Interview with Quant Trader Eric: BTC Breaks $100K Mark, How to View the Future Market? | Trader Dialogue

Since the 2008 financial crisis, Bitcoin emerged. From the "Tulip Mania" in countless people's minds to a national strategic reserve, from 0 to $100,000, Bitcoin has gone through 16 years. Every step of these 16 years has been a thrilling history!

Upon BTC breaking through the $100,000 mark, Blockbeats and trader Eric had a chat. Eric graduated from New York University with a major in Data Science in 2013. Before becoming a full-time trader at a US stock proprietary fund, he also worked in traditional finance in venture capital. When he first entered the Crypto market, Eric experienced an 80% loss of principal, but after years of ups and downs in the capital markets, he achieved A8, A9 trading performance. Currently, Eric has his own quantitative team and is engaged in full-time quantitative trading. After the "Trump Pump" on November 5th, Eric also caught assets such as ENS, DOT, CRV, which saw exponential increases, and received a lucrative return of tens of millions of dollars. Trader Eric and Blockbeats shared their views on how to view the post-breakthrough BTC market and how to participate in the upcoming market.

View on the Future Market

Blockbeats: BTC has already broken through the $100,000 mark. How do you view the future market?

Eric: As a trader, seeing Bitcoin break through the $100,000 mark, I am indeed delighted. But the reason that truly makes me happy is not just about making money, but because the success of this operation comes from the perfect combination of planning and execution. I had already formulated a complete bottom-fishing plan back on April 29th and patiently waited for 97 days until I entered on August 4th. During the 123 days of holding, I experienced two significant profit retracements, but due to pre-established risk management, I overcame the emotional fluctuations and held until now, achieving satisfactory returns.

Breaking through $100,000 is a significant psychological barrier for Bitcoin, but I always believe it is just a starting point in Bitcoin's long journey. The breakthrough at $100,000 does not mean that the price will always rise; it is only a phase of the market trend. As a trader, I will not change my trading system due to price fluctuations or market enthusiasm. No matter how excited the market sentiment is, my operations are always based on the rules of the system and established strategies, rather than becoming aggressive or blindly following.

Regarding the concerns of many about "when to sell Bitcoin spot" or "where is the top of this rally," my answer is: trading can only respond to the market, not predict it. I cannot predict where the peak of Bitcoin will be, but I can be clear that when the price approaches the $115,900 area, I will closely monitor the market's order book performance. This is an area where large sell orders are currently concentrated, and it may also be a riskier point. If the price reaches this level, I will decide whether to take profits in batches based on the specific trend. Ultimately, the core of trading is to formulate response strategies based on the actual situation, rather than rely on subjective predictions.

As for the altcoin market, my view is very simple: the arrival of altcoin season often occurs when Bitcoin's price surge stagnates, and the market's hot money has nowhere to go but starts flowing into altcoins. Strong altcoins in this environment may experience doubling or even multiple-fold increases, while weaker coins may see price increases similar to Bitcoin. However, it is important to remember that altcoins are essentially speculative tools, and their purpose has never been long-term holding but rather accumulating more Bitcoin through short-term fluctuations. So, when you see an astonishing price surge in altcoins, do not forget this core objective.

In practical terms, I categorize altcoins into two types for handling. For those coins that have not yet broken through the weekly resistance level, I remain cautious at key points, taking profits in batches of 3% to 5% of the position size to guard against potential significant pullbacks. As for coins that have entered an exponential growth stage, I tend to adopt a passive profit-taking strategy, setting stop-loss levels below the EMA20/50 moving averages. This approach allows me to capture profits from the continuous upward trends without trying to predict the market top and systematically realize gains.

Lastly, I would like to emphasize two points, which are essential principles enabling me to sustain profitability in the market. First, the ultimate goal of trading is to make money and improve one's life, and withdrawals are key to achieving this goal. Whenever the market is hot, there will always be many voices hyping up a certain coin's potential rise to a specific level, but these voices are often emotional outbursts rather than based on rational analysis. Earnings should be cashed out to truly integrate profits into one's life. Second, do not attempt to time the market highs or lows, intentionally or unintentionally. The core of trading is establishing rules and sticking to them rigorously, as market movements often exceed our expectations. As traders, our role is to follow trends, manage risks, and not try to control the market.

