Dialogue with Trader Episode 4, Guest Twitter @0xminion

Guest Keywords:

• An OG Degen who entered the space in 2018, research and data are the weapons for trading;

• An expert in on-chain trading, with addresses marked as Smart Money by Nansen;

• Has trading strategies for both "value coins" and Meme Coins, has captured $MAGIC $PENDLE $CANTO $BOME $SLERF $DEGEN.

TL;DR

1. Captured $PENDLE and $MAGIC by "Focusing on Small and Mid-Cap"

Key logic is as follows:

• Market cap between $10 million and $100 million, has not been listed on centralized exchanges;

• In the mainstream narrative of the cycle;

• Develop an exit plan based on the trader's trading psychology.

What impressed me is that Minion clearly knows whose money he is making with his trading strategy and the exit logic:

• In the range of $10 million to even lower than $100 million, the tokens traded are mostly by smaller funds and experienced "gamblers" and traders;

• In the range of $100 million to $500 million, tokens listed on relatively larger exchanges are traded by some secondary funds;

• Tokens of $500 million or higher are traded by relatively conservative "American" funds, aiming to capture alpha from small coins, requiring relative certainty and good liquidity.

Minion only makes money from the first part, so I believe that during the trading process, one must clearly understand the buying logic of the latter two to ensure a high win rate. An extended insight is that the buying pressure faced by project teams at different stages is different, and the corresponding market strategies and communication paths should also differ.

The selling strategy is chosen based on the expected returns of the "gamblers," for example, in a bear market it might be 2-3 times, while in a bull market it could be 5-10 times, meaning selling before the consensus sell-off occurs, which depends on Minion's immersion in the community, bringing experience and intuition.

2. Blindly Following Smart Money is Not a High Win Rate Trading Strategy

Smart Money says that following Smart Money is not a good strategy. Because you cannot completely replicate the trading operations of smart money; they sometimes enter and exit quickly and make many real-time adjustments based on the market. They only show you the side they want you to see.

Moreover, true smart money does not want people to know they are smart money for long; for reasons of safety and to avoid being front-run by copy trading bots, they often change addresses. So Smart Money is just a factor that supports your investment logic.

3. A Way to Keep Trading Strategies Effective: Divide Trading into Main Tasks and Side Tasks

Minion studies all sectors, whether he is good at them or not, looking at both. The sectors he is good at or believes should run through the entire cycle, like AI, are treated as main tasks, while those he is not good at, like inscriptions, are treated as side tasks. Main tasks are for making significant profits, while side tasks are more about not missing alpha and experiencing industry changes.

For Minion, as long as there is an information gap between on-chain traders and centralized exchange traders, he believes his strategy will remain effective.

Original Interview

FC:

Let's start with your name. Why did you choose this name? Can you share the story behind it?

Minion:

It's actually quite simple. I really like the Minions from cartoons, who are always chasing after this rather evil character to be their master. And "minion" in English refers to those at the bottom, who are more of the hustlers, without much power, just working hard. So it has two meanings: one is that I like Minions, and the second is the meaning of the word itself in English.

FC:

Before we start the questions, let me introduce why I invited our Minion teacher today. I have written down a few keywords. The first is that you have been in the industry since 2018, right? You should have been at Huobi at that time?

Minion:

Yes, I was actually at Huobi Australia in 2018.

FC:

Australia in 2018 was quite good; it was the tail end of HSR, and there were some developers. I even attended a roadshow there. The founder of Curve also bought a house in Melbourne. Hasn't the market already paid for that? (Inviting you) The second reason is that I remember when we talked before, you had most of your assets traded on-chain, about 80%, and there should be three or four of your addresses marked as smart money on Nansen. The most important thing is that I looked at your portfolio, and whether it was value coins or Meme coins, you have captured them. You shared with our fund a long time ago, and I don't know if the DegenScore is still being done, but I remember you were ranked in the top 5, right?

Minion:

That's right, but now it has dropped a bit because my positions have increased, and I have played with some things less, so I should be around the top 20 or 30 now.

FC:

How is this ranking determined?

