphor from my elder brother. He said that this thing is like the process of big rivers and small streams, the ebb and flow of the tide. What does it mean? When the tide recedes, the small streams dry up first, and there is no water. Then they slowly recede and retreat into the big rivers. If you retreat again, the water level of the big rivers will also drop, and the same is true for the high tide. When the tide rises, the big rivers gradually rise first, similar to our currency circle, first speculating on big cakes, and then speculating on Ethereum when it cant be speculated anymore, and then speculating on altcoins when it cant be speculated anymore, and finally all kinds of pig dog coins, dogecoins, shit coins and other things come out, so I think this is an overall big positioning. I think everyone should understand that people outside the market roughly view this thing. Second, Ethereum, Ethereum may be higher. If big cake can be defined as something that is relatively dreamy but has some fundamentals, such as Russell 2000 to ARKK, then I think the definition of Ethereum should be higher.
Then, if we go up one level, for example, the risk level or liquidity overflow of the altcoins in the cryptocurrency circle, at least the tickets like GME or AMC will fly. Friends who are listening have this stock software in their hands, so you can use it while listening. Lets take a look at ARKK, the code is ARKK, GME game stop GME.
Lets take a look at these two stocks in the last round, and see when they started to rise in 2021. When they rose in 2021, you will be surprised to find that it seems that this thing is very consistent with the bull market in the currency circle. It seems that this thing is also very consistent with the altcoins in the currency circle.
You will see the ARKK ticket, which was originally a fund, and it has reached a peak of 150 or 160, which is very exaggerated. It has risen more than ten times in a short period of time. For example, GME is a stock in the US, and its rise is not lower than that of the things in the cryptocurrency circle. GME has risen dozens of times, which is not less than the increase of most of the altcoins in the cryptocurrency circle, and this is still a US stock. So I also want to tell you about this thing, saying that because the group of people from the outside market have gradually entered this market, these people are too rich, and you have to play with them. Then you have to see what the situation is on their side. So I also want to give you a good and relatively effective reference system that may be effective. Look at what is the situation of ARKK and what is the situation of GME. One day, I suddenly found that these two things took off, and there is no reason why the altcoins in the cryptocurrency circle will not fly. This essentially represents a large-scale overflow of US dollar liquidity. This is a bit too much, but the overall logic and framework are like this.
FC
We have talked about it offline twice before. Recently, the volatility is quite large, but if you look at the price, it is basically a wide range of fluctuations. We have also analyzed a lot, such as the yen, and some people talk about expectations. So what do you think is the reason behind this volatility, and what is your logic for understanding whether there will be a market trend in this quarters election? From the perspective of traditional finance.
HighFreedom
I understand. I think this is the case. Let me review it for you. It is now August 22. Let me review the two recent big drops in July and this big drop in August. It just corresponds to the on-site and off-site we have been talking about. So what was the situation on July 4th? At that time, it was said that the German government was selling coins. Mentougou was going to start paying compensation, etc. What happened on that day? July, I remember it very clearly, it was July 4th, which was a Thursday.
What happened in the United States on that day? It was the Independence Day, the National Day in the United States, and they did not open the market at night. In fact, the so-called liquidity on that day was very fragile, and no one bought or sold. If you want to smash the market, you can really smash it. With this round of hard smashing, there was no fluctuation in US stocks, gold, and US bonds.
So what is this wave of July 4th very typical of? The decline of the market itself, the leverage clearing of the original currency circle in the market. This is also a very beautiful leverage clearing. Basically, the amount of liquidation I have seen is very high. After clearing a lot of leverage, at the same time, you can see that the big players in the market are either buying spot or going long on the currency standard after the spot is fully pulled. So this time is a decline in the market.
I think August 5th has nothing to do with the cryptocurrency world. The market fell on August 5th, which was a Monday. In fact, first of all, it has nothing to do with the cryptocurrency world. Second, the decline was mainly caused by the decline of all off-market assets. For example, Nvidia’s biggest decline, if I remember correctly, was 13% or 14%. Bitcoin itself fell by 17% or 18%. I think this is already very good for Bitcoin. Apple fell by 7 or 8 points, Google fell by 8 or 9 points, and the entire Nasdaq fell by nearly 10 points. I think Bitcoin’s decline of 17 or 18 points is already very good. So I think July was an on-market leverage cleanup, and August was an off-market leverage cleanup.
Lets talk about what happened in August. This is related to the pyramid structure I just mentioned. Do you remember that the higher up the pyramid, the more airy the stocks are. The more money flows in, the greater the increase. Conversely, when liquidity ebbs, these stocks will fall sharply, or fall to a bottom for a long time and then become half dead. Look at GME, AMC, ARKK, these are all such trends.