Trade Your Trades

Blockbeats: In a bull market, altcoins tend to experience a general uptrend. How do you identify high-quality targets that undergo exponential growth?

Eric: The sector rotation logic in a bull market is that BTC leads the rally, followed by overflow funds driving up large-cap altcoins like Ethereum, and then rotating to small-cap altcoins. In this bull market of 2024, BTC led the rally, with overflow funds flowing into established public chain altcoins like SOL and DOGE, followed by some large-cap coins, and lastly, reaching small-cap coins. Of course, each bull market has different narratives, so each sector rotation slightly varies, but the fundamental logic remains the same. When screening for coins, this is actually a very broad first step. As long as you understand the overall market environment and the fundamentals of the targets, you can proceed. However, what is more critical is how to practically trade based on this target, meaning whether you can execute a trade at a highly cost-effective position. Screening for coins should be part of this step.

In reality, what we are doing now is purely coding. Once the code is written, it is pushed through our quantitative trading system to determine whether a certain asset is worth trading. For example, when was there a large single order entering the order book? This large single order, based on our backtesting data, is analyzed to see if a similar order size in the past has had a significant impact on the price. After filtering through similar logic, only then do I consider making a trade.

For a more recent example, let's take CRV. This asset has been very sluggish in its price action for the past one and a half to two years, even during the uptrend from the end of 2023 to the beginning of 2014, there was hardly any corresponding rebound. However, based on our quantitative data, CRV has had large orders placed by whales. The last time this happened was someone buying in late December 2022, resulting in a 146% price increase. In these scenarios, this asset is highly likely to rise. It's not just CRV; for instance, I have also recently bought SAND and DOT.

I have basically caught all these assets that have experienced exponential growth. It's challenging to manually identify high-potential coins unless you have a very strong research capability. Algorithms, on the other hand, make the process much more manageable and less strenuous compared to manual efforts. Additionally, I have my own community, but it's not a pump-and-dump group. Mainly, we provide standardized quantitative products to assist people in trading. Traditional pump-and-dump schemes are very unstable because everyone's capital and risk preferences vary, potentially leading to a "I win, you lose" situation. Therefore, I believe trading should rely on data, algorithms, and let science dictate the decisions.

Blockbeats: How did you build your trading strategy? Could you provide a few examples?

Eric: Of course. I'd like to start by sharing about the ACT asset. ACT has been particularly hot on any platform, with a significant amount of discussion surrounding it. However, from a trading perspective, you'll find that this asset's profitability and gain effects are not as strong. After its Binance listing, its price action was very choppy, filled with long upper and lower wicks, abnormal fluctuations, or immediate pullbacks after a decline. Although this asset may receive numerous endorsements from key opinion leaders from a fundamental perspective, the profitability of ACT from a trading angle is relatively poor. Due to excessive abnormal movements and the lack of observable patterns, making money with ACT is essentially reliant on luck. While I have also obtained some profits from ACT, this asset is not very friendly to regular traders.

From my own data perspective, I observed large orders placed at 0.61 and 0.53 for ACT. This observation allowed me to earn some profit, but overall, the cost is relatively high and not very friendly to everyday traders. Subsequently, I consulted our team's engineer for their opinion on this asset. Due to the insufficient data timeframe and sample size, testing the effectiveness of studying order book data is definitely less reliable compared to Bitcoin and Ethereum.
However, this year, I managed to catch the Bitcoin bottom through order book data. At that time, between $53,000 and $49,000, there were large orders placed, and utilizing my team's quantitative tools, I managed to buy near the relative bottom.

Then you will find that when the data volume is large enough, when there is enough data, from a quantitative perspective, it is possible to discover some alpha. There are some data tools in the market, such as Coinglass and the like. However, most of these tools have only taken the first step, filtering out the raw data, and mostly provide illustrative value. After filtering the raw data, the practical guidance for actual trading operations is not strong. From the perspective of my personal team, my own quantitative system will conduct statistics, such as how much volume is placed at a certain price level right now, and whether the appearance of this order at this price level in the past has influenced the price trend. It can be simply understood as a filter for the success rate of large orders. You must have a reference similar to it. If the same order has influenced past price movements, then statistically speaking, this time will also have a similar price reaction.

