Dialogue Trader Episode 4, Guest Twitter @0xminion

Guest Keywords:

• OG Degen who entered the space in 2018, research and data are the weapons of trading;
• An expert in on-chain trading, with addresses marked as Smart Money by Nansen;
• Has his own trading strategies for both "value coins" and Meme Coins, previously captured $MAGIC $PENDLE $CANTO $BOME $SLERF $DEGEN.

TL;DR

1. Captured $PENDLE and $MAGIC through "Focusing on Small and Mid-Cap"

Key logic is as follows:

• Market cap between $10 million and $100 million, has not been listed on centralized exchanges;
• In the mainstream narrative of the cycle;
• Develop an exit plan based on the trader's trading psychology.

What impressed me is that Minion clearly knows whose money his trading strategy is making, as well as the exit logic:

• In the range of $10 million to even lower than $100 million, tokens traded purely on-chain are mostly small-scale funds, with experienced "gamblers" and traders involved;
• In the range of $100 million to $500 million, tokens listed on relatively large exchanges are traded by some secondary funds;
• Tokens with a market cap of $500 million or higher are traded by relatively conservative "American" funds, aiming to capture alpha in small coins, requiring relative certainty and good liquidity.

Minion only makes money from the first part, so I believe that during the trading process, one must clearly understand the buying logic of the latter two to ensure a high win rate. An extended insight is that the buying power faced by project parties at different stages is different, and the corresponding market strategies and communication paths should also differ.

The selling strategy is based on the expected returns of the "gamblers," choosing to exit accordingly. For example, in a bear market, it might be 2-3 times, while in a bull market, it could be 5-10 times, meaning selling before the consensus sell-off occurs. This depends on Minion's immersion in the community, which brings experience and intuition.

2. Blindly Following Smart Money is Not a High Win Rate Trading Strategy

Smart Money says that following Smart Money is not a good strategy. Because you cannot completely replicate smart money's trading operations, they sometimes make quick in-and-out trades and make many real-time adjustments based on the market. They only show you the side they want you to see.

Moreover, true smart money does not want people to know they are smart money for long. Due to safety and to avoid being front-run by copy trading bots, they often change addresses. So Smart Money is just a factor that corroborates your investment logic.

3. A Way to Keep Trading Strategies Effective: Divide Trading into Main Tasks and Side Tasks

Minion studies all sectors, regardless of whether he is good at them or not. He focuses on sectors he is proficient in or believes will run through the entire cycle, such as AI, treating it as a main task. Sectors he is not good at, like inscriptions, are treated as side tasks. Main tasks are for making significant profits, while side tasks are more about not missing alpha and experiencing industry changes.

For Minion, as long as there is an information gap between on-chain traders and centralized exchange traders, he believes his strategy will remain effective.

FC:

Let's start with your name. Why did you choose this name? Can you share the story?

Minion:

It's quite simple. I really like the Minions from cartoons, who are always chasing after this rather evil character to be their master. In English, "minion" refers to those at the bottom, hustling without much power, just working hard. So it has two meanings: one is that I like Minions, and the other is the inherent meaning in English.

FC:

Before we start the questions, let me introduce why I invited our Minion teacher today. I have a few keywords: first, you have been in the industry since 2018, right? You should have been at Huobi back then?

Minion:

Yes, I was actually at Huobi Australia in 2018.

FC:

Australia in 2018 was pretty good. That was the tail end of HSR, and there were some developers. I even attended roadshows there. The founder of Curve bought a house in Melbourne, and hasn't the market already paid off? (Inviting you) The second reason is that I remember when we chatted before, you mentioned that most of your assets were traded on-chain, around 80%, and on Nansen, there should be three or four of your addresses marked as smart money. Most importantly, I looked at your portfolio, and whether it was value coins or Meme coins, you captured them all. You shared with our fund a long time ago, and I don't know if the DegenScore is still being done, but I remember you ranked in the top 5, right?

Minion:

That's right. It has dropped a bit now because my positions have increased, and I have played less with some things, so I should be around the top 20 or 30 now.