So, let me review the big drop on August 5. For example, everyone will talk about the carry trade of the yen, the cause of the carry trade, etc. I want to talk about one thing, and review this matter systematically for everyone. In fact, if you insist on saying the reason for the carry trade that everyone has seen, I think my understanding may account for 20% to 30% at most, less than 30%, and should be at most about 20%. Just like the so-called historical events, there are fundamental underlying reasons and direct triggering reasons on the surface. At that time, the direct triggering reason on the surface was very simple. August 5 was a Monday, and August 10 and August 2 were Fridays. The economic data released by the United States, the unemployment rate should be, I remember, far exceeded expectations, it was very bad. As a result, the expectation of interest rate cuts was raised very far in advance, and the yen appreciated beyond expectations.
It turned out that the group of brothers who borrowed Japanese yen to speculate in US stocks were lying there and doing nothing, and suddenly their profits were swallowed up by the appreciation of the Japanese yen. In this case, they were forced to start closing their positions with great pain, and they closed all the way. This is the direct surface reason, a sudden deleveraging. But in fact, I understand the deeper reason. To understand this story, I think we have to start from the beginning of this story, which I define as the beginning.
What happened in March 2020? Friends in the cryptocurrency circle will remember that there was a big drop on March 12. Bitcoin rose from 10,000 US dollars on March 11 to more than 8,000, and then fell from more than 8,000 to more than 7,000, rose back to 8,000, and then fell from more than 8,000 again. The lowest should be 3,600 or 3,700. But if you look outward, you will find that the US stock market started to break on March 10, and the SP 500 and Nasdaq indices were the same. And Buffett came out and said, I have been investing all my life, and I have never seen such a big drop.
So what happened? It was actually very simple back then. This person got sick. This guy got sick in March of that year. Everyone talks about the liquidity problem. The entire epidemic brought about this lack of liquidity. All valuable assets fell, causing the entire market to deleverage and fall sharply. So what happened to this person back then? He got sick. If you get sick, its very simple to treat the disease. I think everyone must understand two things. The doctor who treats the disease is the central bank, the Federal Reserve, the central bank of the United States.
Historically, the Federal Reserve is the same in all countries. No central bank can escape these two characteristics. What is the first one called? It is called decision lag. It is not that I predict that you will get sick, so I will prevent it for you. I think you will catch a cold, so I will do something for you, VC will do something, take something to enhance immunity. No, it is not like that. It means that when this person gets sick, he will start to think about what to do. So the central banks of all countries are the same. Its first major characteristic is called decision lag.
What is the second point? Overdose, what does it mean? If you are sick, this medicine is for symptomatic treatment, and the original dosage is 10 mg, but it is not, he directly prescribes 200 mg. So what was the situation back then? After such a crisis, this person got sick, and the Federal Reserve came out to treat the disease. The decision-making of the treatment was delayed, and the dosage was overdose.
So you can see what kind of targets started to take off gradually in 2020. The things at the top of the pyramid we just mentioned, whether it was Bitcoin, Ethereum, altcoins, or some air stocks in the US stock market, GMEAMC, or basically dream stocks. ARKK took off.
Lets look at the most typical ARKK. ARKK reached its highest point in the first half of 2021, and fluctuated at a high level throughout 2021. Basically, it went down all the way. Basically, it went down all the way. What does this feel like? Very, very obvious. What is it? Its called the decline of drug efficacy. If you take an overdose of drugs, the first thing to reflect is that you have too much money. If you tell me that buying Nvidia will double, I think its meaningless and not fun. If you tell me that buying Apple will make 60%, I dont think its exciting. I want to play with things that increase five, ten, or a hundred times at any time.
The same is true for the US stock market, which is the situation in 2021. With the gradual increase in interest rates, further reduction of the balance sheet, and the start of quantitative tightening, the previous excessive liquidity has also begun to be gradually and actively reduced. What will you find? The risk appetite of the entire market is decreasing little by little. So what will happen in the end? It is called the rise from AMC and GME to ARKK, and ARKK basically cannot rise.
After the market starts to fall, what is the market style switch? It starts to switch to stocks like the SP 500, the top 500 stocks in the US stock market. You will find that the SP 500 can no longer rise, and only the SP 100 is rising. Later, the SP 100 can no longer rise, and only the seven mega stocks are rising. The so-called mega seven are Microsoft, Nvidia, Google, Apple, etc. In the end, it was found that only the three major stocks were rising. In the end, it reached the extreme. What is it? Only Nvidia is rising. This is basically a very obvious thing? The dosage is gradually withdrawn with the excessive dosage. Quantitative tightening is a set of things that slowly withdraws excess liquidity for you bit by bit, and there will always be a time when it will change.
At this time, I understand the root cause of the big drop on August 5th, which is the continuous ebb of liquidity. These risky assets that are a bit dreamy but have fundamentals can no longer rise. In the end, there will always be a market style switch, and the market style switch is often accompanied by a drastic leverage cleanup.