In addition to large orders, my own quantitative system also includes a band filter to determine whether the asset is oversold or overbought.

For example, in the case of ENS. First, based on my own quantitative tool indicators, I found that ENS has experienced overselling on the weekly time frame. In the past, each time the price was oversold, it rebounded by 147%, 56.74%, and 58.59% respectively. During the past bullish market, ENS rose from $9 to $30, so ENS entered my field of view.

The price movement of ENS in the past has respected my own code logic and quantitative trading system. After 3 rounds of validation, I believe that it will still likely respect this signal indicator this time. I entered the position at around $14 at that time. If a better entry point is needed, or a better buying point, it is necessary to combine a more granular time frame. For example, looking at the 4-hour time frame from the weekly level, and then looking at the 1-hour time frame when the 4-hour time frame is reached. After passing through the layers of the quantitative system's filters, the risk can be adjusted according to the time frame, and it can be continuously reduced based on a fixed logic.

Finally, I will enter based on the real-time order book (buy and sell orders). Even for a very small transaction, every step of the judgment and process that needs to be reached is indispensable. If you trade without your own strategy, you will only contribute to the market's profits. My overall strategy is to diversify investments and then use algorithms to filter out the most explosive assets.

However, sometimes the price may not respect my strategy, for example, the price may spike below the EMA 20 with a 1.5% range. Statistically speaking, this "spike" is completely reasonable, but once the stop loss is triggered, there is nothing that can be done. In such cases, it tests your trading strategy, and then follows the strategy to recalculate the risk and re-enter.

For example, let's take CRV. On October 29, my technical indicators issued a volatility warning signal for CRV across multiple time windows. It is worth noting that the last time a similar-level volatility warning signal appeared was on December 26, 2022, when CRV rapidly rose by 120%, eventually reaching a cumulative increase of 168%. This signal caught my attention, and CRV came into view. Assessing the characteristics of the asset is a key step in strategy execution. Through an analysis of CRV's price movement over the past year, it is evident that it falls into the category of a typical meme coin, exhibiting: 1. Following the market down but not up: weak trend with short-lived rebounds. And 2. Controversial fundamentals: lacks long-term investment value. Therefore, CRV is a type of asset that can only be traded spot and requires participation with a small position (not exceeding 10,000 USDT).

Combining the volatility warning signal with CRV's price movement, I entered the spot market near the previous low (0.25) to improve the risk-reward ratio. Entering at a low-risk position not only reduces potential losses but also provides ample room for upside movement.

Blockbeats: In a bull market, many people are hesitant to buy due to the rapid price increase. What advice do you have for empty-handed investors?

Eric: If you are empty-handed, you need to be patient. First, from a macro perspective, in the cryptocurrency market, opportunities abound because it is a 24-hour capital market unlike the stock market which has holidays and market closures. So, there are plenty of opportunities in this scenario. Therefore, there is no need to FOMO and make impulsive decisions. Do not think that if you missed the opportunity to get in now, there will be no opportunity to join later. Having such a mindset can lead to losses.

Looking back at the bull market in 2027 or 2021, you will notice that the price experienced several 20% to 30% pullbacks during the price surge. From the perspective of not trying to predict the market, you do not know when these pullbacks will occur, but they are bound to happen. Therefore, there is no need to worry about missing out on opportunities.

However, more important than waiting for a pullback "to go all-in" is to have your own trading strategy. This way, you do not need to predict whether a drop will happen. Instead, if a drop occurs, you will have already calculated your entry point, the specific position size, your risk, etc. Having your strategy and system in place is the natural way to go.

This question can also be extrapolated further. I think there are two points: First, if you missed the opportunity to enter and want to make money in this market, the issue is not how far you can see but whether you see clearly. When it comes to seeing the future, I can envision even 1 million. But in a situation where you need clarity, have my strategies materialized? Have I received any signals that lead me to a gaming and high-odds position? If not, please follow your strategy and, like a hunter, wait for the right moment. Second, concerning bull markets, there is a 20-30% retracement. This retracement will actually cause retail investors to lose money faster in a bull market. So, what is a bull market? A bull market is meant to allow prepared individuals to make more money, earn gains without losses, and enable those unprepared to experience gains.

