Guest of this episode: Raymond, Partner of Mossfire Capital
FC: What is the reason for inviting Raymond today? We actually wrote three keywords on Twitter: the first is the regular army, with 8 years of investment banking experience and a long time in traditional finance; the second is that I have handled APPs with tens of millions of DAU, which I think is actually quite difficult; the third is that I think you have a set of methodology. In fact, I haven’t written one more. I am quite curious about your personality, because I think we are quite similar, and we should both be more sensitive. I think it is not conducive to trading. In fact, I will have a discussion about personality in each issue, because I think everyone’s personality determines the trading strategy, and this influence is quite large. Let’s officially start and talk about your trading experience first. You came from the regular army. What is your mental journey? What made you enter this industry? How do you cross the psychological threshold?
Raymond: I'm not sure how to define my entry into this industry, because I have actually been buying coins for many years, but this buying of coins may be no different from buying stamps, and I'm not sure whether it counts as entering the circle. My simple history is like this. I was an investment bank at first, and then an Internet company. I bought coins in 2017 and 2018. At that time, others said that this thing would rise. It was introduced as a money-making opportunity. Of course, there are many narratives to say, such as the future financial reserves of mankind, and so on. But in 2017 and 2018, I didn't particularly believe in this thing, especially during that period, especially in China, there were many ICOs, so every time I interacted with this circle, the experience was very bad. At that time in Hangzhou, I remember that there would be people holding that kind of pyramid scheme conference in the hotel lobby, and I was very shocked. What kind of circle is this?
I really feel that I have a greater passion for Bitcoin and the crypto track, and I began to invest time and money after DeFi Summer. DeFi Summer is actually a very important time point for me. Before that, the crypto was a place to cheat me of my money. I felt that I was a leek, not a sickle, without a winning rate, and it was impossible to make money, so I left. After that, I found that I might not be a leek, or I had a certain winning rate. I dare not say that I am not a leek, but at least I have a certain winning rate, so I started to study. This is the biggest essential difference. After you have a positive expectation of this thing, you will be willing to invest time, enthusiasm, confidence, and funds, and a series of them will start to run slowly. It just so happens that the market is still good in 2021 and 2022, so I made some money and had positive feedback. If I invest more, there will be greater positive feedback, and I will run like this.
In 2023, it was a coincidence that some friends asked me to help them manage some money. At this time, I suddenly realized that the crypto might be a place where I could do things. At this time, I entered the crypto more full-time. This may be an experience I had before.
FC: What did DeFi Summer do that made you feel different?
Raymond: It was very interesting. I used to work in investment banking in Hong Kong, helping Chinese companies go public in the United States. An important job for going public is to do price discovery. For example, Alibaba's stock opened at 68 yuan, why not 67? Why not 66? This price is actually in the process of your road show. You have to build an order book, you have to have an order book, similar to the AMM pool you see today. You have to draw something like this and finally determine the price for it. There are countless factors to consider in the middle, but this is made manually, and its price is discovered manually. When I saw AMM, I might not understand it at first, but then I suddenly realized that this thing is not doing my previous job? There is a person who puts 50 apples on the left and 50 oranges on the right. They can be put into this model to decide who is better. I think this is a very magical thing.
Moreover, it was already widely adopted at that time. You could buy anything on Uniswap. I think for me it was a GPT moment or an iPhone moment. I could immediately think of a job of a former colleague of mine, which could be replaced by a smart contract or a protocol on the chain. At that time, DeFi Summer was a huge innovation in finance for me. It was not a scam. It had a positive impact on human civilization. It was a positive-sum game, not a zero-sum game. So at that time I thought this thing was worth a look and worth spending a lot of time on.
FC: I understand. You just said that making money has positive feedback, so I want to know, what is the biggest profit and loss you have ever made? Does it affect your trading style in the crypto?
Raymond: I don’t think my wins and losses have accumulated my trading style. Trading style is based on a person’s personality. First of all, I have to determine who I am, what my personality is like, what I like, what my risk appetite is, whether I have a gambling nature, or whether I am more conservative. These personal characteristics determine what kind of transactions I make, and these specific transactions may be classified into a certain style. I’m actually not sure what my style is. I think this may not be an option in MBTI. I’m not sure how to visualize this thing, but I may be conservative overall, so I basically haven’t lost a lot of money.
For example, if I don't understand something or I haven't spent a lot of time researching something, I may put less money in it, and even if I lose all the money, it won't be much. When I understand something, I will put more money in it, but at the same time I will keep a closer eye on it and stop loss, so it's not easy to lose a lot of money. The overall routine is still relatively conservative. I may be more sensitive to some macro things, so many times I may not make mistakes in some major decisions, so it is not easy to have big problems with the overall position.
The biggest amount of money I may have made before was actually from GLP. I remember that I seemed to have talked to you once last summer, and I told you about how I made money from GLP at that time. I may be more conservative and like to look at the big direction. The most money I made from GLP was in November and December at the end of 2022. At that time, GMX was very famous. I bought GMX very early. At that time, FTX collapsed, and GMX suddenly became very famous. At that time, I did such a thing. I thought that it was unlikely to fall again in the macro sense, so I started buying GLP and added 4 times leverage. The 4 times leveraged GLP is approximately equivalent to 2 times Beta, 2 times BTC, because half of it is Bitcoin, which means that I bought a 2 times BTC plus GLP at that time, which should have an annualized return of 30% to 40%, or even 70% to 80%. The 4 times added up to an annualized return of more than 100 to 200 or 300, but there will be some discounts in the middle, which is more detailed. In this example, I feel quite certain that it will come back in the macro sense, there will no longer be any possibility of further explosions, and Binance will not collapse. Overall, GLP is equivalent to my way of expressing a Bate leverage, which makes more money.