What did you find later? Friends who trade U.S. stocks may know, especially those who play with Nvidia, what are many of them? Later in July, it was very obvious that basically these people all had high leverage, all kinds of buying calls, such as bullish and long options. Later, Nvidias volatility was also very small, and these guys thought it was boring and started to leverage, so the closer it got to this time, the closer it was to leverage. So you will also see another thing, I recommend another thing to you, I think you don’t have to trade stocks, but you can put it in your own list.
VIX is called the fear index or volatility index. You will see that with a sharp drop in the market, or a sharp adjustment, or a sharp style switch, VIX will quickly rise from a very low point to a very high point, which means that the market volatility has increased. After a style switch, what does it mean that the market has stabilized? Just look at VIX. First, it falls from a very high level, and the decline is getting lower and lower. Second, its trading volume is also very small, so no one plays with this thing.
What did fund managers of US stocks do in July and August? The stubborn ones did not reduce their holdings of Nvidia, Google, Apple, Nasdaq and SP 500. But what did they do? They allocated part of their positions to deleverage and go long on VIX. These people felt that their positions were not moving and that the market might change or adjust. So they took a protective measure and allocated part of their positions to go long on volatility.
What happened to that sharp decline? All the stocks he held lost money, and all retreated. But he made money again by taking advantage of the volatility and the change in the market. So his entire position can at least ensure an overall profit and loss balance, and he bought an insurance policy.
Buying VIX calls, buying VIX call options, this is a lot of talk. I think to summarize, I think this story is very simple, it says that this person is sick, this story starts from March 2020, this person is basically cured. The big drop in August 2024 basically means that the efficacy of liquidity has no way to retreat. If you let it retreat again, where will it retreat to? It will retreat to the next level. We just talked about Coca-Cola, which is what Buffett likes to buy the most, pure cash call, pure cash flow, so I think this is also a reversal point in the market, gradually retreating, and it will start to rise soon, and it will start to talk about the so-called interest rate cut.
So I will basically review with you. If you want to understand how the August 5th wave fell, you basically have to go back to three or four years ago, to what happened in March 2020. If you review what happened in the entire US financial market, especially the US strategic financial market, from March 2020 to August 2024, you will have a clear idea. So to put it simply, for us in the cryptocurrency circle, I think it is very simple. The leverage cleanup of the off-market during the August 5th wave of the big drop has little to do with the cryptocurrency circle. Now basically both the on-market and off-market have been cleaned up, thats about it.
FC
I see. What I want to say is, for example, what should we refer to for the next market? What should we think about in the future? What dimensions? To be honest, I think it has reached a very boring time now, right? I asked myself seriously, I think now is a time when everyone is not pessimistic, bored and annoyed and don’t want to talk about these things. Because everyone seems to talk about the same few issues, right? Ethereum, for example, Ethereum and Solana, meme, there is no direction, it is all this emotion.
HighFreedom
clear.
FC
If we look at past experience, this kind of emotion, at least when it is at the bottom range, everyone will have this emotion, right? Usually it is often accompanied by, if the bull market is still there, a positive line goes up, everyone doubts that it is still volatile, and if it continues to go up, everyone will give in, basically like this. So for example, what indicators should we look at and what should we pay attention to? If you look at it from your perspective.
HighFreedom
I see. I think its time to go back to the fact that I think there are two groups of participants in this market. The first wave is off-market and the first wave is on-market. Lets talk about the market first. I think the most worthy indicator I have always watched is the long-term and short-term holders. The long-term holder supply and short-term holder supply are their situations. I estimate that the shipment volume of long-term holders in this bull market should be at least 2.2 to 2.5 million. At present, according to my calculations, they have shipped 700,000 to 800,000, which is about one-third of the shipment. The big brothers who have the real say should still have 3/2 of the goods that have not been shipped. These people are still waiting. This is a factor in the market.
As for the off-market factors, I think I just mentioned that if the United States continues to shrink its balance sheet and liquidity, it will basically push down to the next level. The U.S. technology stocks are also a little bit overwhelmed, a little bit overwhelmed. But now you will find that the market has made a slight turn. After a large-scale leverage cleanup, the Nasdaq has made a micro-reversal and returned to around 20,000 points. Basically, the market on the U.S. stock market will have a realization that the interest rate will be cut next. If the interest rate is cut, the risk appetite of the entire market will gradually increase. But here I want to emphasize a small knowledge point and talk to you about this. In the early years, it was very simple and simple to measure the amount of money in the capital market and the level of risk appetite. Just look at the bonus interest rate.
If the interest rate is raised, there will be no money. If the interest rate is lowered, everyone will have money, so they will invest in high-risk things. Once the interest rate is raised, I will be more conservative, and risky assets will fall. But after the US financial crisis in 2008, the US learned from Japan. Japan was the first in 2001. In modern society, Japan basically started in 2001, which is quantitative tightening and quantitative easing.
