Recommended book: "The Man Who Conquers the Market" by Simmons This book is not considered a new book, but I have recently read it again. Due to the popularity of Deepseek by Liang Wenfeng, this biography book of the father of quantification, which is the only one with Liang Wenfeng's preface, has once again become a hot topic of discussion in our financial group, especially the organic combination of AI+quantification+cryptocurrency, which has become an interesting point. As a financial veteran, I have always been in awe of the workings of financial markets. In my career, there have been both traditional ways of building investment portfolios based on fundamental analysis and data-driven strategies to identify unreasonable pricing in the market. After reading 'The Conqueror of the Market' this time, my understanding of quantitative investment has reached a new level, even prompting me to rethink the investment logic of the cryptocurrency market, 👇 Here are some of my personal thoughts: one ️⃣ The Enlightenment of Renaissance Technology: The Market is Not Random Simmons' success proves one thing: the market is not completely random, as long as you dig deep enough into the data, you can always find predictable patterns. Renaissance Technologies relies on mathematics, statistics, and computer technology to analyze market microstructures and identify short-term patterns of price fluctuations. Their strategy does not rely on company fundamentals, but is purely data-driven. This breaks the traditional perception of investors and completely changes my way of thinking. As a professional financial investor, many investment frameworks that I relied heavily on in the past, especially traditional DCF (discounted cash flow), PE (price to earnings ratio) analysis, have lagged behind high-frequency trading and quantitative strategies. The model of Renaissance technology made me realize that factors such as emotions, short-term supply-demand imbalances, and capital flows often determine the short-term trends of asset prices more than fundamentals. This is of great significance for our newly established AI+quantification department. We have conducted a series of modeling and multi factor weighting on public opinion monitoring, on chain data, wallet profiling, market maker strategies, and even macro data to achieve effective semi-automatic decision-making, which is a positive start. two ️⃣ Mapping of the Cryptocurrency Market: A New Battlefield Driven by Data If Renaissance technology completely changed the game rules of the traditional stock market, then the cryptocurrency market is the experimental field for the new generation. Unlike the stock market, the cryptocurrency market is highly fragmented, with uneven liquidity, strong emotional drive, and 24/7 trading, making the role of quantitative strategies more apparent. Simmons' investment philosophy is equally applicable and may even be more effective in the cryptocurrency market. For example: Market microstructure research: Due to the poor depth and liquidity of the cryptocurrency market, there are arbitrage opportunities between many exchanges, similar to what was done in the early Renaissance in commodity and forex markets. High frequency trading and market neutral strategies: The high volatility of the cryptocurrency market creates enormous potential for statistical arbitrage, market making strategies, and liquidity supply strategies. Emotion driven and social media data analysis: Compared to the stock market, pricing in the cryptocurrency market is more easily influenced by emotions, and emotional data from social media platforms such as Twitter, Reddit, and Telegram can even reflect market trends earlier than traditional data. This coincides with the "non-traditional data" mining approach of Renaissance technology. This is accompanied by a large number of trading opportunities, and this input-output ratio will be extremely profitable and considerable. We have learned that some investment institutions in the United States have begun to enter on a large scale. three ️⃣ The Enlightenment of Renaissance Risk Management on Crypto Funds Despite the astonishing success of Renaissance strategies, one of their most core competencies was a strict risk control system. Their fund leverage ratio is extremely high, but they can maintain a stable Sharpe ratio for a long time, which indicates that they have done an excellent job in risk management. The risk management of the cryptocurrency market is more challenging as it involves not only the liquidity risk of traditional markets, but also regulatory risks, technical risks (smart contract vulnerabilities, hacker attacks), extreme volatility (crashes), and other issues. Therefore, if we want to replicate the successful experience of the Renaissance in the cryptocurrency market, the risk control system needs to be more refined, such as: 1. Strict position control: Avoid excessive concentration of a single trading pair and increase hedging across multiple asset classes. 2. Volatility adjustment position: Similar to the Renaissance's VIX dynamic adjustment strategy, adjust positions using cryptocurrency market volatility indicators such as BVOL and DVOL. 3. Response to Black Swan Events: Establish an extreme market triggering mechanism, automatically adjust trading parameters, and prevent huge losses such as those during Luna crashes in March 2020 or 2022. four ️⃣ The Future of the Cryptocurrency Market: The Golden Age of Quantitative Strategy From Simmons' experience, the market will eventually become increasingly efficient, but there will still be new opportunities emerging. Just as high-frequency trading became prevalent in the traditional stock market after the 2000s, and profits were gradually compressed as competition intensified, quantitative trading in the cryptocurrency market will also experience a similar cycle. At present, the cryptocurrency market is still in its early stages, and a large number of inefficient pricing and market sentiment imbalances still exist, providing huge arbitrage space for quantitative funds. However, as institutional investors enter, the efficiency of the cryptocurrency market is improving, which means that quantitative trading strategies also need to constantly evolve. In the future, we may see: More complex machine learning algorithms are involved in trading, such as reinforcement learning, deep learning combined with high-frequency trading. The opportunities for cross market arbitrage have decreased, and quantitative funds need to shift from pure technical advantages to a deep understanding of data sources and market microstructures. The impact of regulation on quantitative trading is increasing, and there may be regulatory requirements for algorithmic trading similar to traditional markets. Summary: With the assistance of AI+deep learning, as investors in the data age, we must evolve. After reading 'The Man Who Conquers the Market' for the second time, my biggest realization is that the market is always changing, and the real advantage comes from continuous adaptation and evolution. The success of Renaissance technology is not only a victory in mathematics and technology, but also a victory in a mode of thinking - data-driven, probabilistic thinking, and continuous optimization. For the small funds we manage, this means that we need to increase our efforts in data mining, combine traditional investment frameworks with quantitative strategies, and find our own market core advantages. For investors in the cryptocurrency market, we are currently in an unprecedented window of opportunity. If we can learn from the experience of the Renaissance and combine quantitative trading with the characteristics of the cryptocurrency market, we may be able to create a new investment paradigm in the future. Let's work together and improve together. 🧐