Timing is Everything
The markets are in a unique position.
The Big Trade is the Inflation Trade. Macro analysts everywhere have an opinion and, lucky for us, it’s oozed its way into crypto.
Because of this, we’re seeing an uptick in bold predictions about where we are in the cycle. Arthur Hayes and Barry Silbert letting you know that the world is about to collapse, Light and Zhu Su telling you that we’re about to start moving back up.
Open Interest is doing this. Funding rates are doing that. Institutional money is doing this, that and the other thing. The Fed is about to ruin your entire life.
It’s all so tiresome.
As we step back to see the meta game being played, it becomes more clear: Time frames are what really matter.
When someone makes a market prediction, it is usually around a turning point. The trend will change from bull to bear or bear to bull. Rarely do people get remembered for telling you to follow the trend every day because that’s just boring.
But if you hear someone say “I am very bearish on crypto now” what does that actually mean? More importantly, what does this mean to YOU the market participant with unique goals, convictions and position sizes?
Does it mean we are on the verge of a 2018 bleed out where you will watch your net worth drop by 80% over two years? Or does it mean we will see a 30% drop that gets bought back up in 3 weeks?
Understanding this nuance will change the way you view market information.
In late April and Early May I started unloading a lot of my ETH and crypto positions. Every signal I had was telling me to sell and that we were embarking on a 2017–2018 blow off top that would end in tears.
Two weeks later, I was right. We saw a huge sell off, maybe the biggest liquidation volume in crypto history, and prices dropped 50%.
Two months later, however, prices caught a generational bid and began to skyrocket again, forcing me to buy back much sooner than I anticipated.
Was I right to do what I did?
Some people would say yes — I followed my system and executed the plan. Everything played out as I expected it to in the short term.
Others would say no — I realized a large tax event by selling positions that I would have to buy back in two months making the whole thing much less interesting as a trade.
The difference is that each person has a different frame of timing. Someone who looks at the 60 minute chart for their bull/bear decisions should not be listening to someone who looks at the weekly chart and vice versa.
This is why it’s so dangerous to let others influence your decisions. They have no idea what your timeline is and they will never tell you theirs.
Yes, you should seek out people who have interesting ideas but make sure they are helping you make the decision, not making the decision for you.
Every day there is a different time horizon to focus on for your portfolio.
On the macro scale, the coming months and years, I think caution is warranted. The sell off in growth equities, uncertainty about inflation and general hesitation of institutional capital is not a good look for crypto. This doesn’t mean we have some terrible risk off environment, it just means that making money is going to be much harder than yolo-ing into the latest OHM fork, tripling your money in a week and thinking you’re a good trader.
On the short term scale, there are huge opportunities. Capitulations lead to 10–15% bounces with deep liquidity. New products are being launched every day, many of which will do 20x. Yields are as good as ever in many of the new ecosystems. There are ways to make money in this market and there always will be.
The key here is to know what game you’re playing. If we get a 20% bounce off the lows in ETH, the traders will tell you they called the end of the bear move perfectly…because they did!
If we see a 12 month dispersion of capital through the crypto markets that results in a general decline in many asset prices, the bigger names will tell you they were right. Because they were!
What you will rarely see is someone who explains the thesis, lays out the timing and gets it right more than once. People build entire careers off one huge call then monetize that memory for the next 20 years.
If nothing else, remember this: The market does not care about you. The people who tell you we are near a top or a bottom do not care about you.
It’s not because they’re bad people, it’s because they couldn’t possible know you and your life. They do not know your situation, your time frame or your portfolio. They do not know your risk tolerance. They are simply sources of information that we attach bias to especially in times of uncertainty.
Timing is everything in markets. You must decide the timeline you are on.
You will hear more and more noise about “where we are in the cycle” and just as much noise about people making all time highs in their portfolio at the same time. Who are you going to listen to?
Just as time is our most valuable asset, timing is our most valuable filter.