Alpha Insights with dHEDGE top managers
Welcome to Alpha Insights with dHEDGE top managers! We will be inviting some of our most interesting and successful managers to go into detail about themselves and their strategies.
Firstly I hope everyone has survived the recent pullback in the overall crypto market. Over $8.5B in liquidations! and huge 50% corrections to most assets. It appears to be a coordinated sell off from huge players in the market. Hopeful for a quick recovery but lets dive in with 2 awesome managers:
Who inspires you in your investment strategies?
JL: No surprise here…the great trader, Jesse Livermore inspired me decades ago when I first read “Reminiscences of a Stock Operator” to watch the tape and learn its behavior to get a deep feel for the asset. Also, reading his descriptions about how Wall Street was such a nascent “Wild West” thing in the early-1900’s provided an excellent roadmap on what to expect from the earlier years of Crypto. The so-called bucket shops and shady traders back then are (or were) eerily similar to what we have (or had) early on here in Crypto.
Also, Jim Rogers’ macro investment philosophies and way of investing (and his way of life) always stuck with me and the guy was essentially a mentor from afar to me and would always answer my questions and provide guidance. And while his investment timing wasn’t always the best, his ability to verbalize his investment theses and then invest in that belief and hold onto it no matter what taught me to look beyond the short-term moves and essentially devoted yourself wholeheartedly into an investment idea”
iB: Having managed over $3 billion in several funds since 1999, I set up a new firm in Shanghai to become an early high-frequency commodities and stock index futures trader in China in 2012. We leased a dedicated fiber-optic line linking our servers in New Jersey to machines we co-located inside the Shanghai Futures Exchange (SHFE) datacenter.
Since 1996, our trading strategies have evolved and learned great lessons from early technical traders such as Jesse Livermore, Richard Donchian, Richard Dennis, Ed Seykota, Ed Thorp, and Jim Simons.
What is the driver / what drives you in your investing strategies?
JL: The driver of my strategy is that ETH will be the overall best and simplest Crypto asset to hold here in this Crypto bull and to mainly hold it 99.9% of the time during this bull and when the various technical analysis alarm bells go off to sell then I sell. I only trade to sUSD if a high-probability short-term trade appears and try to inch out some outperformance relative to ETHUSD. In general though I use multiple timeframes to guide my decisions. From my professional investment management days I studied and back tested hundreds of technical analysis indicators and read hundreds of academia journals testing out these indicators… The vast majority of indicators out there are garbage. That’s all you need to know about my thoughts on “TA”. There are however a handful of very useful indicators which do produce high-alpha returns when used in conjunction with other high-alpha indicators. When a confluence of these indicators start pointing to the same thing that’s typically a good time to listen to them and provide a good opportunity to act on them.
iB: Our trading is model-driven. A model starts with our macro market views. We then use multiple strategies to test our trading thesis. After forming a working hypothesis, we construct a trading system consisting of a combination of trend following and other statistical-based strategies. The trading model receives real-time price data feedback for confirmation. If the ongoing price data rejects our hypothesis, we know our model is not working and a new model needs to be developed.
A single trading strategy is not a trading system, and we place little emphasis on entry strategies. Risk management and exit strategies are far more important.
What is your risk management strategy?
JL: My strategy will be to track 100% with ETH the vast majority of the time in this bull market. If major risks appear and break major trend lines or support levels then I plan to hit the major “abort” button and move the strategy to favoring cash across most timeframes. Luckily I haven’t yet had to do this yet in this Crypto bull. But as it matures the likelihood of having to perhaps do a major strategy change move to cash will increase. Overall I expect numerous ~ 30% declines in ETH during this bull market, similar to what BTC saw in 2016–2017, however those moves really aren’t what I’m that concerned about from a risk perspective.
iB: Risk management is at the center of our trading system. Each trade starts and ends with risk management.