Another one with a higher multiple may be Velodrome, a DEX on OP. To be honest, in 2021, I didn't put that much money in Crypto. At that time, I might not have known the rules of the game and many things. I may have gradually put more and more money in after 2022, which means that my crypto allocation is getting bigger and bigger. Velodrome also appeared at that time, so the money was also bigger and I made more money. These may be able to express some of my trading style trades.
FC: Actually, what you said just now is very good. Who am I determines your trading style and your starting point. Suppose a person is new to this industry and has just started trading. How would you suggest him to break down these problems first? For example, you just said who am I, I may be a risk-averse person. If I am risk-averse, I may set a stop loss, or I don’t do contracts. Do you have a series of questions that can help him find his own trading method or direction?
Raymond: I think everyone’s background may be different. Some people have very traditional backgrounds. For example, they used to do stock research. These people may look at DeFi first, which is the easiest track for traditional people to understand. Some people have obvious technical advantages. Public chains and Infra may be able to express these advantages better. Or some people are very diligent in playing community and social media. Memecoin may be more suitable. After the background, it depends on the risk preference. Is he here to double or turn around? If he is here to double, he may buy DeFi-type things, but if he is here to turn around, the things he buys will be completely different, and his experiences will be very different. So I think it may be everyone’s personality. In fact, if you look at the process of his entry into the circle, he will make his own choice. It is difficult for you to test him and tell him to go here.
FC: I agree. You just said one is background and the other is his own risk control line. And the GLP you mentioned, I think this is more typical, that is, the opportunity for people who understand finance. I actually gave up the DeFi track now, because its biggest risk is uncontrollable, which I cannot accept. Just now you also said that GLP is a transaction because you understand finance, so you are willing to study the track and project. What I want to ask is, from the perspective of traditional finance, did you classify these trading styles when you came in, or did you think that what you accumulated in the past, you found that your opponents in this industry were too weak, and it turned out that I could beat them by playing like this. Did you have a thinking path for these things at the time?
Raymond: I think the crypto is very different from traditional industries. It is hard to say that anyone can come and strike down. I think even if Buffett or Soros came to the crypto, they would probably lose half of their money. In addition, traditional finance is also divided into many different categories. It is not two worlds. In fact, you can understand that the crypto is also a part of finance. It is just another type of risky asset. Many people do not say that Bitcoin is a triple-leveraged Nasdaq. The rules of the game within this asset are different. For example, there are many things driven by emotions.
I think if traditional financial people have advantages here, for example, people who have worked in investment banks and finance for a long time may be more familiar with the Federal Reserve and have a stronger feeling about the entire cycle. For example, if he talks about cutting or raising interest rates today, we will have some of our own readings in these things. When you listen to Powell's speech, you can probably feel whether he will cut interest rates in July or September. You will have a feeling about these things. I think this is an advantage. Another advantage may be that the judgment of some specific major events may be better, such as whether the ETF will pass and why it will pass? What will the next capital inflow be like? I think I may be more sensitive to these things, because this is originally part of traditional finance, so when traditional finance and the crypto are combined, people with traditional backgrounds will definitely have a better interpretation.
Third, I think people in traditional finance still have certain advantages when looking at the DeFi track, because DeFi is still finance in essence. For example, we invested in Pendle in February and March 2023. At that time, Pendle was only 20 cents, because Pendle was an interest rate swap product. When I bought it, many people said, why do you want to buy this thing? Have you been in Wall Street for a long time? People in our crypto don’t need this kind of interest rate swap product, but I think this product is well made, not like a liar, and all kinds of things are good, why don’t people buy it? At that time, from the background of traditional finance, I thought Pendle was a product that the world needed at a glance. At that time, Pendle had some competitors, but Pendle was obviously the best. So this may be an advantage. We will understand some deeper and more difficult products earlier and faster, but this may also be a mistake. It is possible that after I buy it, the crypto really doesn’t need it, no one uses this thing for a long time, and this coin can’t rise. This is also possible. But from a large level, in terms of the speed of understanding and accepting objective facts, it may be faster.
FC: I would like to ask Pendle, maybe I am just thinking in the crypto and I think this thing is too difficult to use and requires too much brainpower. Don’t you think the market space will be small?
Raymond: I don’t know if you remember that at the end of 2022, there was a narrative called real yield, which is real yield. At that time, many decentralized exchanges, such as GMX and the projects on Binance for free, were all real yield narratives at the time. As long as there is real income, it means that its income and principal can be separated. In the historical context, I discovered Pendle, which can separate GLP, and at that time Pendle had the function of separating GLP on Arbitrum, which I think is very powerful. Later, Lido was released, and there was the LSD track. Later, Points was released, and there was the LRT track, and Pendle was used by people. If it had only stayed at the level of GLP at that time, Pendle would still be very small today, so I just said that at that point in time, I thought this product was good, but it still depends on whether this product has the possibility of subsequent development.
