How David Hoffman Uses Mandelbrot Fractal Patterns To Trade Crypto — Set Social Trader Spotlight
Welcome to the Set Social Trader Spotlight Series. In these posts, we’ll give you an insight into the launch traders that are part of the Set Social Trading platform. Learn more about Social Trading here.
Today, we’ve got an interview with David Hoffman for all of you to enjoy.
Hi David, nice to have you. Can you give us an intro of yourself?
I’ve been in crypto since the middle of 2017. My first ETH purchase was at $300, and that felt super cheap at the time! By the end of 2018, I learned that I was not as early into the 2017 mania as I thought I was.
During this time, I spent endless hours pouring over whitepapers and watching charts. It’s been a fun experience learning about the personality of each asset and the stereotypical patterns that are constantly repeated across time.
You told me about your regard for Benoit B. Mandelbrot. Can you tell us about he guides your trading strategy?
Benoit B. Mandelbrot is a pioneer of the intersection of physics and markets. Benoit was obsessed with fractal geometry and how fractals constantly are behind the many forces of the world, both organic patterns and market forces. One of my favorite concepts he talks about is how each market (or asset) has its own ‘memory’. Buyers and sellers of an asset will behave in a similar way to how buyers and sellers behaved in the past. This ultimately impacts how an asset will behave across time.
My strategy is much less TA, and much more of an intersection between probability and historical similarities across market cycles. Cryptocurrencies have very little “Fundamental Analysis” to do behind them; these assets are almost entirely driven by shared belief. Thus, these markets behave much closer to the fractal probability that B. B. Mandelbrot models, compared to assets in traditional markets.
That’s impressive. How did you find out about this strategy, and when did you realize that it could work?
During 2017, almost all assets in the crypto mania represented the same population of buyers and sellers. Consequently, the same chart shapes and outcomes would be found across many assets.
With enough pattern recognition, one could cross-reference the asset with the community and also with recent market behavior.
For example, it was no coincidence that Nano (Raiblocks, at the time) — one of the few DAG cryptocurrencies — pumped from $0.50 to $36.00, just one month after IOTA (another DAG) pumped from $0.25 to $5.60.
If you also knew where to look, you would have discovered that NANO was both very illiquid, and also had a growing and energetic community. Stitching all of these together, I was able to execute my largest win: buy NANO at $2.50, sell at $24 — In financial markets, luck is always involved, but understanding the personality of these human-driven markets is a key factor in crypto markets than isn’t found in traditional ones. This, of course, was during a bull market, where it is difficult to lose. The takeaway was the acknowledgement of the uniqueness of the opportunity, cross-referenced with the market personality at the time of execution
Is this pattern recognition strategy that you’d be offering on the Set Social Trader? If so what assets will be inside and what’s the average trade interval?
I pay attention to the crypto markets, the news cycle, and the market cycle much more than the average individual.
Now that we are in a time of consolidation to quality, the only crypto assets I will be trading are ETH and DAI, for the USD price of ETH is all the matters. My trading strategy will surround a balance of USD/ETH assets, and the local temporal news and market cycles.
What is something that people don’t know about you that you’d like to share?
I have executed a total of 7 trades on dYdX (one currently open). I have only cashed-out at a loss for two of those 7 instances.
Anything else you’d like to tell us or your potential followers?
There are traders, and then there are technical analysts. And then there are people that watch those people, and that’s me.
We hope you enjoyed reading this interview! David will be one of our premiere traders when Set Social Trading goes live in the next few weeks. If you’d like to be notified when David’s Set goes live, head here to sign up!