Minion:

It is based on metrics created by the DegenScore team, such as whether you have participated in FYI, SUSHI mining, how many times you have interacted with Uniswap, and a series of other factors.

FC:

OK. I think today I want to chat with you about a few parts: the first is your trading growth experience, which I think is quite important because it determines why you formed this trading strategy; the second part is mainly about your overall trading strategy and what style it is now; and finally, about your personal growth. So let's start with your growth experience. If you are comfortable, can you talk about your past experiences in the financial industry and some important trading experiences?

Minion:

No problem. Actually, I don't have much background in traditional finance; I entered this industry right after graduation. Before graduation, I was doing some IT consulting and data analysis, etc., because my academic background is in computer science and finance. I was doing some IT consulting, and later, by chance (I entered the industry) because I had a course in graduate school where we wrote a report on blockchain. After I finished the report, I found it very interesting, so I started researching it, which should have been in the second half of 2016. By 2017, when I was in Australia, the four main exchanges were quite small, and there was a 10% arbitrage every day, so I started playing with arbitrage every day. Eventually, one day I noticed Bitcoin rose from $1,000 to $2,000 in January, February, and March of 2017, and I realized that arbitraging like this was not as good as just buying Bitcoin directly. So I started researching Bitcoin mining, then Ethereum, ICOs, and by 2018, I officially entered Crypto. At that time, I was doing everything at Huobi Australia, including industry research, but during the bear market in 2019, there weren't many job opportunities in Australia, so I went back to traditional finance for a while, mainly doing data analysis, which didn't really relate to pure finance. Then at the end of 2019, I wanted to find a job related to Crypto again, but there were very few in Australia, so I targeted the Asian market and eventually joined TokenInsight, doing project research, industry research, and some work on rating models. Later, at the end of 2020, I went to Huobi Global to work on listing and investment, and then at the end of 2021, I left Huobi to join the current team in Hong Kong at GBV for investment research. That's roughly my experience.

FC:

I believe during your time at Huobi, you should have gained a lot of insights into what projects exchanges need, right? And at TokenInsight, you should have mainly analyzed fundamentals with data, which should have been quite helpful for you, I understand.

Minion:

Yes, that's about right.

FC:

OK, the next question. I want to know what your biggest loss or biggest gain was? The core purpose is to understand which trades laid the foundation for your current trading style.

Minion:

The biggest gain was probably in the last market cycle; there weren't many opportunities in this market cycle. In the last market cycle, the biggest multiple was from MAGIC, and the biggest loss was probably from this cycle's Memecoins.

FC:

If you were to describe your trading strategy or trading style, how would you describe it?

Minion:

I lean towards being a "gambler," fully on-chain, looking for information asymmetry. The essence of my project involvement is to find information asymmetry, where the market hasn't realized something yet, but through my research, including project fundamentals, industry or sector research, and competitive product analysis, along with some on-chain data analysis, I conclude that I believe this project may explode in the next 2 months or within half a year, and the project's valuation is relatively low, and no one is discussing it, but the team is decent. Basically, I operate based on information asymmetry.

FC:

I want to know if this so-called information asymmetry is what allowed you to make money for the first time, or did you find this trading strategy after losing money, for example, by listening to others or forming losses?

Minion:

You definitely have to lose money first. In fact, when I first started losing money, I think it was due to inadequate analysis or not being comprehensive enough; you only saw one angle. For example, a friend once told me that Cardano was definitely going to rise. I asked him why, and he said that the smart contract hadn't been released yet, and it needed to be released, so there was a so-called expectation that it would rise. My analysis was that he didn't see the whole picture; he only saw that the Smart Contract hadn't been released, but what was Cardano's reputation in the industry, or what was its market cap, and what was the ecosystem like? So when you first start losing money, it's generally because you haven't thought through the issue comprehensively.

FC:

So you judged it from a single dimension, right?

Minion:

Yes, exactly.

Let's talk about specific trading strategies. What is your current trading strategy and framework? I hope it can include several dimensions, such as your overall position allocation ratio, fund distribution, some buying logic, judgment logic, and exit logic. If you can, it would be clearer if you could relate it to a specific asset. Let's divide it into two series: one series is Pendle and Magic, right? The other is the Meme series; I think these might involve two different trading methods.