FC: I have a follow-up question. How do you strike a balance between breadth and depth? For example, Mr. Ba talked about the circle of competence, but it is actually quite difficult to do, especially when you manage a fund. How do you strike a balance now? For example, should I look at more tracks, or go deeper into one track?
Raymond: I think in my personal situation, I don't have a good balance. I hope to be as broad and deep as possible. Why is it like this? Because it will cause anxiety. For example, the last cycle may be DeFi's year one. Everyone may have studied it for three or four years and are familiar with it. But suddenly a new track may appear, which you have never seen before. For example, Meme is a completely new track, and AI is also a completely new track. You have never seen this track before, and you have not seen 20 or 30 companies. How do you make an investment judgment? At this time, you have to start making up for it. This is actually the anxiety caused by seeing others rise in the market and finding that I don’t understand it very well, which forces me to do more homework.
But when I shoot, I still have to make a judgment. I know enough about this thing to shoot. If I still don't understand it, I may not shoot, and continue to study and see. We may still be more driven by fundamentals. We still need to understand more and better why it will rise and why it will fall. If you have no feeling at all, it is no different from gambling.
FC: I understand. We are just talking about trading strategies. Actually, you are managing a fund yourself now. Can you briefly talk about the strategy of your entire fund, including how you find a project and judge a project?
Raymond: Both of our partners are relatively conservative in character. We also like to study things and look at new things. So we are often driven by fundamentals. For example, before we invest in a company or a coin, we will basically do the corresponding homework, such as white papers, competitors, industries, on-chain data, holders, and tokenomics. The guests in the previous issues also mentioned that what everyone does is very similar. Many people will take out the first 1,000 coins and select them. You will find that if you use fundamentals (the fundamentals mentioned here are relatively general fundamentals, not necessarily a PE/PS concept, but the overall situation of the company), you will filter out from 1,000 coins. In the end, there may be only 30 to 50 coins that are worth watching and investing. At this time, what you do among the 30 to 50 coins is actually more of an Alpha judgment. Its information may be the changes in prices or some narrative hotspots.
Let me give you an example. For example, LIDO has fallen a lot recently, but we found that the protocol is very good. As a result, the price changed and fell by 50%. I think this may be an opportunity to take action, because the fundamentals of the project itself do not have any major problems, but its price has changed, which gives us an opportunity to take action. However, the prerequisite is that LIDO is on our whitelist. We found that there are thirty or fifty coins available for purchase among 1,000 coins, and LIDO is one of them. I only took action when its price changed. This is definitely the logic.
In terms of configuration, there may be a part of beta and a part of alpha. LIDO belongs to the alpha part. The alpha part will have different weights depending on our belief in different tokens, so the final ratio may be like this. We like to buy things when the market is relatively low.
FC: So what does low mean? It means relatively cheap. Specifically, for example, what does low mean when it comes to execution?
Raymond: When executing, for example, if it is in a bull market, if many things can fall below the 200-day moving average, I think it is cheap. Of course, this does not mean that you have to buy it on the day it falls below the 200-day moving average. It still depends on the market conditions of the day, but many times it falls below the 200-day moving average, I think it is a signal worth buying, this is the first. Second, many times we will collect, from the perspective of technical analysis, each coin has some of its own technical patterns, the distribution of its chips, so when it approaches a strong resistance or support before, these will be some specific signals to tell you that it is close to cheap. At this time, you can see that it will not fall another 20%, and the 20% will stop loss, but if it rises back, it will double. This is a judgment. I think the profit and loss ratio is very cost-effective, so I will buy it. This is the logic. Is it possible for it to fall 20%? It is possible, but at this time the corresponding stop loss will be triggered, and this thing will lose 20%, and you will make a mistake.
FC: I see that there are basically three directions. The first is fundamentals, the second is macroeconomics, and the third is the community, or the status of the entire community. In fact, I want to ask a question about data. Can you give an example of what the data is used for from your trading perspective? Because my own trading is a very large cycle band, so I am not so sensitive to changes in short-term data. When you do some smaller-level bands, how can these data help you make decisions?
Raymond: I think the data is particularly obvious in the DeFi track. Take Pendle as an example. Its TVL and its price are completely positively correlated. For example, at the beginning of this year, you had to make a judgment. At that time, EigenLayer's products had been released. Would EigenLayer's TVL continue to flow into Pendle? In addition to EigenLayer, are there other large-scale things like EigenLayer that will be on Pendle? Will Babylon, Solana and other series of things have the opportunity to be used by Pendle? Many times when you look at these, you may be looking at some specific big directions at a macro level, and then their data will directly reflect that he may have launched a new pool or a new strategy, and this part suddenly locked 300 million, 500 million, or 600 million in it. It is very obvious that many people are using this thing, which is a relatively transparent thing.