FC:

How is that ranking determined?

Minion:

It's based on metrics created by the DegenScore team, for example, how many times you participated in FYI, SUSHI mining, Uniswap interactions, and other various activities.

FC:

OK. I think today I want to chat with you about a few parts: first, your trading growth experience, which I think is quite important because it determines why you formed this trading strategy; the second part is mainly about your overall trading strategy and what style it is now; finally, it's about your personal growth. Let's start with your growth experience. If you don't mind, can you talk about your past experiences in the financial industry and some important trading experiences?

Minion:

No problem. Actually, I don't have much background in traditional finance; I entered this industry right after graduation. Before graduation, I was doing some IT consulting, data analysis, etc., because my academic background is in computer science and finance. I was doing some IT consulting, and later, by chance (I entered the industry) because I had a course in graduate school where we wrote a report about blockchain. After writing the report, I found it very interesting and started researching it, which should have been in the second half of 2016. By 2017, I was in Australia, and the four main exchanges were quite small back then, with daily arbitrage opportunities of around 10%. I started playing arbitrage every day, and one day I noticed Bitcoin rose from $1,000 to $2,000 around January, February, and March of 2017. I realized that arbitraging was not as good as just buying Bitcoin directly, so I started researching Bitcoin mining, then Ethereum, ICOs, and by 2018, I officially entered Crypto. At that time, I was doing everything at Huobi Australia, including industry research, but during the bear market in 2019, there weren't many job opportunities in Australia, so I returned to traditional finance for a while, mainly doing data analysis, which was not really related to pure finance. By the end of 2019, I wanted to find a job related to Crypto again, but there were very few in Australia, so I targeted the Asian market and eventually joined TokenInsight, working on project research, industry research, and rating models. Later, at the end of 2020, I went to Huobi Global to work on listing and investment, and by the end of 2021, I left Huobi to join my current team in Hong Kong at GBV for investment research. That's roughly my experience.

FC:

I believe during your time at Huobi, you should have gained a lot of insights into what projects exchanges need, right? And at TokenInsight, you mainly analyzed fundamentals through data, which should have been quite helpful, I understand.

Minion:

Yes, that's about right.

FC:

OK, next question. I want to know what was your biggest loss or gain in a single trade? The core purpose is to understand which trades laid the foundation for your current trading style.

Minion:

The biggest gain was probably from the last market cycle. In this market cycle, there weren't many opportunities. The biggest multiple in the last market cycle was MAGIC, and the biggest loss was probably from this cycle's Meme coin.

FC:

If you had to describe your trading strategy or trading style, how would you describe it?

Minion:

It's more "gambling" oriented, fully on-chain, looking for information asymmetry. The essence of my project involvement is to find information asymmetry, where the market hasn't realized something yet, but through my research, including project fundamentals, the overall industry or sector research, and competitive analysis, combined with on-chain data analysis, I conclude that I believe this project might explode in the next 2 months or half a year, and its valuation is relatively low, with little discussion, but the team is decent. Basically, it's conducted in the form of information asymmetry.

FC:

I want to know if this so-called information asymmetry is what allowed you to make money for the first time? Or did you find this trading strategy because you lost money before, like listening to others or forming losses?

Minion:

You definitely have to lose money first. In fact, when I first started losing money, I felt it was due to inadequate analysis or not being comprehensive enough; you only saw one angle. For example, a friend once told me that Cardano was definitely going to rise. I asked him why, and he said the smart contract hadn't been released yet, and it needed to be released, so there was an expectation that it would rise. My analysis was that he didn't see the whole picture; he only saw that the smart contract hadn't been released, but he didn't consider Cardano's reputation in the industry or its market cap, or how the ecosystem was doing. So, in the beginning, losing money was generally due to not thinking through the situation comprehensively.

FC:

So you judged based on a single dimension, right?

Minion:

Yes, that's right.

