What a 'Degen' Crypto Trader Really Does All Day

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1:25Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, there's been this big crypto run up. It's pulled back over the last couple of weeks. Bitcoin got above 70 ,000. We haven't really done crypto this cycle. I know. We did mean. I have a theory for why we haven't done one. But what were you going to say? You just want to talk about your theory. No, there's a separate theory. Okay, I was going to say, it feels like a lot of stuff that's happening in this cycle has happened before. And I know part of it is the launch of the Bitcoin ETFs. But I mean, we have episodes on Bitcoin ETFs from like years and years ago.

2:03So if we do an episode, which we're doing now, I think it should be about what the difference is in this cycle, if anything. I think it's just been boring. And what I mean by that is like, it's always exciting when lines go up and down really fast, which is why I am a markets journalist in the first place. But I actually think there's almost nothing particularly interesting about this crypto cycle. And in past ones, there's like, you know, there were at least some narratives like Web3 and gaming to earn and some of that stuff we did in the past or like how like Uniswap works, like kind of some interesting things about people like redesigning markets or whatever.

2:37This one, there's no thing there other than price and basically meme coins, which VCs love to write thought pieces about, but are not really that interesting. Joe, I think you are ignoring technological breakthrough that is dog with hat. Okay. That was not around last cycle. You're right. So we had Dogecoin and SHIB last cycle, but neither of them had a hat in the last cycle. So there have been some breakthroughs in putting cute hats on the cute puppies for the coins. You're right. That is progress. But yeah, exactly. OK, but we are doing a crypto episode right now for the avoidance of doubt. And I think the way we are coming at it is talking to someone who has seen multiple crypto cycles at this point.

3:22And also that if you accept the premise that basically the only interesting thing is price and why things move around, I don't want to hear from a VC. I don't want to hear from someone who's doing some layer three solution or some made up tokenization of a building in New York City. I just want to hear from someone who rides the ups and downs and what that's really like. Because if that's actually the only thing going on, which I believe, then the only true expert is not the VC or the investor or the founder, but the person who day to day is helping move that price one direction or another. No, I think that's absolutely true.

4:00The other thing that I sometimes think about is what are crypto traders doing on a day to day basis? Like, how do you actually spend your time if you are trading crypto? What does research look like? Yeah. And then the other thing that kind of blows my mind is just the amount of man hours and labor power that is spent on thinking about whether or not line goes up on chart. Totally. You know, on some level, that's all finance is. But I guess like in traditional finance, I have some. There's a veneer of respectability. There's a veneer. And I have some intuitions about how the professionals in the space make educated bets on whether the line is going up or going to go down.

4:40and there's fundamentals and earnings and momentum factors and all that stuff. And people different try. And I sort of understand what they try to do, but I don't really know what the equivalent is in crypto. So I think we got to learn. And I think we should talk to, we got to talk to someone who is in the space of like determining whether the price is going up or down. Let's do it. So I'm really excited. We have the perfect guest because not only has he been a degenerate crypto trader for several years, it's the first guest that we've had on Odlots, who has been sourced from our own Odlots Discord, an active participant in there.

5:15And we're like, oh, this guy's a smart guy. So why don't we talk to one of our own community members, a listener, someone who chats with us from time to time, someone who's not a VC writing big thought pieces about how the industry works and the importance of memes, someone who's just trading the coins. Let's do it. Yeah, I'm excited. All right. I am very excited. We are welcoming to the show, Julian Malinak. In his professional life, he does healthcare, tech, and data stuff. And then in the other half of his life, he's been trading crypto for a long time. Julian, thank you so much for coming on Avlads.

5:46My pleasure. Why don't you just start off? You're a crypto trader. How did that happen? Yeah. So I think that my journey was somewhat typical, right? So for most of my career, I've worked in healthcare policy and technology. I was in my early 30s working in tech in San Francisco. If you think of crypto, it's like, okay, a guy in his early 30s in San Francisco working in tech, that's kind of what you think of, right? You're the archetypal crypto guy. Exactly. So I had heard about it and had seen some lines going up and had some extra money at that time. This was 2021, early 2021. And from an early point, it was about the prices, right?

6:22I was curious about the technology, but it really was about, okay, these lines are going up. It seems like people are making a lot of money. Why not me, right? And I think fairly quickly, kind of in that first year of trading, went through the tour of opportunities available to, I think, the typical retail participant, right? So started with Bitcoin and Ethereum, went down the list to like kind of the mid-cap coins, right? So the top 100 coins that are traded on exchanges, but where there's just bigger ups and downs. Went to kind of the world of micro caps, so coins that maybe the market cap is$100 ,000 and it only trades on some on-chain index, it's probably going to go to zero, but it might 100x.