The United States started doing this at the end of 2008 and the beginning of 2009. The chairman of the Federal Reserve at that time was probably Ben Bernanke. They were doing this thing, learning from Japans quantitative tightening and quantitative easing. What does quantitative tightening mean? In fact, the current financial market is much more complicated. It is not simply a matter of raising or lowering interest rates to explain this matter. What is the process? First, the interest rate is lowered. The interest rate reduction is similar to a doctor treating a disease. I will give you some conservative treatment medicine first, you take it and see if it works. If it still doesnt work, its quite serious, and this medicine doesnt seem to work, then we will give you an injection or an IV drip next. Even surgery is required later.
The same is true for quantitative tightening and quantitative easing in the United States. First, lower interest rates. If the problem is solved, then there is no need to expand the balance sheet later. Expanding the balance sheet is very simple. The central bank prints money and buys all kinds of assets, such as everyones mortgages, various US bonds, and so on. So here I must emphasize a point, saying that it is not necessary to expand the balance sheet after lowering interest rates, raise interest rates after expanding interest rates, raise interest rates after expanding the balance sheet, and then reduce the balance sheet after raising interest rates. It does not mean that it must be A to B, B to C. It is A first, give me a medicine to see if it works? If there is no problem, then I will not expand the balance sheet, I dont need to expand the balance sheet.
So I want to talk about something. Next, the issue of interest rate cuts has been discussed a lot, and there has been a lot of discussion recently. My understanding is this. This is back to an elementary school math problem. There is a water tank here, and there is a water pipe on the top of the water tank as the water inlet pipe, and there is a water pipe under the water tank as the water outlet pipe. The water inlet pipe takes in five liters of water per minute, and the water outlet pipe takes out three liters of water per minute. Now the water tank has 800 liters. What will the water tank look like in ten minutes? What is this example? The water in the water tank is like the so-called US dollar liquidity. How does the US base currency M0 increase or decrease the liquidity of the US dollar? How will the interest rate cut help? The pressure to maintain the high level in the water tank will be much smaller. In the original high interest rate environment, the water tank inside had a lot of water, and the pressure was very high.
However, after the interest rate cut, it is always good for risky assets, but the extent of the benefit may be limited. So what extent is really good? Expand the balance sheet, but we just went back to the topic of expanding the balance sheet. This person is really sick. He found that the interest rate cut is useless and cant pull it up. He cant save it, so he will do this. So back to the topic, whether you have a large-scale super bull market in risky assets, I think the first thing to see is whether the Americans are seriously ill. But I think this is something that ordinary people like us cant judge, and the officials of the Federal Reserve cant judge it either. The Federal Reserve itself is always lagging. So what can we do? I want to talk to you about this logic just now, and everyone will understand that if the Federal Reserve officials really say that we are really sick, I will expand the balance sheet soon.
What might happen then? Risk assets will collectively plummet, and after the fall, the balance sheet will be expanded on a large scale, repeating the story of 20 years. But at present, the probability of this situation is relatively low. What do I think is more likely? Cut interest rates, and if you find that this is supported, you can slowly cut interest rates. Inflation is not high, and the economy has not collapsed, so inflation is stable, and the economy is healthy. This is how both sides are done, and they will go down all the way. It is definitely good for risk assets. So I think there are several very practical indicators. You can search for the Russell 2000 code, which should be RUT, or the fund issued by BlackRock called RWM.
Then add ARKK, GME and AMC to your watchlist. You dont have to buy these things, but you have to look at them, and gradually begin to find that if you say these things start to rise, then it is basically very simple, which means that the risk appetite of the entire US stock market is gradually rising, and everyone is starting to rush into this kind of thing, so I think this is the most direct thing to see in the OTC market. As for the increase and reduction of interest rates, expansion and contraction of the balance sheet, US dollar liquidity, etc., the issuance of ultra-short bonds, medium- and long-term bonds of government bonds. What about the monthly flow? I think these are too complicated for most ordinary investors. Dont look at these things, it doesnt make much sense, just look at the risk appetite of US stocks. This is what I think is off-market.
So I also mentioned one thing. I think judging from the two points that everyone may care about most, coin holders. The first is how is Bitcoin, and the second is how is the altcoin. I think it is like this. Bitcoin is very simple and very clear. It is a growing digital gold. When did the market value of Bitcoin reach the highest compared to the market value of gold? It was in November 2021, when Bitcoin reached 69,000. At that time, the market value of Bitcoin was 11% higher than that of gold, which was the highest in history. Then every round of bull market will see Bitcoins market value climb higher and higher. In every round of bull market, the market value of Bitcoin will rise to a higher level than the market value of gold. Especially in this round, all these new funds coming in from the OTC market are very simple, and the positioning of the digital gold they buy is very simple.