FC:

Let's talk about your specific trading strategy. What is your current trading strategy and framework? I hope it includes several dimensions, such as your overall position allocation ratio, capital distribution, some buying logic, judgment logic, and exit logic. If you can, please relate it to a specific asset for clarity. Let's divide it into two series: Pendle and Magic as one series, and Meme series as another, as I think these are two different trading methods.

Minion:

First, regarding Pendle and MAGIC, according to the previous cycle's strategy, I only look at projects with a circulating market cap between $10 million and $100 million, which are purely on-chain and have not been listed on exchanges. In 90% of cases, I don't play tokens that have been listed on exchanges. I only play on-chain because the multiples can be significant; for example, from $10 million to $100 million is a 10x increase, which can be achieved in about 3 months. However, going from $100 million to $1 billion may take half a year or even a year. As the circulating market cap increases, the required entry capital also increases, and the rise becomes slower. Therefore, I only look for opportunities in relatively small and mid-cap tokens. The advantage of this approach is that the multiples can be large, and the margin for error is acceptable because if a project with a $10 million market cap doesn't rise, you're basically out of the game. This is my logic. Of course, you need to combine other angles or data for in-depth analysis. I bought Pendle and MAGIC when they were close to their historical lows and sold them when they were listed on Binance.

The reason for buying Pendle was that it was already close to a bear market, and the price was low enough, and the team was still active. So I thought I might as well take a gamble since its market cap was very small. Of course, liquidity was also poor, and I couldn't buy much. Based on my own judgment or how much risk I was willing to take, after buying, I generally aim for a 5-10x return in a good market, and if it goes above 10x, I reassess. Sometimes I might get a 20x return, but if I feel that 20x is unattainable, I might exit at 10x. My general strategy is to hold some good assets until they are listed on exchanges, and after they are listed, I take profits. Pendle and Magic are typical examples. The reason I mentioned a 5-10x return is that "gamblers" think this way; at least the on-chain "gamblers" I know generally aim for a 5-10x return in a bull market, and in a not-so-good market, it might be 2-3x, with the remaining profits being a so-called free ride, depending on how confident you are in the coin, mainly based on the project's fundamentals and the potential for being listed on exchanges, along with a comprehensive judgment of the data.

The other half is Meme Coins. I think Meme Coins are quite random, and I don't have a very structured strategy for them. I mainly captured Slerf and Bome; for others, I probably lost money or didn't make much, maybe just 20-30%. Of course, there's also Degen, which is somewhat between having fundamentals and being a Meme coin. Degen is considered a proxy for Farcaster; although it is a Meme coin, since Farcaster doesn't have its own token, from the perspective of "gamblers" or traders, Degen is a proxy for Farcaster. If Degen has a circulating market cap of $10 million, it is too small for the Farcaster ecosystem, so it must rise. But whether it can rise to $100 million or $500 million is uncertain. So Degen is a special case, while the other two are quite random.

Bome is a project where I recruited a few interns this cycle, and for the past two weeks, we have been studying Meme coins. I even posted a Meme coin on Pump.fun to research how Meme coins work, including their liquidity and how to market them. When Bome launched, it happened to be the day after I finished my research on Meme coins. I thought to myself, should I learn about Meme coins from Bome? So it was quite a coincidence; my subconscious action was to buy, and I did. After researching, I observed the market, and the volume seemed decent because it had a significant turnover. Later, I told the team that we needed to get it listed on secondary exchanges. After a night's sleep, it was listed on a secondary exchange. Then I checked the market again and felt it might go up. I gambled on Binance listing, and three days later, I found that Binance had listed perps. Generally, once it is listed on perps, it should also go on spot, although it's not guaranteed, but there is a certain probability. So I thought I might as well hold it until it was listed on Binance's spot. Later, Binance did list it quickly, and I found it quite miraculous that it got listed on major exchanges so fast. I wondered how much this coin would charge for listing, but later realized something was off. As the market progressed, I noticed that the "gamblers" I knew started dumping their holdings. At that stage, I basically took profits because the multiples were sufficient. I initially wanted to hold for a higher multiple, but I didn't have enough positions. The reason I decided to take profits was mainly that the market wasn't performing well, and the volume started to decline. I felt my multiples were enough, so taking profits was also a good choice.