Minion:

First, let's talk about Pendle and MAGIC. According to the previous cycle's approach, I only look at projects with a circulating market cap between $10 million and $100 million, which are purely on-chain and have not been listed on exchanges. For those that have been listed, I generally don't play them in 90% of cases. I only play on-chain because the multiples can be significant; for example, going from $10 million to $100 million is a 10x increase, which can be achieved in about three months. However, going from $100 million to $1 billion may take six months or even a year. As the circulating market cap increases, the amount of capital required to enter also increases, and the price appreciation will slow down. Therefore, I only look for opportunities in relatively small and mid-cap projects. The advantage of this approach is that the multiples can be large, and the margin for error is acceptable. If a project with a $10 million market cap doesn't rise, you are basically out of the game. This is my logic. Of course, you need to combine it with other perspectives or data for in-depth analysis. I bought Pendle and MAGIC when they were close to their historical lows and sold them when they were listed on Binance.

The reason for buying Pendle was that it was already close to a bear market, and the price was low enough, while the team was still active. So I thought, why not take a gamble? Its market cap was very small. Of course, liquidity was also poor, and I couldn't buy much, based on my own judgment or how much risk I was willing to take for this purchase. After buying, I generally aim for a 5-10x return in a good market, and if it goes above 10x, I reassess. Sometimes I might aim for a 20x return, but if I feel that 20x is out of reach, I might just take the 10x. My general strategy is to hold some good assets until they are listed on exchanges, and then take profits. Pendle and MAGIC are typical examples of this. The reason I mentioned a 5-10x return is that "gamblers" think this way; at least the on-chain "gamblers" I know generally aim for a 5-10x return in a bull market, and they might hold the remaining profits or not. In a market that isn't particularly good, it might be a 2-3x return, and the profit is what I call a free ride, depending on how much confidence you have in the coin, mainly based on the project's fundamentals and the potential for being listed on exchanges, along with a comprehensive judgment of the data.

The other half is Meme Coins. I think Meme Coins are relatively random, and I don't have a very structured strategy for them. I mainly captured Slerf and Bome, while I likely lost money or didn't make much on others, maybe earning 20-30%. Of course, there's also Degen, which is somewhat in between having fundamentals and being a Meme coin. Degen is considered a proxy for Farcaster; although it is a Meme coin, since Farcaster doesn't have its own token, from the perspective of "gamblers" or traders, Degen serves as a proxy for Farcaster. If Degen has a circulating market cap of $10 million, it is too small for the Farcaster ecosystem, so it must rise. But whether it can rise to $100 million or $500 million is uncertain. So Degen is a special case, while the other two are more random.

Bome is a project where I recruited a few interns this cycle. In the past two weeks, they have been studying Meme coins, and I even launched a Meme coin on Pump.fun to research how Meme coins actually work, including their liquidity and how to conduct market promotion, etc. When Bome launched, it was just the day or two after I finished my research on Memes, and I was thinking, should I learn about Memes from Bome? So it was quite a coincidence; my subconscious action was to buy, and I did. After further research, I felt the trading volume looked good because it had a significant turnover at that time. Later, I told the team that we should aim for listing on secondary exchanges. After a night's sleep, it was listed on a secondary exchange, and then I looked at the market again and felt it might go up. I decided to bet on it being listed on Binance. Three days later, I found out that Binance had listed perpetual contracts. Generally, when perpetual contracts are listed, it should lead to a spot listing, although it's not guaranteed, but there is a certain probability. So I thought, why not aim for a spot listing on Binance? Later, Binance indeed listed it quickly, which I found quite amazing. It was listed on major exchanges so quickly. I wondered if this coin would require a significant amount of capital, but later I realized something was off. As the market developed, I noticed that the "gamblers" I knew started to sell off heavily. At that stage, I basically took profits because the multiples were already sufficient. I initially wanted to hold for a higher multiple, but I didn't have enough position size. The reason I ultimately decided to take profits was mainly that the market wasn't performing well, and the volume started to decline. I felt my multiples were sufficient, so taking profits was also a good choice.