For us, chart patterns represent what happened in the past. They do not have the ability to predict the future. After 25 years of trading and surviving in multiple asset classes and markets, we understand that we know less than what we think we know as the market is always changing. The system is built to take the unknown into account. But the key for successful trading is consistency plus the ability to deal with the unknown unknown. A hard stop is one way to deal with the unknown, but not knowing what we do not know is inherited in every trading system and it could and would destroy an otherwise “sound” trading system.
One way to deal with that is to always follow our written rules and keep our losses small and never over-leverage a position, no matter how attractive it looks at the time an order is placed.
Have you managed funds on another platform? If so, how was your performance?
JL: Yes, TokenSets where I started an ETH Momentum Strategy which was way more active then this dHEDGE one. At last glance it was up 626% (started May 26, 2020).
iB: No. We do have another pool/fund on our own DeFi platform at https://iob.fi/. It is up over 300% in 6 months. As a matter of fact, it also owns tokens of our three pools on dHEDGE, acting as a “mother pool.” We also provide direct links to the dHEDGE pools.
How can other investors get in touch with you?
JL: I have an amazing community of my dHEDGE holders over at my Discord where I can easily be found: https://discord.gg/ZKTgTw9E
Why should a potential investor invest with you?
JL: From my 7-year history of trading Crypto and also my professional and personal 25-year history of trading stocks, bonds, options and FOREX, I know the tendencies are very likely for retail traders to over-trade, to get rekt, to get burnt out, to get FOMO, and to overall only get a minority of bull markets while getting the vast majority of bear markets. And a common theme amongst the community of “Jesse Livermore Hearts Crypto” holders is that I’m their long-term “rock” when it comes to holding ETH. I’m basically the easy way for them to “buy, hold and forget”, which is (IMO) the easiest and best way for retail traders to capture the returns that come from these Crypto bulls.
Trading with rule-based algorithms, we are constantly evolving as the market is changing. We know what we don’t know and are constantly seeking to understand the unknown unknown. We do not try to predict the market, and we manage our trading with both macro modeling and technical, statistical methods.
Fun fact about you or about the world you’d like to share?
JL: By way of my 9-to-5 job (which used to be in the Wall Street investment world years ago but not any more) I’ve been to every continent except Antarctica and South America. It’s a very humbling experience to see that regardless of location overall human emotions are the same around the world.
iB: An unexpected event in 2015 propelled me to look into the fledgling decentralized currencies called Bitcoin and Ether. Having spent millions building a proprietary ‘black box’ algorithmic trading hardware and software system co-located in SHFE datacenter, my firm’s good time in being one of the biggest stock index futures HFT traders in China came to an abrupt halt when the local government banned HFT index futures trading and limited all order size to a maximum size of just 1 contract. Being aware of the danger posed by any centralized authorities led me to make my first purchases of BTC at $430 and ETH at $8. That further inspired me to become one of the first people to call Bitcoin to reach $1 million in 2016.
Thanks for joining us! You can invest with the the above pools here:
More About dHEDGE
dHEDGE is a decentralized asset management protocol connecting the world’s best investment managers with investors on the Ethereum blockchain in a permission less, non-custodial, trustless fashion. dHEDGE aims to democratize the investing experience leveraging the unique capabilities of Ethereum and Synthetix.
Supported by some of the biggest names in crypto, including Framework Ventures, Three Arrows Capital, BlockTower Capital, DACM, Maple Leaf Capital, Cluster Capital, Lemniscap, LD Capital, IOSG Ventures, NGC Ventures, Bitscale Capital, Divergence Ventures, Genblock Capital, Trusted Volumes, Altonomy, Continue Capital, The LAO, bitfwd (比特未来) and Loi Luu, Co-Founder and CEO of Kyber Network,
DHT tokens are a means by which users may utilize the protocol. dHEDGE DAO does not recommend purchasing DHT for speculative investment purposes. DHT tokens may lose value or have no value and may have no market.