In DeFi, for example, Perps, you can look at trading volume; look at Open Interest and Lending, TVL is a core indicator; look at Dex, which is the trading volume of non-BTC Ethereum trading pairs. These core indicators will help you judge whether this thing is doing well, but no one has seen it yet. Like Aerodrome, it is actually a dex on base. Before the price of Aerodrome rose this year, the volume on it had already risen very fast, but its price had not yet responded. These are all opportunities. The reason for the subsequent rebound was that everyone found that the base was quite good, so what other good targets were there on the base? Aerodrome is one, so everyone bought it. So there are always some such data that can help you make some judgments. But at the same time, there are also some situations that will fail, such as Tranchess, which is a protocol where TVL has been rising, but the coin price has not moved at all.
FC: What is the reason?
Raymond: I think there are several things. The first is the ecosystem. Aerodrome is viewed by more people because of base, but people may not know which chain Tranchess is on. The second is that the way and ability of the protocol to promote itself vary greatly. The community discussion of Tranchess is not high.
FC: To be honest, we can get some information long in advance when we talk to some project parties, so will you talk to the project parties? For example, Pendle, do you think you need to talk to the project parties?
Raymond: We are a secondary fund, so for us, to put it bluntly, I can sell it tomorrow after buying it today. If I make a wrong decision, I can sell it tomorrow. So for me, the due diligence may not be as deep as that of the primary fund. But at the same time, the data of the secondary currency protocol is often more sufficient. Whether it is doing well or not, there must be more data to pull out. We will try our best to meet the project party, but it is not a mandatory requirement. 80% of our investment decisions have been made before meeting the project party. He may just say, I will check the box in the end to see if this person is a liar, whether he has ambitions, and whether there is anything I don’t know. I almost understand.
FC: When we were chatting privately, you mentioned the information advantage. I remember your original words were, "I may know some "information" earlier than others, so how do you find these so-called tracks with information advantages? Or as an ordinary trader, what should I do?
Raymond: It is difficult to find a specific track with information advantage. This does not really exist. Many times, it may be a specific case, and I found that I seemed to see something that others did not see. For example, Ribbon at the beginning of this year is a protocol that has been released for three or four years and no one has ever used it. It is an option. He launched a new protocol called Aevo, and this coin was later listed on Binance. But the situation at that time was before Aevo was released, when the price of Ribbon was 0.5 or 0.6, I suddenly noticed that someone was trading Aveo's Prelaunch token, which was more than two yuan at the time. I found out that Ribbon here was fifty or sixty cents, and Aevo there was more than two yuan, but at the same time, its token economic model made it very clear that its coins were exchanged at 1:1. This was actually one of our more profitable trades in March, because at that time there was a three or four-fold price difference between two coins that should have been exchanged at a 1:1 ratio. One of the prices must have been wrong. Of course, we didn’t expect it to be listed on Binance later. But even if it hadn’t been listed on Binance, the narrowing of the price difference would have at least doubled the profit, so I think these are the areas where we discovered information advantages.
I should have communicated with you about OTC recently, because I run a secondary fund myself, and many middlemen will send me OTC information about the project. For example, we knew very early that Solana would sell coins in the first, second, third, and fourth phases, and we knew how much merlin and bounce OTC would cost. This information often gives us some additional data points to help us judge. Now its VC can't help it anymore and hopes to buy at 500 million and sell at 700 million. I put a label on this coin in my mind. It may be a strong support at 500 million because the sellers have disappeared. These are some information points. Sometimes this information may give you a lot of points, and the final conclusion is that you don't want to buy it because you find that there are too many OTCs for this project. So his mind set is actually to say, can I judge whether I am the only one who knows this matter, whether I am the only one who can do it when I know it, or whether this matter is currently reflected in the price, whether it can be traded, it may be such a series of judgments, in the specific case, you can find out whether you have or not the information advantage, of course, it is easier to place a heavy bet.
FC: So this is a question that often bothers me. How can I judge whether I am the only one who knows this information, and whether it is possible that I will be the only one who knows this information in the future?
Raymond: I understand what you mean. Several guests in the previous episodes mentioned a similar theory, which is the information dissemination theory. Where am I in the dissemination chain? In fact, we have summarized this theory before, but we think this theory does not work well, because everyone's judgment on each thing at each point in time is at different places in the information chain. For example, I may be the first-hand information source on project A today, but I may be the seventh-hand information source on project B, but I am still me. Everyone has different information levels on different projects and different coins, so it is difficult to judge the information flow by labeling people. I think this is difficult to judge. But I think that many times, for example, some of the examples I just talked about may have some objective standards, and then there is a place where arbitrage can be made in terms of price. Some objective information can be dug out, allowing you to find that you may be able to earn more alpha.
FC: The next question is about your personalization. You have done a project with 30 million DAU in Web2 before, and you also posted on Twitter that many people are not qualified to start an Internet business. So I don’t know how your past experience helps you judge Web3 projects? I think it may become a burden sometimes, because you are not happy with everyone.
Raymond: In my personal experience, I have worked on product and led operations. Except for not being able to write code, I have worked in all positions in major Internet companies. So most of the time when I look at a product, I can estimate relatively quickly how high the replication cost and threshold are for doing this thing. I roughly know how many people I need and how long it will take to do it myself. This is a very clear feeling. Some things are difficult to do, some things are easily copied, and some people can easily replicate them. The easier it is to replicate, the lower the threshold, the less worth buying, and the less exclusive it is.