FC:

I understand. I have a follow-up question: when you bought Pendle, did you look at the fundamentals? Because when its market cap was below $10 million, what it was doing seemed quite niche, or at least relatively unknown to retail investors. Most people probably didn't know what it was doing. So if we look purely from the perspective of retail investors, do they know what they are buying? Were you concerned about this when you made your purchase?

Minion:

I looked at the fundamentals from a speculative perspective. My understanding is that if your fundamentals are good, then that should already be reflected in the price. When the fundamentals are not great, but you have the potential to improve, that is when I enter the market.

Regarding the retail perspective, in the range of $10 million market cap, there are no retail investors; it's all "gamblers" playing on-chain. In fact, I summarized a gambling table issue during the last market cycle. In each market cap range, there is a significant percentage of a certain group playing. For example, in the range of $10 million to $100 million circulating market cap, purely on-chain coins are mostly played by experienced gamblers or those who enjoy gambling, as well as relatively experienced traders, but with not particularly large capital.

For coins with a circulating market cap of $100 million to $300 million, $400 million, or $500 million that have already been listed on major exchanges, those are played by some secondary funds with certain fundamentals. Due to compliance or legal issues, they can only play with these coins that are listed on major exchanges. In the case of a $100 million or $200 million market cap, the multiples are also sufficient for them.

For those with a market cap of over $500 million, they are blue-chip coins, and these large American capital players want to capture beta, believing the fundamentals are also good, and they can provide a good explanation to their LPs without needing to venture into high-risk areas where no one knows anything. Moreover, the returns are also quite considerable for them. You will see that every time the circulating market cap rises, the gamblers will sell off completely at a certain stage. After being listed on exchanges, I won't play those because that is not my gambling table. My gambling table is on-chain, in the range of $10 million to $100 million. I don't touch the gambling table of secondary funds. So, for Pendle with a $10 million market cap, in most cases, only very speculative or "gamblers" would play it. Therefore, as long as you think clearly about how gamblers think, then it will rise. The rising logic between $100 million and $500 million is that secondary funds believe it will rise, so it will rise. For coins with a market cap of $500 million or higher, if large American funds believe it will rise, then it will rise. Each gambling table has different groups of people with different mindsets, and you need to consider how that specific group thinks, and that will suffice.

FC:

This part is excellent. I actually heard a project team say something similar before; they said that after two cycles, they suddenly realized what game blockchain is playing. This game is about the orderly exit of capital. It is very much like what you said, which is about when and who is making what kind of trading moves; this is essentially what it is. Although this matter is quite detached from fundamentals, I think you have articulated it very well from a trading perspective. Just now, you mentioned that you need to find good assets in a non-consensus phase. The next question is about your core ability: how do you obtain this on-chain information? Do you categorize it into several layers? What tools or systematic follow-up methods do you use?

My experience in non-consensus comes from recognizing non-consensus. For example, back in the day, everyone thought Polkadot was the next EOS, and I asked them why they thought that. They said it was because all the developers were Chinese. I then asked if they knew what Polkadot was doing, and they didn't. I later read an interesting article by Lao Mao, who said in 2017 that Ethereum was the next BitShares. You realize that people who don't think will always have someone they believe in at every stage. So I believe this is how I discover non-consensus; I ask many people who they think that person is. Of course, I didn't do well in this round; I missed Solana. So from your perspective, how do you think this so-called information is obtained? How do you ensure you are ahead? What methods do you have?

Minion:

Actually, my overall strategy is a bit of a clumsy method, which is to sweep through all sectors and all projects. I will go through all the coins within the top 1000 on Coingecko, and this sweeping is categorized by sector. Among the coins within the top 1000, especially small-cap coins or mid-cap coins, I look for projects that are still active and whether their activities align with the themes or environment of the current market cycle. You can't say that you are still working on an AMM in this market cycle; that would be unrealistic. The things that align with the current market cycle, such as Bitcoin's Ordinal ecosystem or the current Rune ecosystem, are what I focus on. By scanning these projects, I find those that are still alive, and if I discover that a project has entered the Bitcoin ecosystem, and I have also scanned some of the Bitcoin ecosystem, and I feel that this trend is about to emerge, then isn't it possible to buy this coin directly? It actually is, because these are the things that the market hasn't paid attention to.