So if you are extremely conservative, you should at least wait until the market value of Bitcoin. I am talking about this with my friends. Recently, everyone has been in a state of depression. It has been sideways for five or six months. The constant fluctuations and wide fluctuations are unbearable. I think the bull market is over. I cant stand it. I think my judgment is that there will be a new round of main rising waves in winter. This thing has not started yet. Dont fall before dawn. Control leverage and control your mentality. Because first of all, it is very simple to buy this asset. The current positioning of digital gold. The market value of Bitcoin in this round is only 7% to 8% higher than that of gold. It has not reached the highest point of the previous round. So do you have to give it a little chance? At least you have to reach the highest point of the previous round before you leave. According to the volume of gold of 17 trillion, the price of this currency is about 100,000. If you have a little dream, do you have to be high-profile? Should the market value of Bitcoin be slightly higher than that of gold?
I think the estimate for this round is 15% to 20%. This brings us to another topic. How do I estimate these things? It depends on the counterparty. I think the biggest counterparty in this round of the market is all the traditional financial institutions in the United States. For example, the state government funds of the 50 states in the United States, three of the 50 states have started to build positions to buy Bitcoin. The fastest is Wisconsin, the birthplace of the Republican Party. Wisconsin has a market capitalization of about 150 to 160 billion US dollars, and they plan to build a position of 1% to 2%. What I want to say about these people is that these people are real friends of us in the currency circle. Why? These people are real holders. When they buy, they may not move for five or ten years.
What is our enemy? Now you can see that the inflow of spot ETFs from January 11 to now is actually less than 16 or 7 billion US dollars. First of all, you can see from the disclosure of institutions at the end of each quarter that about 80% of the actual warehouses are retail investors. Our real friends, these institutions, are still on the way and have not yet boarded the train. They have to go through a lot of internal processes to buy these products. They need to learn what Bitcoin is, report to their boss what Bitcoin is, and communicate with regulators whether they can buy Bitcoin. This product also has a 90-trading-day observation period, etc.
So I want to say that everyone should not be anxious. The counterparties of this round, the advanced word is counterparties, and the people who actually take over the Bitcoin in this round are still on the way, and they havent figured it out yet. Some of their vanguards have started to buy, such as Goldman Sachs using its own money to buy, and some banks in the United States have started to buy with their own money. These are all counterparties of this round, and they have just started. So I think the situation off-site is very optimistic, because they are very early, but for them, they bought risky assets themselves, so they may not be able to buy at the most difficult time at the end of quantitative tightening. For example, in the middle of the second quarter, this is quantitative tightening, and interest rates will be cut immediately at the end, and quantitative tightening will end.
Then they started to buy these things gradually, so what do I hope for? Of course, it is also a simple wish. They can do it faster. Everyone is almost unable to bear it. I think it is the situation outside the market. Everyone in the market just needs to look at the chain. Those big brothers, whales, long-term and short-term holders, still have a lot of goods to sell, and they are also waiting, so I think they should be patient. I don’t think this pie is worried at all.
Let me talk about my views on altcoins. The first question is, are there altcoins? I think there must be, why? Its very simple. Just look at who holds Bitcoin. Its very simple. At least 60% of the coins are in the hands of people in the cryptocurrency circle. When Bitcoin reaches 100,000 or 150,000, these long-term holders will always go and speculate in altcoins.
I always think that the topic says that there is never a lack of stories in the cryptocurrency circle, but whether these stories can encounter a suitable historical opportunity to start them and generate a positive cycle. What does it mean? Everyone looks back and says that in the past year, I didn’t do it for more than a year. In the past six months, I made tens of billions of dollars in Inscription, and I can’t make more than one or two billion dollars. The brothers who have heavy positions in layer two and Merlin are all numb, and now they have lost a lot of money, so they keep coming up with new stories. It is itself at the end of quantitative tightening. Look at AMC, GME, ARKK, and other tickets that have been half-dead for a long time. The market has no money to do these things. So it is normal that these stories can’t take off.
So are there any altcoins? Its very simple. When the time comes, 60% of the Bitcoin holders will always speculate on altcoins. At that time, they will add some stories. I dont know what the stories are. Just come up with some stories and rush in. I think what is the only point that everyone can discuss or discuss? As for how powerful the altcoins are, I think there are two situations. When Bitcoin rises to, for example, 120,000, 130,000, 140,000, or 150,000, if you see Russell 2000 and GME outside, they will all fly up, even exceeding the previous high. At this position, it has risen five times or ten times, then the altcoins in the currency circle may fly very high. Just like the summer and winter of 21, the summer is about DeFi and the winter is about NFT and Metaverse.
This is the first optimistic scenario, but I think the probability of this scenario is relatively small, because it still goes back to that point. If this person does not do something drastic, this scenario is unlikely to happen. I think this may be the reason? I think there may be no altcoins, and I think people may have taken these factors into consideration. This is the first scenario.