FC:

I understand. I have a follow-up question: when you bought Pendle, did you look at the fundamentals? Because early on, when its market cap was below $10 million, what it was doing seemed quite niche, or relatively unknown to retail investors. Most people probably didn't know what it was doing. So if viewed purely from the retail perspective, do you think people know what they are buying? Did you worry about this when you bought?

Minion:

I looked at the fundamentals from a more speculative angle. My understanding is that if your fundamentals are good, then that should already be reflected in the price. When the fundamentals are not great, but you have the potential to improve, that's when I enter.

Regarding the retail perspective, for a $10 million market cap range, there are no retail investors; it's all "gamblers" playing on-chain. In fact, I summarized a gambling table issue during the last market cycle. In each market cap range, there is a significant percentage of a certain group playing. For example, in the range of $10 million to $100 million in circulating market cap, pure on-chain coins are mostly played by experienced gamblers or traders who enjoy gambling but with relatively small capital.

In the range of $100 million to $300 million, $400 million, or $500 million, those coins that have been listed on major exchanges are played by some secondary funds. Due to compliance or legal issues, they can only play with these coins that are listed on larger exchanges. In the case of a $100 million or $200 million market cap, the multiples are sufficient for them.

For coins above $500 million, those are blue-chip coins where large American capital wants to capture beta, believing the fundamentals are decent, and they need to provide a good explanation to their LPs without venturing into high-risk areas where no one knows anything, and the returns are also quite attractive for them. You will see that every time the circulating market cap rises, the gamblers will sell off completely at some stage. After being listed on exchanges, I won't play anymore because that's not my gambling table. My gambling table is on-chain between $10 million and $100 million. I won't touch the secondary fund gambling table. So, for example, with Pendle at a $10 million market cap, most of the time, only very speculative "gamblers" will play it. So you just need to think clearly about how gamblers think, and then it will rise. The buying logic for the $100 million to $500 million range is that secondary funds believe it will rise, so it will rise. For coins with a market cap of $500 million or higher, it's the large American funds that believe it will rise, so it will rise. Therefore, the thinking of the people at each gambling table is different, and you need to consider how that specific group thinks, and then you can proceed.

FC:

This part is fantastic. I once heard a project party say that after two market cycles, they suddenly realized what game blockchain is playing. This game is called the orderly exit of capital. It actually resonates with what you said, which is about when and who is making what kind of trading actions; this is essentially what it is. Although this matter deviates from the fundamentals, I think from a trading perspective, you are absolutely right. You have been saying that you need to find good targets in non-consensus phases. My next question is about your core ability: how do you obtain this on-chain information? Do you categorize it? What tools or systematic follow-up methods do you use?

My experience in non-consensus comes from recognizing non-consensus. For example, back in the day, everyone thought Polkadot was the next EOS, and I asked them why they thought so. They said it was because all the developers were Chinese. I asked if they knew what Polkadot was doing, and they didn't know either. Then I read an interesting article by Lao Mao from 2017, where he said Ethereum was the next BitShares. You realize that people who don't think will always have someone they think is the next big thing. So I believe this is how I discover non-consensus. I ask many people who they think the next big thing is. Of course, I missed the boat on Solana this round. From your perspective, how do you think this so-called information is obtained? How do you ensure you are ahead? What methods do you have?

Minion:

Actually, my overall strategy is a bit of a brute-force method: I sweep through all sectors and projects. I will go through all the coins within the top 1000 on Coingecko, categorizing them by sector. Among those coins, especially small and mid-cap coins, I look for projects that are still active and whether their activities align with the themes or environment of the current market cycle. You can't say that in this market cycle, someone is still working on an AMM; that's definitely unrealistic. I look for things that align with the current market cycle, such as the Bitcoin Ordinals ecosystem or the current Rune ecosystem. By sweeping through these projects, if I find ones that are still alive and discover that they have entered the Bitcoin ecosystem, and I have also swept through some of the Bitcoin ecosystem, if I feel that this trend is about to emerge, then I can buy that coin. This is because these are things that the market hasn't paid attention to.