7:03So I had a few of those, a lot of them went to zero, I had a few that did go up a ton and made some money. And then I also did during those first few years, some yield farming, right? So basically, finding some obscure DeFi protocols where they're typically rewarding users with kind of a native token to attract liquidity and kind of like a mercenary, I would just judge the yield versus risk and go where it was best. And then as the market went on, oddly, my best week in crypto was actually the Luna crash, whether through luck or insight. I shorted a bunch of stuff and made a ton. And then I think unsurprisingly to a lot of veteran traders, I just gave up most of that money in the following months.

7:41Right. And I think that often those kind of euphoric periods you have end up being your downfall. And so I took some breaks after that. Luckily, I didn't have a lot of money in FTX. So I was kind of taking a break from the market after that huge, you know, making a ton in Luna and losing it. And then the past year, I've gotten back into it, focused mainly on short to midterm trades. You know, I'll be honest that the strength of this rally, I think if you had asked me a year ago, I wouldn't have seen it going as high as it did. But it turns out that the Bitcoin ETF, as you said, was a pretty big deal.

8:12Yeah. So yeah, I've continued to trade and have been watching the markets for a while now. So you mentioned making money and losing money. Can you talk to us a little bit more about what kind of numbers we're talking about here. And beyond the Luna position, what was the split like between money you made from yield farming versus money just going long or short certain coins? You know, I started with low six figures in crypto, made, I think on my best kind of small cap position, seven figures. And then Luna was my all time high. And I could have kind of retired, not with a ton of money, but enough to live on for a very long time.

8:52And then gave up most of that. I didn't lose everything, but gave up what was seven figure gains, essentially. What's that like? Going from having money where you're like, actually can think about retirement, even or maybe a modest retirement to losing seven figures and then not being in that position. Yeah, it was funny because this is so fitting. So I live in New York, right? And I remember in 2022, it was like the week that I started looking at these nice apartments to buy with cash was the week where I wiped out 40 % of my net worth. And I think that what happens in crypto is basically, it happens on both sides, right?

9:31So you're early to some trend. So in my case, in 2022, I was early to the shorting, or maybe you were early to the bull market, right? And you keep riding that, and you grow more confident, right? And you're betting bigger and bigger. And people you know who are being conservative are making less money than the people who are being really aggressive. And so you get more and more aggressive, and then it violently shifts. Two weeks ago, I heard a ton of stories from traders I know who wiped out months and months of gains in literally minutes. And I remember when this happened to me the first time, it was literally months of, I would like to say hard work, maybe some luck, wiped out in an hour or two.

10:11I had at the time been, I think, going on very little sleep. It was nauseating. It's hard to feel sorry for someone who's just gambling, right? But it was kind of traumatic in the sense that it was just so sudden and so fast. And I think it really was pretty hard to recover from that from a trading perspective, right? Because you think about, oh man, I really want to get back to that all-time high and you're chasing that. I would be upset if I lost that amount of money. Everyone would be upset, I think. Yeah, I can't even fathom it. It does seem like it's like a meme, right? People even joke like when the coins are going up, they're like, I'm going to load Zillow dot com right now.

10:49So you should probably start shorting. And so it's very funny that you were literally looking at apartments to buy on all cash. I'm kind of disturbed by my mindset in those times. And I've had two or three times like that. I think the worst was in 2022. but since then I've had a few blowups like that. But, you know, I've had some huge wins too. But it's just, it's really hard after you've had a series of wins to step back, right? Because you just want to keep going and keep going.

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13:12So you said something interesting when you got into the crypto space about you were mostly interested in just making money. So gambling on the price of a particular token. But there are a lot of people out there who assign particular values, let's say, to something like Bitcoin. or particular narratives maybe is a softer way of saying it. How come you didn't get interested in that aspect of crypto? I think when I got in, I was actually not that cynical and I thought you could do both. And I remember the really cool thing about that bull run, as Joe said in the intro, was like it was like using Uniswap for the first time.

13:52It was like, this is, yeah, I'm just speculating on tokens and this kind of feels disconnected from the real world. But man, this is so fun. It's really cool to be a participant. I thought the technology was interesting and fun if maybe there was kind of a lack of real world relevance. I think since then, I've gone through cycles of being more or less cynical. And I think that when it comes to narratives, I kind of think of four central ideas that people talk about with crypto. Right. So the first one is basically the casino, which is it's about the tokens. people trade the tokens, exchanges make a lot of money off people trading the tokens.