The second scenario, I think it may be more likely, what is it? It is said that Bitcoin can rise to 120,000, 30,000, 140,000, 50,000, I think this is possible. But if Russell 2200, GME, AMC are still half dead. The overall market value of stable coins is not too high, so the growth of altcoins may be very limited.
But I think there are altcoins, and most of the big pie is in the hands of people in the cryptocurrency circle. If you look at it from another angle, most of the big pie is in the traditional institutional investors of the US stock market. He doesnt understand layer two, let alone inscriptions, let alone defi, he doesnt listen to AI at all, he doesnt understand, he doesnt participate, then its bad. How high the big pie grows has nothing to do with altcoins, and it has nothing to do with altcoins. So I think there is still this round, its just a matter of magnitude. And of course, people will scold you for throwing out this view, sometimes or slap you in the face or something, I think now is the bottom of the bottom, I think whether it is big pie or altcoin, I think it is the bottom of the bottom now. Everyone may find a suitable target to rush, maybe even I think this is what you said a few months ago about rushing altcoins, you said I opened the stock software and saw that GME and AMC were half dead, I couldnt do it, I didnt have money and it was difficult to rush these things, and I couldnt make a fortune.
But now, I think the better altcoins may be at the position of 2021 or the beginning of 2024, and the worse altcoins have already reached the position of the bear market for two or three years, basically the position before the start of August and September. I think this is the time for a gradual reversal. Finally, the tide has receded to the point where there is no more room for retreat, interest rates are starting to be cut, and the tide is starting to rise. You hold an extremely high-risk asset, and you hope that the tide will rise to the small tributaries of your stream or river. So I dont think its that pessimistic.
Some of my friends think it is a bear market, and I say the bull market is over. I don’t think so, and I hope not to be slapped in the face, and I hope to verify it as soon as possible. Now is the middle of the third quarter, I think it is around the fourth quarter, and now it should be the bottom of the bottom, the entire bottom of the bottom, and the leverage clearance inside and outside the market is very thorough. And the entire macro level is starting to reverse, and it is starting to slowly change from the rhythm of the ebb tide to the rhythm of the tide. The only controversial point is how big the tide will rise, I think.
FC
This needs to be discussed clearly. OK, lets set the title. The bull market is back in Q4. You have basically answered all the questions I asked. But I want to add a question because you have been working in a brokerage firm for quite a long time. As a trader, what do you think is the more formal growth path for entering a brokerage firm or a financial market? Or what is the more traditional growth path? What should he learn first and what should he learn later?
HighFreedom
I think about it, I would like to recommend you something, which may sound a bit silly. But what do I recommend you? You should take CFA 1, force yourself to take CFA 1. If you sign up for the early bird, I dont know how much it costs now, but it used to be about 700 to 800 US dollars. You have 10 courses, which one is CFA? Yes, its called certified financial analyst, and the Chinese translation is chartered financial analyst. This is a set of financial courses from abroad, and it has three levels in total, CF 1, CFA 2, and CFA 3. If you work in a traditional financial institution and are an analyst, you have to take this exam.
Why do I want to talk about this with you? When you were studying, you might have studied mathematics, music, sports, physics, etc., which were not important. It doesnt matter if you didnt study finance. CFA is specially designed for this. You dont need to take the second and third levels. I think it is completely unnecessary. If you dont work in this field, it is completely unnecessary. But what is the thing worth taking the exam for? It basically gives you an opportunity to study for a so-called master of finance. You go abroad to study and spend tens of thousands of US dollars, tens of thousands of Singapore dollars, and tens of thousands of Canadian dollars to study for a masters degree in finance.
These courses are not much different from CFA, and whats even funnier is that many students focus on the CFA exam when they go to school. What is the CFA exam? It has a total of ten courses, and it is very comprehensive and systematic and can explain it to you clearly.
The basic knowledge at the bottom of the entire financial system is a framework. Once you have this framework, you can extend and learn other things. Its very simple. You will be in the same discourse system and discourse with these people. So sometimes I say silly, I recommend it to everyone after a long time, and ask everyone to take a test or something. But I think this thing is very useful, and why I sometimes encourage my friends around me, saying that you must spend money on it. If you want to do it, just spend some money. A few hundred dollars is not too expensive. Only this kind of thing can force you to learn, otherwise those things are quite boring, and a lot of them are in pure English, which is very strenuous for you to read. You can only force yourself to study if you have an exam, otherwise you will do it for two days, throw it aside, and never read it again. So I think this thing is very good.
So if you look at people working in securities companies, they may not necessarily have a background in finance. For example, many of those working in Huaweis industry chain originally studied electronic machinery manufacturing, TMT or other technology fields, or studied computer science. There are people from all walks of life, but they all basically take the CFA exam, because the knowledge of finance has been around for hundreds of years and there is no flexibility.