The second reason is that as someone who has managed products, I often have certain requirements for the development pace of a company. For example, when I first met a project owner, he told me that he wanted to do 5 things. I thought that was good, but two months later he hadn't done it. From the perspective of a product manager, why was the schedule not completed? Why was there such a long time difference? What was he busy with? I might have this feeling because I know how long it takes to do this thing. So when he didn't do it, I knew that he didn't submit all the homework for this period, so I could deduct points from him.
Many times, because we all have entrepreneurial experience, I can often roughly see what another entrepreneur wants, what he needs, and what his shortcomings are. It is also easier to judge from a human perspective. I think these may be some of the valuable help I have gained from my past experience of leading large products.
The second thing you just mentioned is about prejudice. I think this is quite obvious to me, because there is actually very little innovation in the crypto. Many times, everyone makes one thing and often makes it over and over again. I hate the same thing on different chains the most, without any originality. This kind of thing is very deductible, but in fact, sometimes you may still have to try to keep a relatively open mind, maybe the time stage is different. For example, if you make a Perp Dex in 2020, no one may use it, but if you make it in 2022, it will actually be used by many people. If you make Pendle in 2020, no one will use it at all, but if you make it in 2023, it will actually be used by many people. Maybe time has changed, space has changed, and the objective environment around you has changed. There was no PMF at that time, but there may be one now. (The same is true for Web2) The first short video was made like Xiaokaxiu Miaopai, and the earliest template of Douyin was very similar to them, but you can't say that Douyin is another Xiaokaxiu. Its objective environment has changed, which makes that thing more likely to succeed. This is quite clear.
FC: I think this change is very important, but how do you catch the change? How can you quickly tell that this time is different from the last time?
Raymond: I think it is quite difficult. If this thing comes out, I think based on my understanding, I am usually not the first wave person. People who eat the first wave, you need to have a more acute judgment of the objective environment. What is the second wave? It has already come out and it has (formed a certain) social influence, such as Friend.tech, or Farcaster, which are some new things that have come out in this cycle. It may be due to some special changes, changes in the ecology or changes in the flow of funds, which may make this thing work better. It is hard to say which one, but what I have to do may be to change my original prejudice about the track as soon as possible after this thing comes out, so that I can embrace this thing faster and look at it with a new mindset, so that it will be easier to catch the second wave.
FC: My perspective is like this. I usually look at this from the perspective of "people". I found that the first people to embrace new things are two types of people. One is the "debtor" person, and the second type is the people around you who have a good relationship but you look down on. I think these two types of people are the easiest to find Alpha and the easiest to miss. For example, when I came out of 36Kr in 2017, I was actually a "debtor" at that time. I was the most sensitive group of people to change the so-called class or change the current situation of life. And I also owed money when I started a business. At that time, I was more eager for new opportunities than anyone else, so (once there is a new opportunity) I would rush in. When these people start to make money, I will often keep an eye on them. For example, I feel like someone around me owes money and suddenly becomes rich. I will immediately go to talk to these people and ask them what they have done. Especially in our industry, I think this is a kind of, for example, you can see that the inscription is very typical, including when college students first come. The second type around us, I also talk to my friends, there is a kind of people who are often missed, that is, the brothers around us. Isn’t there a saying that there are no saints in the neighborhood, and Jesus is also the son of a carpenter, similar to this. So when someone around me starts a business and I instinctively think that he is not doing well, I will go and take a look. I think maybe my inertia will make me miss this type of Alpha. I think these two are what I use people to judge now. When this change occurs, I should not seize it. I just share it simply.
Raymond: I think what you said is very good. In fact, your mentality is very open. Let me give you the example of Inscription. It was very embarrassing at that time. When Inscription came out last year, a friend of mine started to tell me about this kind of thing. I never accepted it. The thing that impressed me the most was that he told me about it about every two weeks, asking me to play SATS. I ignored him. Later, this friend got it. It should be 0.5% of the chips, SATS. So you can calculate it. I don’t know if he sold it at a high point, but the return was very exaggerated.
FC: So he resigned?
Raymond: We are friends now, not employers. But I think after this incident, I immediately thought I missed this thing, so I bought ORDI again when it was more than 20 yuan. I played a lot of runes this year, and I think it’s okay, so when the first wave appears, if you still have the opportunity to get on the second wave, get on the train with a relatively clear mindset.
Let me talk about the example of Pendle. I bought Pendle for 0.2 yuan and sold it between 0.7 yuan and 0.8 yuan, which was the day it was listed on Binance. I thought this company was almost done, and being listed on Binance was already great. But I didn’t expect that it would do a lot of things on its own later. So I actually had a little inner demon later, that is, I didn’t buy Pendle very late. When I encountered this situation, new things happened, and LRT came out, you have to embrace the new information, get rid of the inner demon, and buy it again, otherwise you will miss more later. I think people still need to change in time.
FC: I have two last questions about trading strategies. For example, for sensitive people like us, what is in your current stop doing list? I believe you have thought about how to avoid the worst-case scenario of your strategy? What do you do? And I don’t know if your current trading style or trading strategy will become ineffective one day?