14:31And that's what the space is about. And everything else is kind of narrative fluff. The second narrative idea is kind of the store of value. This mainly applies to Bitcoin. This is digital gold. And people even take it further to talk about Bitcoin as kind of a reserve currency or a monetary standard. And then the third kind of category of kind of fundamental idea, for lack of a better term I'd call future of finance. And there's a few sub ideas here, right? So one is around being your own bank, which is essentially the idea of interacting with financial products without the need to trust a big bank, right?

15:03I can use Aave and I'm just trusting the code. The second sub idea is effectively kind of modernizing the financial system, right? So it takes, what is it, a day for stocks to settle when I do a trade and on, you know, Solana, it's nearly instantaneous. And then the third thing is this idea of tokenizing marketplaces. So I think Helium is kind of the poster child of this, right? I can essentially bootstrap a marketplace using a token that I just create out of thin air. I actually find that really interesting because for my money, it's like the thing that crypto is really good at is people can create tokens out of thin air and people really like to speculate on them.

15:41And if you can use that to do something in the real world, that seems pretty interesting. And then the fourth category I think of as Web3. And this is the be your own bank idea applied to the consumer internet. You know, whether it's a social network or a game, I'm in control of my own content. And I think the odd thing about it to me is it feels like people are either entirely skeptical, like it's just a casino, or they're entirely on board. And it's like we're creating the future of finance and the internet. And to me, I kind of have come around to like, it's mainly a casino. And I'm kind of interested in some of these other ideas.

16:12Like I believe in store of value. And I think that the idea of tokenized marketplaces make a lot of sense. I think Web3 I'm fairly skeptical of, but I think the ideas are quite a bit different. And sometimes it feels like crypto is kind of just like searching for a narrative that catches on among this kind of laundry list. Yeah. And some of them are contradictory to store of value versus casino lottery ticket. Right. Line go up. But yeah. So in the process of identifying the next trade, people turn this around on the stock market. And I get there's plenty of just pure gambling in the stock market, but also in the stock market, like there is such a thing as people who make money by looking at fundamentals, like deeply looking at how this company is getting real user traction.

16:57They're really selling a product. In the process of identifying the next 100-bagger microcap winner, is there alpha to be found in actually identifying a connection between what the so-called project is and actual attraction? Or is it mostly sort of the reflexive war trading of, I am going to be long this because I have reason to think that tomorrow someone else will be long this? I think that it depends on the type of trading you're doing. the type of thesis. In my experience with kind of the micro cap on chain coins, you really want to have a thesis that is kind of orthogonal to price, right?

17:38There's this marketplace called pump.fun, which is like anyone can create a coin there and it just gets liquidity without any cost. And there was like a meme coin that was like the first one there, right? And I don't own it anymore, but it was kind of like, well, I think people will get on board with this because pump.fun is getting a ton of volume. And this is like a proxy to be bullish on pump.fun. By the way, I'm not shilling this coin because I don't own it anymore. But that's an example of a thesis that is not directly related to price. One of the best trades I ever had actually was PooCoin back in 2021.

18:11And that was actually a very thesis driven trade, right? Because it was an application that people use to track their kind of low cap coins. And it had this meme coin attached to it. I think if you're just trading technicals on small caps, it's a tough journey because it kind of is a zero-sum game and the insiders and developers have an edge against you as a retail investor. So I think you have to have some idea that is somewhat original and is not reflected yet in price. Tracy, yeah. One thing I noticed is I've seen projects that'll say things like, we're the first dog coin that launched on Avalanche.

18:48And it's like, there's no real thing there except people are talking about this new layer one chain. So obviously, you want to buy the first dog coin associated with that chain. It's like a news peg, right? You need a thing to hang interest off of. But Julian, so you mentioned some thesis driven trades, but talk to us a little bit more about what the day to day actually looks like. If you are in the crypto market. It doesn't sound like it's researching the underlying technology necessarily, but are you in the message boards? Are you trying to gauge upcoming interest in a particular token or coin?

19:27So I'll answer that by just going through the routine I follow when it comes to trading. So generally, I try not to trade for the first half hour or so after getting up just because I don't really know what's happening in the market until I've had a bit of a time to digest it. I'll go in some Discord groups, I'll go on Twitter, I'll look at the charts, and I'll often have a hypothesis about how both the week and the day will unfold. And that just helps because I want to have a hypothesis that's falsifiable. So I might look at the markets and say, I think it's sideways bullish today, right? So I kind of want to look for longs and maybe some countertrend shorts.