FC
It feels like you are Mr. Hong Haos channel, as if you are his spokesperson.
HighFreedom
Then ask him to get me some advertising fees.
FC
What do you think CFA is? What is orthodox after we come in? This is quite interesting. Many of my friends often ask me, of course this is in the first half of the year, I want to enter this industry, what should I do? What should I learn. Some smart friends will ask what is your industry list? This is quite interesting.
Some of my friends are doing this, looking at the top three tokens every day, and analyzing why they are rising. I am also doing this every day. I will take a look at who is the top of the growth list every day, and I will find the reason for the rise. I think this cultivates my muscle memory. When I see this, I may see a similar situation next time.
HighFreedom
Maybe you will understand.
FC
What do you think the deliberate training for a trader who uses a trading system similar to yours should be?
HighFreedom
I see. I have an idea as I was talking. I will tell you about it. There are two groups of people doing research in financial institutions, the so-called analysts. The first group looks at the bottom, the macro. They are generally called macro analysts, aggregate analysts, or those who look at fixed income, bonds, and treasury bonds. They basically look at the bottom macro direction. This is one group of people.
The second wave looks at specific industries. I look at electronics, you look at consumption, he looks at manufacturing, this is the industry, be an industry analyst. I feel that the cryptocurrency world is the same. If you look at the macro of the cryptocurrency world, I think the glass node and other things, often look at the glass no things, understand the most important indicators of the glass node set, I think the macro of the cryptocurrency world is there.
Going down one level, I think it involves the alpha of the cryptocurrency circle, all kinds of new tracks and new directions, that is, what track it is on, what is the market value, token unlocking status, etc. As for the situation on the chain, some tools, such as Ding Yong, and several other tools are all working on small currencies, and the chain can also be seen quite clearly. I think it just corresponds to the situation of securities companies. There is a group of people who look at the macro, and another group of people who look at various industries. I think it is the same here. There may be a group of people in the cryptocurrency circle who look at the glass node on the chain of the big cake. There is another group of people who look at this small currency, this alpha, and this kind of excess return. I feel that there are two groups of people and two sets of things. So one set corresponds to the cryptocurrency circle, which I think is on the chain, that is, the big cake chain. I think that the small currency in the market has that set of things, which is the unlocking status of the entire pathological fundamentals, and so on.
FC
Yes, I understand. OK, lets move on to the last part, about growth. I want to know which trader you like more and which one you pay more attention to, and why?
HighFreedom
Is this not limited to the cryptocurrency community? Or is it all kinds of things?
FC
As long as it helps you.
HighFreedom
OK. Then I recommend a few people. The first one is definitely Mr. Fu. This big brother of Northeast Securities is called Fu Peng. He is also very successful in self-media. I think his views and analysis on some US dollar assets are still systematic and insightful. And he likes to share. I wont start a fight. I think Mr. Fu is still good.
I think the first person is Fu Peng, the second one is that Sir, and this brother. I think he has a relatively clear view of the macroeconomic situation in the United States, but I think this brother likes to write extremely long articles, using a lot of American slang. Sometimes it seems to be quite difficult, but I think what he sees is OK. For example, in March and April, he said that liquidity might decrease in April and it might go sideways slowly. Maybe he said recently that he is optimistic about the future market, such as September, October, November, and December, when the big cake breaks through 75,000. What do you think? I think Sir is the second one.
Another one is a brother of mine, he is a fund manager, he also has his own Twitter account, but he rarely talks, he is lazy and writes less, I often ask him questions, his name is Victor, Boss Victor is also a veteran in the cryptocurrency circle. He was a miner in the early years and has been mining till now. I have added the little bell to these people, I have to check them out as soon as they post something. Another one is a brother from the last round, a famous trader called person song, he made a website. I think it is useful to look at some key cycle indicators. There are big cycle indicators.
FC
I understand, thats good. You can follow us, we will publish the text version. I heard you talk about it again today, and I have the effect of reviewing the old and learning the new. I think the most important thing for people who do cyclical trading is to find a hobby.
HighFreedom
Yes, its too boring.
FC
Most of the time no action is required.
HighFreedom
yes.
FC
I think people who do on-chain trading need to find a good psychologist. Our dopamine comes too quickly, and we cant accept it when it goes away. Its not easy. So traders are all highly sensitive people. I think OK HighFreedom, do you have anything to add? For the whole process today.
HighFreedom
Let me think about it. Oh, and there is one more thing you ask every interviewee every time, the so-called stop doing list.
FC
I first heard what you said about stop loss. Can you add more to it?
