The Trader's Trilemma: Navigating crypto's complex trading world.
— 2 min read
If you are a crypto trader, you are always swinging between what to follow,
- The chart showing strength on technical analysis.
- The protocol making money behind the token. So focusing on fundamentals.
- Or following the crypto twitter consensus i-e "Narrative"
This is a complex problem. I call it the "Traders trilemma." LoL! (p.s. if you are new to crypto and didn't get this, just google "blockchain trilemma")
No matter what you follow, a human mind can rationalize anything and everything. We all do this consciously and sometimes without even realizing it. So zeroing down on one strategy can be stressful and confusing.
Let's try to solve this.
In 2020, we saw it with DeFi and in 2021 we saw it with NFTs and now in 2024, we are seeing it with memecoins. If you dig a little, you realize, people were just getting excited about these new shiny things due to meteoric price increases. They rationalized this behaviour by attaching some meaning to it.
Narratives generally chase price. Its the price which pumps leading to the investor behaviour change and then they try attaching some forced meaning to it. DeFi is the future of finance, NFTs would onboard maximum normies as they are easy to understand, Memes are liquid, have no unlocks, so its a Fck U to artifically bloated VC marketcap coins. The only meaningful utility that came out of crypto or web3 is "stablecoins." But since no one can make any money out of it, we question, is utility really important? Since no meaning is required, lets meme our way to success.
What is common in all this is the momentum. Momentum is the underlying truth that is very hard to manipulate. Everything else are supporting parts where conviction building gets difficult.
You can lable yourself anything, "hodler, shitcoiner, believer, gigabrain, 50IQ or 150 IQ, bagholder, part of a Cult etc, but all you are actually doing is chasing momentum.
to solve the trilemma,
- Fundamentals
- Technicals
- Narratives
I think, all these things are meaning attached to coins with momentum. Idea is to focus on technicals first. (momentum) and narratives later. Fundamentals (earnings) are probably the last thing crypto folks care about. (atleast for now)
So its really important to understand how momentum works.
Idea is to first understand momentum in a particular category and see the top coins by marketcap of that niche/category. This is just a glance. Not a detailed study of technical analysis. Just a 10 second glance through the top coins in the meme category should tell you whether they are in an uptrend decisively or not.
If they are, now you dig a little deep and study the top pumping coins in that category. A few days/weeks chart would get you an idea as to whther the gains are sustaining or not. The strongest, most fiercest movers are your coins. You want to ride them.
Idea is to find the coins that have been pumping for a while now (a couple of months) than head over to lower timeframes (dail,h4) and try to enter during pullbacks. A floor formation and coinciding with fib retracement of 0.618 where price shoots on lower timeframe unexpectedly, indicating trend shift on lower timeframes could be worth punting into.
There is lot of material on how to play momentum online. The ones I really like are https://x.com/ColdBloodShill This guy plays momentum really well and has put out some relly informative tutorials on momentum.