19:58And so I'll maybe have a few trade ideas. And often for me, it's like I'm looking at maybe Bitcoin, Ethereum, maybe like a few altcoins that are particularly volatile that day. And basically, I'll just kind of, you know, look at the charts and some of the technical tools that we can talk about and i'll have a hypothesis that's like okay i'm i'm kind of bullish on the day so i want to get into a long position to this coin but i kind of bet it goes back to this zone so maybe i'll set a price alert right for a few coins where it's like i'm i don't want to just ape in immediately to the subterran i want to wait a bit so maybe i've spent the first hour or two kind of getting a handle on what's going on in the market is there any major news setting some kind of price alerts for areas of interest for different coins and then honestly it's kind of waiting around just observing, right?

20:42And often I'll kind of have a feeling of like, okay, am I understanding what's happening, right? If I think that it's a sideways bullish day, is it playing out like that? And maybe one of my alerts goes off, right? And it's kind of like, okay, this coin is kind of in an area where I thought it might be interesting to long. And so I'll kind of enter a position. And once I've entered a position, then at least for like short to midterm training, it becomes a matter of actively managing it. And if the thesis is, I think it's going to bounce around here, I want to see a pretty quick reaction or I'm out of the trade.

21:13Once I'm in a position, I'm kind of watching closely and I don't want to necessarily overmanage. But if the thesis is one about how it reacts, you know, in a kind of minute to minute basis, if I'm not seeing what I want to see, then I want to get out of the trade immediately. So that's kind of one type of way I deal with short to midterm trades. Another way I might spend a day is kind of looking at different narratives, right? So like recently, some of these real world asset coins have done well. So like Ando Finances is one that's, they're like taking treasury bonds and putting them on chain.

21:43And it's kind of like, I was looking into that a while ago and it was like, I just think people are going to get really excited about anything that relates to the real world because so much of the space is so abstract. And so, you know, Ando's one, but are there other coins that are in this real world asset space? So I'll kind of look on Twitter and maybe Masari, which is kind of a good research service that puts together different articles. And I'll kind of get a sense of, okay, here's like five coins in this rural asset space that maybe I want to get into long positions on. And then I'll look at the chart and say, okay, maybe I'll enter now, maybe I'll wait a bit.

22:15But really a lot of it is just about, I have a hypothesis about how price will react, or I'm looking to get into a position. And then I'm just waiting until that happens. For me, when I think about the times I've made money and the times I haven't, some of it is luck, sure. But there's this emotional state when I'm doing well of almost a kind of bored curiosity. It's like the opposite of FOMO, right? So I just want to be sitting around. I may be watching the price action. And it's really boring because I'm just waiting to see something clear. And most of the time in the market, you just don't want to be entering.

22:48So that's kind of a typical day. And it's not that exciting, I think, if it's done well. I find that actually very interesting. They say professional poker players, which seems like it'd be fun. If you're doing it well, it should be boring. And that actually it's this miserable existence of spending 12 hours in a day and mostly folding your hands and mostly letting cards go by and then waiting for opportunities. Poker well played and a cash game in a casino is not fun. Something I'm curious about, you know, with the launch of the Bitcoin ETF, for the first time, there is a segment of traders that is on New York time, specifically.

23:26Bitcoin and crypto has always been 24-7. But now there is this segment of trading that happens between 9.30 a.m. Eastern and 4 p.m. Eastern, maybe some after hour stuff. I don't know. Can you talk a little bit about time zones and the different flavors of the market between when New York is up versus Asian hours versus maybe, I don't know, if European hours inflected so much? Yeah, that's a good question. And it's funny because some of the better short-term traders I know will talk in great detail about the different zones. And it's like, this is the London kill zone from these two hours. I'm just like, can we just not get so free?

24:02But I do think the markets offer some differences, right? So I think the New York hours tend to be, at least for what I do, a little bit better. There's a little bit more liquidity. The wicks tend to be a little bit less involved. Overnight for me, as someone who lives in New York, like the Asian hours, there just tends to be a little bit more scamminess. By scamminess, I mean like weird kind of wicks and stuff. And it feels like liquidity is often lower. It's funny because I sometimes like to trade these kind of long tail altcoins. And sometimes you just see like really wacky things happen at strange hours, right?