HighFreedom
I think things on the chain are very important, especially on the Bitcoin chain, where you will see very obvious cyclical effects. But I want to talk about something, but at least this round is useful, so dont worry about it. But it may not be the case in the future, this thing may have a big impact in the future. Look at the cyclical traders on the chain, they hoard coins, and then sell them when the bull market comes, its very simple. But you can see these things on the chain, and its important because they have pricing power, and the coins are in their hands. Just now we talked about about 60% of the coin holders, basically these people are holding them. They dont trust any exchange very much. He has 10,000 Bitcoins, and he cant put the coins in OK or Binance. He puts them in his own cold wallet.
So I want to say that these people on the chain have very strong pricing power. Because those who have a lot of coins are on the chain, not in the exchange. But their behavior can be seen on the chain.
But what is the problem? When the spot ETF buys more and more pie, it may reach about 20% to 30%. You will find that this thing is like going back to an exchange, and it is a coinbase cold wallet escrow address. At this time, the chain may not be so effective. I think everyone may have to consider this, but I think it is a long-term problem, and this cycle should not be seen. Second, I think this is on the exchange. When do I think the off-exchange will become invalid? I think I have a set of judgment logic here, such as the liquidity of the US dollar, interest rate cuts, and balance sheet expansion and contraction. Of course, the Americans may come up with a new logic for you, and stop doing quantitative tightening and easing. Then this thing may have to be learned again, and it will not work again. But I think it may not be seen in the short term, so I think these are two points, and there should be no other.
FC
I understand. Here is a difficult question for you: predict the price of Bitcoin on December 31st of the year. It’s okay, this is not an investment advice.
HighFreedom
This is going to be ahead of me, haha. I think 100,000 is fine, lets just set a number, 100,000.
FC
December 31
HighFreedom
I have touched at least 100,000. It’s hard to say whether I can guarantee 100,000, but I have touched 100,000.
FC
How much money did you lose? If you lose this much, don’t lose too much. Let’s bet.
HighFreedom
You have to be the counterparty.
FC
Of course, I am sure. I dont think it will reach 100,000. I will be your counterparty. Besides sending red envelopes directly, you can also hold a lottery when the time comes.
HighFreedom
Or it could be like this: if it reaches 100,000, you treat me to a meal, and if it’s not, I treat you to a meal and that’s it.
FC
Then this has nothing to do with you. Ill treat you alone, right? If you lose, I think we can bet on a lucky number, right? Ill think about how much money it is when the time comes, and Ill tell you its okay. Anyway, if you lose, Ill give it to everyone. If I lose, Ill give it to your fans and help you draw a lottery.
HighFreedom
You can use 666, 888 or something like that.
FC
Yes, we use U as the unit.
HighFreedom
No problem, no problem.
FC
Thats fine.
HighFreedom
Then let me ask you a question instead, why do you think it cannot reach 100,000?
FC
I didnt think about it, because I dont guess the price, to be honest, but I think if you let me look at the exit now, from my perspective, I think its possible to achieve the expected return now. I think, for example, there is an expectation of 50% to 1%. Im not talking about BGC, Im talking about Ethereum and Sohu, I think its probably about the same. Because I think its like this, if we assume that we leave the market in the middle and late stages of the bull market, you can do a lot of things at that time. For example, if you use U to buy new stocks, use U to do quantitative and arbitrage, I think it may be about 10% to 20% annualized, right? Then I think the winning rate may be higher than if you hold the currency, this is my idea.
HighFreedom
However, there may be other operations in the future, and the profit and loss ratio may be better. It does not necessarily mean that lying down and taking the spot is the best choice.
FC
I think this is my mentality. Because I know that when it was around 70,000, many people around me sold their shares.
HighFreedom
Thats just practice.
FC
You can think of it as the first distribution of a long weekend.
HighFreedom
Right? Yes, it was very obvious on the chain in March, with large-scale distributions, including 3/1.
FC
From your perspective on the chain, Galaxy has been making regular investments recently, and many institutions are also making regular investments.
HighFreedom
Yes.
FC
Anyway, its quite interesting. OK, we will reveal it on December 31st.
HighFreedom
OK.
FC
By then, you can click and follow me. I will try to put this in the later part, and I will ask this question to everyone who comes.
HighFreedom
Okay, Ill be there. Okay.
FC 01: 16: 07
Yes, if you look at the chain, Galaxy has been making regular investments recently, and many institutions are also making regular investments.
HighFreedom
Yes.
FC
Anyway, its quite interesting. OK, we will reveal it on December 31st.
HighFreedom
OK.
FC
You can also click to follow me. I will ask this question to everyone who comes in the future.
HighFreedom
Can.
FC
Thank you, everyone. Our recording is in the small universe, there is a program called Dialogue with Traders, you can pay attention to it, basically thats it. If you have any good traders, please recommend them to me, I dont have enough now. Okay, thank you, thank you, thank you. Were done for today.
HighFreedom
Okay, bye.