Raymond: Let me talk about my personality first. My personality may fluctuate a lot. I think our personalities are similar. We are not completely calm. My partner is a very stable person, like a robot, so we work very well together. I often say, no, we must buy it. I must buy it when it goes up and sell it when it goes down. Many times, I will express this kind of emotion, and he will help me balance it and pull me back to a point, which is equivalent to a second confirmation. Do you really want to buy it? Do you really want to sell it? My partner is a great help to me. But personality is actually very difficult to change. The rule I set for myself is that because of my impulsive personality, I will have a clear stop loss before buying anything before I make many transactions, especially at the fund level. The risk tolerance may be slightly larger at the personal level, but the risk tolerance at the fund level will be smaller. Stop loss is a relatively clear thing. That is, I think it has fallen a lot today, so I buy it, but it falls another 20%, which means that my judgment is wrong, so I will stop first, and I can wait until it falls lower before buying it. But at the beginning, from the perspective of a single transaction, a clear stop loss is still required. There are actually explanations for stop loss or stop profit. Don't gamble. What does gambling mean? There is no explanation for gambling. I buy something and then pray that Guanyin Bodhisattva will bless my coin to rise. This is called gambling. But if I buy a coin with an expectation of how much it will go up or down, this will allow you to have more rounds in the long-term game and you will have more opportunities to gamble. Assuming that your overall winning chance is higher than 50, the longer you win, the more money you will make. Therefore, this stop loss may be a relatively clear personal indicator for my personality to ensure.
There is another thing I think I did very badly, but I am also working on it. Don’t get emotional with your positions. The crypto is a very magical place. Many times, people will cry and shout, and must buy this coin, as if the world will collapse without this coin. This is a reaction of the emotional side of the crypto, especially Memecoin, which is extremely exaggerated. Many times, it feels like Memecoin is like your ancestral grave, and others can’t say anything. Being extremely emotional is a very bad habit. Try not to get emotional with your positions. If it falls, then sell it at a stop loss. If it rises, then sell it at a stop profit. Don’t just hold Solana because I believe it will definitely reach 500 or 800. Your emotions are far greater than your rational judgment. In fact, it’s very bad, especially under the volatility of the crypto. It’s really a waste of time.
FC: How do you usually withdraw from a relationship? What methods do you use?
Raymond: There is no other way. Just remind yourself not to develop feelings for it. The specific approach can be like this. For example, your child is definitely the best-looking, but if you ask another relative or friend if his child is good-looking, he may hesitate. You can take him for a walk more often and ask others if my coin is good. He will say, I'm not sure. These are cold water. If you pour cold water on him, he may not be so obsessed.
FC: I think I have a method, which is how I see the truth in the end when I see many of my friends' companies. What they do is, there are always two rows of people on the left and right. They habitually collect the opinions of those who support and oppose the matter, and they act as a referee. Especially the bosses of exchanges, they often do this, asking A and B, and they must find those who agree and those who disagree, and then they feel at ease. I think this is actually a good method for them to always treat themselves as referees and never athletes.
Raymond: Yes, but to be honest, the person who can implement this method actually has no feelings for this matter. He is a person who is not easy to have emotional connection, so he can do this. For those who are easy to have emotional connection, you will find that the number of people who agree with him will gradually increase, and the number of people who disagree with him will gradually decrease, and the structure of the team will change. I think it may be personality. I am the kind of person who is easy to get carried away, so I will remind myself not to do this, but some people may be born cold-blooded. For example, my partner is not easy to get carried away, so he may not have this problem.
FC: I understand. So I think the most important thing for us is to have such a partner around us. It is also very important for us to have a partner. I think there is another question that I am also concerned about, which is what do you think should be focused on in the second half? I now define the first half of the bull market as the halftime break. What do you think should be focused on in the second half? What is the logic?
Raymond: Is our bull market already at halftime?
FC: What stage do you think we are in now? You think it is before the bull market.
Raymond: I think it is still early, because everyone is still in a very chaotic state, including the delay of interest rate cuts, the election, and the current inflow of ETFs. These things are actually brewing and preparing for a bigger bull market. The further it is pushed back, the higher my expectations for the bull market are. This is how I see it, but try not to die on the road in the middle, which is more important. So I think it may be more cautious during the summer vacation, June, July, and August. Second, I think from the overall track, I have an idea recently, I don’t know if it is right, we can discuss it, because in our last cycle, L1 and DeFi are actually obvious tracks. The track means that there are dozens of horses running out at the same time, and they all run well, which is called a track. Like GameFi at the time, to be honest, there may be one or two miracles, that is, GMT and Axie are miracles. It is not a track, not many games have come out, so I think this track is different from a miracle. I think in this cycle, one is Meme and the other is AI. These are relatively obvious track-level opportunities. What does a track mean? No matter what you do in the track, you are right, everyone likes it, it has a high fault tolerance rate, has external input, and it is easy for others to take over. These are track opportunities. But Pendle is actually a miracle opportunity in this cycle, because DeFi no longer seems to be a good track, and there may be no track opportunities.
FC: I think this definition is quite interesting, track and miracle. Because I found that the essence is that the cycle is greater than the track and greater than a single project. When you choose a single project, you are actually looking for the Alpha of the track. Although I recognize this, I found that, for example, I also said last time about AI, it is because you focus too much on fundamentals, you find that you can't invest in anything, but in fact, you can buy anything, the AI track. In fact, I wrote in my title that you think the next three months may be a more dangerous time. Why do you think so? From a macro perspective. Another thing is that you think that in fact, if you look at the interest rate cuts in the past, we don’t look at specific indicators. Most of the interest rate cuts actually fall at the moment or when they start to fall. The retracement is very serious. Of course, there are many, such as the employment rate issue. I don’t know what you think this time.