Then let's talk about the example of Arweave, which is upgrading its narrative to focus on AI. How did I discover that they started working on AI? I noticed that various ecosystem projects began to appear on their Twitter in a short period, for instance, I came across about ten projects within two weeks, and these projects were only followed by AR-related accounts, with very few followers, around 40 or 50 accounts. At that point, you know that Arweave is going to work on AI. You can check the price of AR to see if it has risen; at that time, it was clear that it hadn't. This is what we call an information asymmetry; most of the information asymmetry comes from Twitter and your own understanding. You need to scan through each project, gather all the information sources, and then synthesize and organize it with your understanding. Once you hear others say that this project is doing something or that project is doing something, at that point, it is no longer considered front-running; the information asymmetry is no longer significant. What I want to do is to be among the first to know, apart from the project team.

FC:

To be honest, I might have known that AR was going to do AO six months ago, but even those who were thinking about this with me didn't believe that AO would have such a significant market reaction. My question is, you mentioned scanning within the top 1000; I do that too. First, how often do you scan? Second, how do you determine that a particular sector is a good sector in this cycle? And third, how do you know that after it transforms, it will definitely rise?

Minion:

Let me answer your second question first. I believe you shouldn't dismiss any sector. When you are synthesizing and organizing, you might say that DeFi exploded in the last market cycle, and now that DeFi is so mature, it won't explode in this market cycle. This idea is actually incorrect; you cannot deny its potential for an explosion. You can lower its priority, though. I think the compliance of DeFi and the risks of smart contracts are relatively high, and the logic of innovative contracts is quite complex, so I feel that the likelihood of an explosion is somewhat smaller, but it doesn't rule out the possibility. Therefore, I will prioritize these according to my understanding and then go through each sector one by one. Don't dismiss any sector because the entire industry is continuously learning and progressing. So somehow, one day, a sector might suddenly explode; no one knows. Suddenly, the old and new things combine, and it seems like something can be done, leading to a resurgence of the old.

As for your third question, I think it is due to a relative indicator: the market has not realized that Arweave is going to work on AI, and its price has not been repriced. What does this mean? You will see that at the beginning of this year, many projects were rising because Bitcoin and Ethereum were rising, and other tokens also needed to be repriced. However, if you look at the AR chart, it basically hasn't been repriced. So first, it hasn't been repriced; second, the market did not expect this situation, which leads to a potential rise. So fundamentally, it is a market efficiency issue.

Regarding your first question, I will systematically go through everything at the beginning of each cycle. Within a cycle, I might divide it; for example, if the market is relatively empty, I might scan again to see if there are any interesting targets and what they are doing. I also take the opportunity to understand the progress of some targets that have risen or not risen, or how they compare within the entire sector, such as relative evaluation. If A and B are in the same sector, I look at the relative valuation changes between them.

FC:

Next question. You should have three addresses marked as smart money on Nansen, so I want to ask, do you think following smart money for trading is useful? Or how should I follow them to have a good strategy?

Minion:

I think you can follow smart money, but it depends on your own understanding and strategy. Smart money is just a way to help you validate something at a deeper level; it serves as a reinforcement. This reinforcement means that if I think a target is good and suddenly find that a smart money address also bought in or thinks the target is good, then my confidence increases. However, if you purely follow what smart money buys, I think the returns are not that high. The so-called smart money has many personal strategies; for example, I might think a coin will rise, so I buy a little bit to play with it for six months and then forget about it. It doesn't mean I am seriously investing in that coin because my position is relatively small. The reason I often change addresses is primarily for security reasons, as I tend to play with relatively more projects. Having more projects increases the risk of contracts, including smart contract authorizations, which have had many incidents, as well as cross-chain issues, etc. Of course, some might say you can unapprove, but I think the gas fees for that are not particularly worth it, so I generally just switch to a new address. Another reason is that I don't particularly want many people to know my address or for many people to follow my address to buy. Following my address can sometimes lead to losses, and significant losses at that. This is something I have tested internally; if people purely follow my strategy to buy, they generally end up losing money. My approach sometimes involves quick in-and-out trades, or I might watch the market or the project all day. By the time others realize what's happening, it might be a bit late. So, the main reasons for changing addresses are security concerns and the fact that if too many people are tracking my address, I will also change it. I have an address that, whenever I buy some small coins, some bots will follow me to buy, and some bots will use MEV strategies to front-run me, which sometimes prevents me from buying in. Therefore, I tend to change to a new address relatively frequently, transferring Ethereum to an exchange and then withdrawing to a new address.