Many people tend to oversimplify a bull market from a linear perspective. It seems like opening one more position will result in additional gains, or buying more coins will lead to more profits. However, the fluctuations in a bull market are often significant, and many people end up experiencing an "account rollercoaster" due to greed or fear.
Therefore, for newcomers with empty hands, it is unnecessary to overly focus on whether it's a bull or bear market. What's more important is to build your own trading strategy that has a statistical edge.

Holding Philosophy

Blockbeats: How do you usually manage your positions in trading?

Eric: Personally, I have four different accounts. I often tell my friends that in trading, "the more pits you step on, the fewer pits you step on in the future," and I believe this after trading. For instance, why do I have four accounts, including a spot account, a contract short-term account, a swing trading account, and an investment account? Typically, after earning from short-term trades, I transfer the profits to the investment account. Then, after making gains in the spot account, I engage in some low-risk position rolling. The swing trading account actually complements the short-term operations. You'll find that having completely separate accounts helps isolate risks. Though occasionally I can get heated, I never hodl a losing position, let alone incurring significant losses due to hodling.

For example, if I run out of positions and need to access funds, I must withdraw a portion from my investment account or transfer a part. However, these accounts are not whitelisted with each other. So, every time I make a transfer, I need to input a verification code and confirm to ensure the process. Through this simple operation, I calm down effectively, preventing losses due to impulsive trades.

Regarding specific positions, I think it varies from person to person because everyone's capital size and risk tolerance are different. With my own capital size, I actually have 40% of my positions untouched, falling under the investment category. While my 40% funds may be much more than most people, the gains from investments may cover some of my expenses. But for other individuals, allocating 40% of their funds to investments may mean missing out on many opportunities, with the returns not yielding much profit.

I believe that for traders with small capital, it's possible to fully utilize all positions. Traders should have a developmental perspective on themselves, shaping themselves into hexagonal warriors of trading. Even if a small-capital trader suffers a full loss, they can make up for it through work or other channels. So, applying the full position gradually builds up step by step and enlarges holdings slowly.

Specifically, in my current spot account, I am fully positioned. I began to build my spot positions in July, August, and September, purchasing in batches. As of today, for instance, for the assets I previously bought in spot like INJ, ENJ, SAND, DOT, and ENS, from the gradual closing in batches, I've closed 5.61% in total. I will patiently wait for opportunities in the remaining time. Simultaneously, risk control is crucial. Each trade's risk should be maintained between 0.5% to 2%, ensuring a statistically significant strategic advantage in the long run.

Blockbeats: How do you usually control your take-profit and stop-loss?

Eric: To explain stop-loss, I will use the example of ENS. I participated in spot trading for ENS, and usually spot trading is not a one-time event. Instead, it involves placing a premise in a large time frame window and then continuously trading on smaller time frames. The core of stop-loss is actually risk control. We need to calculate the entry position and stop-loss position carefully in order to calculate the difference, which can then be used to calculate the risk. Risk is usually considered advantageous statistically when controlled at 0.5%-2%. I often tell my friends around me that before making money, we need to calculate how much we are willing to lose. Only then are we qualified to say how much we want to earn. After we measure the risk properly, what is left is actually handed over to the market, probability, and the market trend.

As for take-profit, the current logic generally involves gradually pushing for a stop-profit. When a certain asset rises to a certain level, I will gradually start taking profits starting at 5%. If there are some large orders in the order book, I will consider and evaluate further. Taking $ENS as an example, when the price enters the expected take-profit area, the correct operation process is to adopt a phased take-profit strategy, taking profits each time the price surges while gradually moving up the stop-loss line to ensure locking in profits. The incorrect operation process is to hesitate and wait, thinking of waiting a little longer to earn more, or even adding to the position against the trend at the expected take-profit position, leading to increased risk. In conclusion, it is important to have your own trading strategy and strictly adhere to it. If you casually add to or reduce your position, it can lead to FOMO and emotional fluctuations, resulting in unnecessary losses due to emotions.