Raymond: Let me first say that when the interest rate is really cut, there is always a retracement. From the historical data, you may be able to summarize such a pattern, but the actual situation is that this time is different. It is different because the interest rate may have increased by two points in the past, or decreased by half a point. For example, if you refer to the interest rate cuts in 2007, 2015, and 2018, they are actually relatively small interest rate cuts, so it will not last long, and it may be over in half a year. But this time, we started from 5.5, all the way down to the neutral rate and finally 2. If it is assumed that the average opening will be reduced by 25 points or 50 points, it will take nearly two years to reduce these interest rates. So this is a very long time to cut interest rates. I don’t think we will fall for more than two years because of this. I think at least in the first half of the interest rate cut, for example, from 5 to 4 to 3, there must be a relatively loose liquidity environment, which is generally beneficial to risky assets. This is something I believe in.
The first question is why do you say that the next three months may be more risky? Maybe my view is different from that of many people in the market, because we are now expecting that there will be two interest rate cuts this year. I think I may not be so optimistic. I think there may be only one interest rate cut this year, and the first cut may be in December. Why? From Powell's perspective, Powell is a 70-year-old man who hopes to leave his name in history. What is he most worried about? We cut interest rates, but the various economic data in the United States are too good, causing CPI to come back and re-enter the inflationary environment. If we raise interest rates again, this is the most terrible thing. It will directly turn us into the situation around 1982. At that time, the US government was in the early Reagan period. At that time, the interest rate was first cut, and then it was found that it could not be controlled and then raised interest rates. This will cause a huge disorder in the entire economic environment. In the next two or three years, the economy will experience major turbulence. It is a situation where you don't know whether to rise or fall. It is actually very dangerous. So in order to avoid this situation, if I were Powell, of course I would hope to find very strong evidence to support us. I must cut interest rates before I cut. This strong evidence may be that the CPI data is very good for a very long time, perhaps more than three months. The second reason is that the US has experienced some major recessions or economic crises. But does the US economy look like it has problems now? Not at all. So there is no urgency to cut interest rates. Why did they cut interest rates in July, August, September, October, and November? This is the first point. I think from the overall situation, our overall layout for the next three to five years, the requirements for the first interest rate cut are actually very high.
Second, the election is coming up in November. What is the biggest difference between these two presidents? One president will print money, and the other will print a lot of money. If we cut interest rates in September this year or in October, November, or December, and the new president takes office, if it is Trump, he may start to cut taxes and do a lot of things, which will greatly promote fiscal policy. At that time, its government will become an inflationary government and print money. What should the Fed do at this time? Different governments and different presidents will call for different monetary policies. If I were Powell, why would I rush to cut interest rates? Because the Fed is a reactive institution. When society changes, data changes, and the economy changes, I will take corresponding actions to counteract this change. The most unpredictable reaction is who is the president? How much money will be printed? Different presidents have different paths for cutting interest rates, so I think these two are very uncertain. Therefore, there is no need to think about July, August, and September. What will be accompanied by this process? In fact, everyone would wonder why the market was supposed to rise in July, but it disappeared in August and September, and it kept going up and down. I think there will be wide fluctuations. During the big fluctuation, it may be in early July, because ETFs will start trading again, with an increase in one wave and a decrease in August. Then, the closer it gets to the election, the more certain I think this bull market will be.
FC: I think this is a wonderful paragraph. Only if you have this background can you have this feeling. Another thing I want to ask is that many people judge the ETF. Why haven't I sold Ethereum? My logic is that the fundamentals of Ethereum have not changed. I think the logic of buying Ethereum last year and selling Ethereum this year are all emotions. So if I am the main force, this is too illogical. The fundamentals have not changed. The price is so low. To be honest, it is a state of very poor liquidity. It is very easy to operate. So I think it is an idea that goes against common sense. I don't want to sell it, because I think there is a high probability that even if the ETF will not pass, Ethereum will not lie like this. I don't know what you think of Ethereum's ETF. Do you think it will be the same as Bitcoin in the future, or will it have its own style? Including some of my LPs actually calculate, for example, BlackRock does ETFs. It must reach a certain scale to be cost-effective for it. Then it will calculate the scale of Bitcoin. I don't know how you view these things?
Raymond: Yes, but the scale and what he can do are two different things. But it is true that ETF is not a particularly profitable business, because his point is too small. For example, Cathie Wood has withdrawn from several ETFs because this business is not easy to do. Ethereum ETF has been approved now, and he is just waiting for S1 to be approved for trading. I think the overall inflow should be relatively ok in the future. One part of the inflow comes from itself, which is normal for everyone to use as asset allocation. The other part includes many options short arbitrage, and various funds and quantitative funds that need to buy spot. These are also very large. I think compared with the proportion of their respective marketcap, it may be less than Bitcoin, but not much less. I think this should still be a more bullish thing in July. It may bring about a situation that, because it changes the market sentiment, everyone says that Ethereum is good and Ethereum is the future civilization of mankind. Then, after a month, it may be found that ETFs are out low again. At this time, everyone collapses again. This situation may occur, but in the early stage, it should be more upward.