FC:

I understand that the real smart money doesn't want people to know they are smart money for a long time, right?

Minion:

Yes, they will only let you see what they want you to see.

FC:

I find your statement quite surprising. Essentially, you should first think a target is good and then use smart money to validate whether it is good, rather than just buying what smart money buys.

Minion:

It's fine to validate your belief in a target through others' perspectives and operational forms, but if you take a completely follow-smart-money approach, the win rate is not as high as people think.

FC:

Got it. I have two more questions. First, do you have a stop-doing list? Have you thought about when your trading strategy might fail or what might cause it to fail?

Minion:

At the end of last year and the beginning of this year, I was frantically looking for inscriptions and various things. During that frantic search, I actually thought about whether my entire strategy would continue to be effective. After some practice, it turned out to still be effective, but the degree of effectiveness was not as significant as I imagined. The reason is that everyone's attention is too scattered. The effectiveness of my entire strategy relies on a clear sector rotation. For example, after the AI rotation, it moves to gaming. However, at the beginning of this year, the entire market was in a state where everything was exploding, and attention was very scattered without a clear main task. In that case, the efficiency of my overall strategy was not that high.

I actually structured my trading approach into main tasks and side tasks. The main tasks are to find relatively obvious or important targets or sectors I am good at, while side tasks involve scattered things, such as those with very poor liquidity that I can't play with but need to understand and research. For example, it was quite obvious that the initial liquidity for inscriptions was particularly poor, and it wasn't instant liquidity; it was an order book, done in the form of NFTs. I don't particularly like this form because while it looks like there are large multiples and potential profits, when you try to place an order to sell, you can't sell it, and you have to keep lowering the price to a very low point to possibly sell it. I don't like this, and it serves as a side task for me.

The main tasks are things I can understand or things I like. For instance, I believe that AI should be a sector that runs through the entire cycle, so I need to elevate it as a main task. Other things, like Solana, have changed in the market's perception due to memes and various reasons, so Solana also needs to become a main task. Side tasks, like memes, I think require in-depth research and understanding, but I don't necessarily want to treat them as main tasks because I find it difficult to make significant profits through heavy positions. Therefore, I categorize them as side tasks, where I can earn some small profits and incur some small losses. I research all sectors; regardless of whether I am good at them or not, I need to look at them. However, those I am not good at can be treated as side tasks, while those I am good at or believe should run through the entire cycle are treated as main tasks.

I believe my entire strategy will continue to exist as long as there are gamblers on-chain and main tasks. As long as the initial circulating market cap is relatively small, below $50 million, and not every project that issues tokens goes directly to exchanges. If all projects that issue tokens go directly to exchanges, then my strategy would be ineffective. However, as long as there are projects that issue tokens and do not immediately go to exchanges, with an initial circulating market cap that is relatively small and a reasonable potential unlock ratio or selling pressure in the future, I believe my overall strategy will remain effective.

FC:

Okay, I understand. Finally, if you were to train your colleagues, what do you think is the most important thing for them to do well in trading? And what is the one thing they absolutely should not do?

Minion:

What is the most important thing in trading, right?

FC:

Yes, what do you hope they will master first, or what is the most important skill or knowledge?

Minion:

For me, the most important thing should be a clear understanding of the industry and a solid research foundation. Because if your research foundation is solid, you won't be afraid wherever you go. In this industry, whether you are working on the project side, doing data analysis, conducting investment research, or trading, any position or role in this industry requires a deep understanding of the industry. The one thing you absolutely should not do is to let your mindset crumble, such as falling into FOMO or similar mentalities.

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