For example, regarding Arweave, I noticed they upgraded their narrative to include AI. How did I discover that they started working on AI? I found that various ecosystem projects appeared on their Twitter in a short period, for instance, I might have seen about 10 in two weeks, and these projects were only followed by AR-related accounts, with very few followers, around 40 or 50 accounts. At this point, you know Arweave is going to work on AI, and you can check AR's price to see if it has risen. At that time, it clearly hadn't risen. This is a so-called information asymmetry; all information asymmetries basically come from Twitter and your own understanding. You sweep through every project, gather all the information sources, and then synthesize and organize them based on your understanding. Once you hear others say this project is doing something, that project is doing something, at that point, it is no longer front-running; the information asymmetry is no longer significant. What I want to do is to be among the first group of people to know, apart from the project parties.

FC:

To be honest, I might have known AR was going to do AO half a year ago, but those who were thinking about this matter together with him didn't believe AO would have such a large market response. My question is, when you say you sweep through the top 1000, how often do you do it? Secondly, how do you determine that a sector is a good sector in this cycle when you sweep through it? And thirdly, how do you know that after it transforms, it will definitely rise?

Minion:

Let me answer your second question first. I believe you shouldn't deny any sector. When you summarize and organize, you might say that DeFi exploded in the last market cycle, and now it has matured, so it won't explode in this market cycle. That thought is actually incorrect; you can't deny its potential for explosion. You can lower its priority, though. I believe that the compliance of DeFi and the risks of smart contracts are a bit high, and the logic of innovative contracts is relatively complex, so I think its potential for explosion might be a bit lower, but it doesn't rule out the possibility of an explosion. Therefore, I will prioritize these according to my understanding and then go through each sector one by one. Don't deny any sector because the entire industry is continuously learning and progressing. So somehow, one day, a sector might suddenly explode; no one knows when the old and new things combine and create something new.

Regarding your third question, I think it's about relative indicators. The market hasn't realized that Arweave is going to work on AI, and its price hasn't been repriced. What does that mean? You will see that at the beginning of this year, many projects were rising because Bitcoin and Ethereum were rising, and other tokens also needed to be repriced. But if you look at AR's chart, it basically hasn't been repriced. So first, it hasn't been repriced; second, the market doesn't expect this to happen, which creates a situation for rising.

As for your first question, I will systematically go through everything at the beginning of each cycle. Within a cycle, I might divide it; for example, if the market is relatively empty, I might sweep through again to see if there are any interesting targets and what they are doing. I also want to understand the progress of some targets that have risen or not risen, or their relative evaluation within the entire sector, comparing A and B, which are in the same sector, and observing the changes in their relative valuations.

FC:

Next question. You should have three addresses marked as smart money on Nansen, so I want to ask, do you think following smart money is useful for trading? Or how should I follow it to have a good strategy?

Minion:

I think you can follow smart money, but it depends on your own understanding and strategy. Smart money is just a way to help you validate something more deeply; it's a form of reinforcement. This reinforcement means that if I think a target is good and suddenly find that a smart money address is also buying or thinks this target is good, then my confidence increases. However, if you purely follow what smart money buys, I think the returns are not that high. Because so-called smart money has many personal strategies; for example, I think this coin will rise, so I buy a little bit to play with it for half a year and then forget about it. It's not that I'm seriously buying this coin because my position is relatively small. The reason I often change addresses is primarily for security reasons, as I play with relatively many projects. Having many projects increases the risk of contracts, including smart contract authorizations, and there have been many incidents, as well as cross-chain issues, etc. Of course, some people say you can unapprove, but I think the gas fees are not worth it, so I usually just change to a new address. Another reason is that I don't want many people to know my address or for many people to follow my address to buy. Because sometimes following my address can lead to losses, and significant losses at that. This is something I have experimented with internally; if you purely follow my strategy to buy, you will generally lose money. My approach sometimes involves quick in-and-out trades, or I might be watching the market all day or keeping an eye on the project. By the time others realize what's happening, it might be a bit late. So, changing addresses is mainly for two reasons: the larger reason is security, and the second is that if an address is being tracked by too many people, I will also change it. I have one address where every time I buy small coins, some bots follow me to buy, and some bots use MEV strategies to front-run me, which makes it difficult for me to buy sometimes. So I tend to change to a new address relatively frequently, transferring Ethereum to an exchange and then withdrawing it to a new address.