FC: Very good, I think we should stop talking about trading strategies today, and finally I want to talk about the issue of personal growth. I would like to know, for example, which person has a greater influence on your current trading style, or which knowledge content or book has a greater impact on you. If everyone wants to be like you, what should be their learning path?
Raymond: I check Twitter quite a lot. Actually, there is no one that I particularly like, or that I think is right. If you want to say it might be GCR, maybe everyone thinks it is a god-like figure. I think I may have learned a lot of different things. I may learn the skills of different schools, technical, emotional, fundamental, and each school has different people. I may take a look at them and will not set a clear limit for myself. It is not necessarily the right thing to set a clear framework for yourself or label yourself, because things in the crypto change too quickly, and this school may be eliminated in three months, so I think it is more important to learn new skills as much as possible.
FC: Where do you usually discover new martial arts? What new martial arts have you seen recently?
Raymond: I am on Twitter. I often check the timeline and collect things on Twitter. I have collected at least thousands of things. If someone writes a great article, I will read it. If I don’t read it, I will code it first. There are many such things. It is actually difficult to say. For example, I have been looking at meme coins recently, because this is not a track I am particularly good at. I was a LP of PEPE on the chain in 2023. I am probably one of the biggest people. There may be no one. At that time, half of the pool in Uniswap was mine. It is exaggerated to say that it was not only my money, but also the money of those friends. The core of our strategy of doing PEPE LP at that time was the Delta Neutral strategy, which means that we want to hedge it, so the whole strategy is neutral. I have zero exposure to PEPE, but PEPE has risen so much this year. I looked at our wallet that day. Now there is a lot of money, and the zero is almost uncountable.
So maybe everyone has different personalities at different times. At that time, I used PEPE as a Delta Neutral tool, but today I treat it as a Meme coin. I don’t know it well, so I will try my best to read all the KOLs, OGs, and people who discuss it on PEPE. I think the basic work should be done. In this process, I will find that, for example, some Meme traders have more experience, and their technical analysis is more mature than mine. I feel that they understand it better. I will communicate with some of the top 10 traders on Binance, which I think is quite helpful. Everyone says something different. Anyway, you can roughly hear the voice of the market and some inference methods of different schools. I think it is quite interesting. These will form a large unstructured information as a whole, helping me to form a personal subjective judgment. It may not be a single point of information that affects me.
FC: I think this is quite interesting. It is about learning methods. Suppose a new track appears. What is your quick method to make yourself understand the track and make a trading decision? What is the learning path? I think you must have a set of methodologies. Just now you mentioned finding the best people. Is there anything else?
Raymond: Let me give you an example. If someone tells me today that the AI track is a new track, and I know nothing about it, what I might do is to go to coingecko and pull out the coins in the AI track. I might look at the top 30, pay attention to what I should pay attention to, read the white papers I should study, and do the basic homework. It might take a total of one or two hundred hours, and I should have a relatively superficial understanding of this track. At this time, close your eyes and throw away the book. Think about what you can still remember, what may be more critical, who is whose father, who is whose son, how to draw this map, and imagine that after throwing away the book, you are given a blank sheet of paper again, and you write down what is it, and what may be more important. In this process, if you encounter problems and solve them, and then study and look again, I think basically one or two hundred hours should be enough to have a relatively clear basic understanding of a track.
FC: Actually, I think the process of closing your eyes is very important. There is a book called "10 times is easier than 2 times". I didn't read the content of this book, but I think the title itself is awesome. When I reviewed with my team, I found that you only made one or two important decisions in a year, such as which track to choose and when to buy. These are basically the two things. Including what you said after reading this, the most important thing is not that you read it. I believe that people like us often collect a lot of things, but in fact, sometimes I look back and think about which one I must read today. For example, I will go to see the sharing of the founder of 0xscope in a while. I think it's great. I will invite him in the next issue because I am really not good at tools. So I think this action itself may determine what you can really remember and what is most important to you. I think this is very useful. There is one last question below. Can you recommend a book or a person? Everyone can go and have a look. It will be helpful to you.
Raymond: I would like to recommend a book that I have not finished reading. It is written by Michael Lewis, Going Infinite, which is an autobiographical book about SBF. I think it is quite interesting. It tells about the process of SBF growing up from childhood to adulthood, and the process of his founding FTX. In this process, you actually get to feel the personality of another person, because that person's personality led him to make choices in childhood and in middle school, and one choice after another. In fact, every choice you make makes your life narrower, not wider. For example, if you choose to study mathematics and Chinese, your life may be reduced by half. In the constant choices, you are detailed to what you plan to do, but his choices are actually consistent, so I think personality is quite interesting. I think it is quite interesting to see the personality development process of a big man in the last cycle of the crypto in this process, and I think it will be different for some of my own trading methodologies, including some perspectives on things. This book is quite recommended.
FC: Thank you. The last time I saw Sam was in Shenzhen in 2018 or 2019. It was magical. They held an after party in Shenzhen at that time. It was quite interesting. Finally, I recommend everyone to listen to Raymond’s blog called the Guide to Immigrants to Mars. The latest issue is Raymond talking to my other partner Eraser about his previous investment in Africa. It’s quite interesting. We’ll stop here today.
