Disclaimer: This post contains thoughts on crypto, a volatile and risky asset class. It is not investment advice, and you should do your own research. All information is for educational purposes only. Please don’t take risks with money you’re not willing to lose.

Success in crypto is rare. In order to learn the game, you need to experience a few impactful losses first. However at that point, most will either give up or trip over the same mistake countless times before reverting to option one. The space can feel like a scam when you’re losing, and it’s frustrating.

I don’t proclaim to be a rare success, but I’ve been in the shoes of a new entrant. It’s overwhelming and technical jargon extends the already high barrier to entry. Trading itself gets overcomplicated by “professionals” plotting meaningless lines that change as their ascending triangle fails to break out. And see, you’re already lost. None of this really matters.

Sure, some background in technical analysis might serve short-term investing, but I believe crypto is largely too unpredictable to merely chart up and call it a day.

Probabilistic Thinking

Crypto is a game of probability.

Probabilistic thinking is rooted in the acceptance of uncertainty. Rather than defining events as inevitable or not, this mental model considers the entire range of possible outcomes and their varying likelihoods. It’s essentially an estimation of which futures have the greatest chance of becoming realities.

Let’s consider an example in crypto that seems relevant at the moment. Memes have been dominating market rotations and are outpacing all other sectors during rallies. DOGE, the leader in this category, trades accordingly. However, Dogecoin has historically seen it’s largest moves when Elon Musk is involved. He posted throughout the 2019-21 bull market and even went as far as experimenting with Tesla DOGE payments. Musk now owns X and consistently interacts with the crypto community - will he begin to shill it again as the market trends upwards?

We’re not going to imagine endless outcomes, but let’s start with four to outline what the future may look like:

1. Elon promotes it, price pumps

2. Elon promotes it, fails to go up

3. Elon doesn’t promote it, goes up anyways

4. Elon doesn’t promote it, price dumps

The above scenarios could be weighted as such:

• p(1) = 75%

• p(2) = 10%

• p(3) = 10%

• p(4) = 5%

These likelihoods assume it’s not only fairly likely that Elon shills Dogecoin during this cycle, but that it becomes more valuable too. Regardless, we still recognize that there’s possible outcomes that omit his involvement.

So, if the price goes up (p(1+3)=85%), we can roughly estimate that the upside is 300% (DOGE hitting $0.45). Conversely, if the price goes sideways / dumps (p(1+2)=15%), you could probably sell at no worse than a 50% drawdown.

In effect, there’s an 85% chance of tripling your investment, while only a small chance of losing <50%. That would be a bet I’m willing to take.

Probabilistic thinking is ultimately a loose framework and simply requires repetition to improve. Drafting scenarios and their respective likelihoods derives from knowledge and experience - you just get better at it over time.

Metagame

Another way to trade crypto is by closely following new metas and sector rotations. In a bull market, hot token metas are defined by “a rising tide lifts all boats”. Nearly everything in the respective sector is beta to the leaders just with varying volatility / returns. You’ll ultimately be most profitable if you are 1) early to developing narratives; and 2) can identify rotations before they happen and ride to new highs.

Off the top of my head, here are a few metas that are, and will be significantly relevant this cycle:

Memes - community-run, utility-free tokens: DOGE, SHIB, PEPE, WIF

AI - decentralized neural networks: TAO, RNDR, FET

RWAs - real world assets: ONDO, PENDLE, OM

DePIN - decentralized physical infra: FIL, HNT, AR

SocialFi - social finance: FRIEND

Memecoins have led the majority of rallies thus far, so it would be fair to assume that the remaining sectors have greater upside at this point. Nailing these eventual rotations is hard, so it doesn’t hurt to front run them with small capital sprinkles. However, a lot of this ultimately comes down to attention - a notion that I touched upon in my foundational newsletter.

Attention in crypto is scarce. The space is simply oversaturated with new startups vying for the focus and investment from an already minuscule group of participants. With this, metas rapidly grow and dissipate as novel use cases find temporary market fit based on speculation. Our attention dictates where capital flows. You’re not necessarily betting on metas to have long-term value, but that you can be profitable while their relevant. In fact, it might even be safe to assume that every narrative will merely die out as you trade it. Just as we front run rotations before they happen, it makes sense to take profits before attention shifts elsewhere. Never be the greater fool.

The very worst thing you can do when implementing this strategy is chase. Don’t spend a lot of time and energy doing something to achieve nothing; that is a path of futile pursuit and self-destruction. You inevitably won’t time every rotation… In these cases, it’s best to remain passive rather than play catch-up and endure further losses (time, attention, and $$$).

“He who chases two rabbits catches neither”.

Finding a Niche

Playing the metagame can be hard without extensive knowledge, so it might be best for beginners to start by finding a niche.

Those who know their few strengths are far more powerful than ones who think they can master all. If you’re an artist, you might align well with NFTs. If you’re into finance, look into liquid staking protocols. If you follow culture, consider memecoins. The list goes on. Identify your strength and find the niche that supports it.

You’d be hard-pressed to find someone in crypto that understands everything that’s going on. The space is too young and has too many new developments to keep up with. If someone claims they do, they’re lying. All of us are ultimately wandering through the same variable world, acting like our experience gives us insight into the future. Point is - focusing on trading a niche will allow you to block out the noise and bootstrap fundamentals. It will help you navigate crypto on a much smaller scale while still learning about the underlying catalysts that move the market: community, innovation, tokenomics, etc.

Once you can effectively trade one sector, you can use that experience to better inform exploration into others.

Final Thoughts

I shouldn’t have to reiterate, but obviously none of this is financial advice. Certainly don’t expect to apply any of what I’m saying and instantly make money. These are simply a few of the things I consider (among many others) when evaluating trades and my mindset towards holding positions. I, like many others, stumbled into crypto many years ago and had no idea where to start. I was no different and lost countless times before finally changing my mindset. If you can avoid any of the mistakes that I made early on by being more thoughtful in approach, then I will have accomplished my mission.

I’ll leave you with this - embrace uncertainty, never chase, and don’t be afraid to stick out from the crowd. There’s no one way to do anything. Absorb knowledge and carve your own path.