FC:

I understand. So, in reality, true smart money doesn't want people to know they are smart money for long, right?

Minion:

Yes, they will only show you what they want you to see.

FC:

I find your statement quite surprising. Essentially, you should first think a target is good and then validate it through smart money, rather than just buying what smart money buys.

Minion:

It's fine to use others' perspectives and operational forms to validate that you think a target is decent, but if you start by completely following smart money to buy, the win rate is actually not as high as people think.

FC:

Got it. I have two more questions. First, do you have a stop-doing list? Have you thought about when your trading strategy might fail or what might cause it to fail?

Minion:

At the end of last year and the beginning of this year, I was frantically looking for inscriptions and various things. During that frantic search, I actually thought about whether my entire strategy would continue to be effective. After some practice, it turned out to still be effective, but the degree of effectiveness was not as great as I imagined. The reason is that everyone's attention is too scattered. The effectiveness of my entire strategy relies on a clear sector rotation. For example, after AI rotates, it moves to gaming. However, at the beginning of this year, the entire market was in a state where everything was exploding, and attention was very scattered, with no clear main tasks. In that case, the efficiency of my overall strategy was not that high.

In fact, I have structured my trading approach into main tasks and side tasks. Main tasks are to find relatively obvious or important targets or sectors I am proficient in, while side tasks are scattered things, like those with very poor liquidity that I can't play but need to understand and research. For example, it was quite obvious that the initial liquidity for inscriptions was very poor, and it wasn't instant liquidity; it was in the form of limit orders, like NFTs. I don't particularly like this form because while it looks like there are large multiples and potential profits, when you try to sell, you can't find buyers, and you have to keep lowering the price to sell, which I don't particularly enjoy. This is similar to my side tasks.

Main tasks are things I can understand or like. For example, I believe AI should be a sector that runs through the entire cycle, so I need to pull it out as a main task. Other things, like Solana, have changed in the market's perception due to various reasons, so Solana also needs to become a main task. Side tasks, like Meme coins, I think require in-depth research and understanding, but I don't necessarily want to treat them as main tasks because I think it's difficult to make significant profits through heavy positions. So I categorize them as side tasks, making small profits and small losses. I research all sectors; regardless of whether I am good at them or not, I need to look at them. However, sectors I am not good at can be treated as side tasks, while those I believe will run through the entire cycle can be treated as main tasks.

I believe my entire strategy will remain effective as long as there are on-chain gamblers and main tasks. As long as the initial circulating supply is relatively small, below $50 million, and not every project issues tokens and immediately lists them on exchanges. If all projects issue tokens and go directly to exchanges, then my strategy would be useless. However, as long as there are projects issuing tokens that do not go directly to exchanges and the initial circulating supply is relatively small, and the future unlocking ratio or potential selling pressure is reasonable, I believe my overall strategy will continue to be effective.

FC:

OK, I understand. Lastly, if you were to train your colleagues, what do you think is the most important thing for them to do well in trading? And what is the one thing they must not do?

Minion:

The most important thing in trading is… right?

FC:

Yes, what do you think is the most important skill or knowledge they should master first?

Minion:

For me, the most important thing should be a clear understanding of the industry and a solid research foundation. Because if your research foundation is solid, you won't be afraid wherever you go. In this industry, whether you work for a project, do data analysis, investment research, or trading, any position or role in this industry requires a deep understanding of it. The one thing you must not do is let your mindset crumble, such as FOMO or similar types of mindsets.