Blockchain, Crypto and DeFi

Chapter 12Beyond HODL: Mastering the Art and Science of Crypto Trading

Preface

In a world where “blockchain” is the buzziest of buzzwords and “crypto” could well be the answer to the ultimate question of life, the universe, and everything (move over, 42!),¹ there lies a vast, wild, and often weird landscape known as the crypto market. It’s a place where fortunes are made and lost in the blink of an eye, where tokens featuring dogs can somehow become more newsworthy than most global currencies, and where the term “HODL” is not just a typo but a way of life.²

But strip away the memes, the hype, and the sometimes-religious zeal for decentralization, and what are you left with? Surprisingly, an old friend: traditional finance principles. Yes, that’s right. Beneath the veneer of revolution, much of what’s happening in crypto isn’t newfangled chaos—it’s good old-fashioned finance wearing a funky new hat.

Take our friend Beta, a measure of a stock’s volatility in relation to the overall market. In the traditional world, a high beta might mean a stock is prone to dramatic swoons and surges. In crypto land, high beta can mean that when Bitcoin sneezes, the entire market catches a cold—or throws a party.

Now, onto factor investing. It’s like taking the “sorting hat” of finance and plopping it onto the head of each cryptocurrency to see where it fits. Size? Check. Value? Check. Momentum? Check, check, and check—if it’s Tuesday and the Twitter sentiment is just right.

But how does one ...