退休需要多少钱？| 1000x

We’re filming this at the top of the market, at $42K. It is the top for many reasons, but one of them is my engagement on my tweets this week. It’s been ridiculous.

Jonah, most of my tweets are tongue-in-cheek. I really hope nobody takes them as gospel or very seriously. I try to have fun on Twitter. Every now and then I’ll post real thoughts, but sometimes I just like watching what people do with statements.

I tweeted out that dog coins—animal coins right now, like dogwifhat and catwifhat—are like being in a casino where the slot machine is 55% likely to win. You just abuse that button until it stops working or until you get kicked out of the casino. I tweeted that at what I thought would be the dog top.

What’s crazy about this market is that everybody’s a genius now. Everybody knew that Solana was going to rip to the $70s. Everybody knew that dogwifhat, Bonk, and Sonic the Hedgehog were going to make them rich.

Can you put some respect on the name?

Sorry—dogwifhat.

No, it’s dogwifhat.

You don’t have a hat.

I don’t have a hat. Actually, I do have a hat.

I guess people watching on Spotify can’t see this, but that’s a good hat.

It’s a great hat. I got it at this restaurant at the top of a mountain in Puerto Rico called Aventura 4x4. You can only get there if you have a 4x4. The name speaks for itself.

Do you have a 4x4? That’s the million-dollar question.

Of course I have a 4x4. Are you kidding? I drive a Ford Bronco Sasquatch Wildtrak package. Why would I drive anything differently? That thing is a beast. It comes with 32-inch stock tires. It’s sturdy.

I don’t want it to feel frothy. I want this to be a nice, sustainable rally that gets us all rich for another 4x or 5x. But this is frothy to me. There’s no way this continues, Jonah. I’m calling it now.

One of the top signals is when you’re sitting with your buddies and giggling about the names of coins that have just 100x’d in a week—not 2x, not 5x, not 10x, not 50x. You’re giggling at the name of a coin that has 100x’d in a week.

There was a 1,000x one. I think it was the dogwifhat one.

Did it? I know it had to 1,000x because it started so small, but how long did it take?

I thought it had been around for 10 days or something like that. I don’t know.

At this point, if you’re paying attention to crypto and you’ve been asleep or uninterested during the whole bear cycle, and now you’re waking up and getting back in, you’re looking at Crypto Twitter and saying, “Oh, wow, Jupiter’s going to do an airdrop. Oh, wow, I should buy a Saga phone to try to get some airdrop tokens. Oh, wow, all these people who claim to be rich are talking about all this airdrop money that just landed in their accounts that they’re not liquidating.”

In the absence of an actual use case—sorry, a new use case, some technological unlock that’s occurred in crypto—this just feels frothy to me. I’m nervous here.

Here’s my bear argument, Jonah. This is my dumb bear argument. What drove this rally? It was speculation on the ETF.

I’m pulling up data on the CME. On October 11, there was $1.89 billion in open interest on the CME. We peaked at $5.11 billion on December 7, and now we’re down to $4.71 billion. We’ve hit a plateau of TradFi front-running the ETF.

I think the people who are ready to buy on the news are basically just the algo traders and the actual inflows. You have at least $3 billion—let’s discount it by half and say $1.5 billion—front-running flows from TradFi that are looking to exit on the launch of an ETF.

You have $1.5 billion of selling that’s probably going to happen over the course of a week, if not sooner. Then you have a bunch of people outside that looking at this and saying, “I’m going to sell once they start selling.”

You’re already seeing it. Open interest is down $400 million on the CME over the last 10 days. There’s a ridiculous amount of froth in the market. Bitcoin has gone sideways, consolidating for the first time since $25K.

Funding rates aren’t crazy elevated, but they’re elevated. Those CME futures are giving you 15% to 20% annualized yield with no problem in this market. It’s pretty crazy to me. It just shows you that there aren’t enough crypto-native shops out there doing spot versus futures.

I think you have to start getting on the sidelines now. If you’re not on the sidelines, you could be in for some pain. A very easy way to get back in is to start buying above $44K if you’re wrong.

I’m not doing anything right now. I’m holding on to my core longs. I didn’t participate in a lot of this crypto rally. I almost clicked on Bonk—I really liked Bonk—but I didn’t.

If I were holding a bunch of dog coins or frog coins, or Bitcoin ordinals that are BRC-20 versions of ERC-20 tokens, I would be selling those. But I’m not that kind of trader. I think it’s tough to buy those with any real size anyway. You can make $100K or $1 million, but you can’t put $5 million into these things and turn it into $50 million.

I guess with Bonk you kind of could, but that’s besides the point.

Sadly, it’s not.

It’s not. Now, there are people out there with very sophisticated models for tracking these meme coins. You have to understand that I’m not kidding: there are people scanning the mempool for new contracts, seeing whether liquidity is locked and in which pools, comparing them against databases of contracts known to be rugs, and comparing them against phrases known to be associated with rugs.

They immediately snipe if something looks good. You can ingest Reddit data and Twitter data to track the activity of these coins. There are sophisticated operations out there pumping these things.

Every now and then, you get a coin that breaks into the mainstream. Tech bros and Silicon Valley bros, for some reason, really like dogwifhat. I saw a few people tweeting about it and saying, “This is really funny.”

Which I guess makes sense. Their sense of humor isn’t great.

Why is it always a dog? You’re crypto-native. Why?

No, now they’re cats too.

I think the big ones are always dogs.

Avi, what’s amazing to me about crypto is that when I was professionally trading crypto every day, I interviewed a lot of candidates for crypto trading jobs.

You’d talk to some of these people and they were absolutely brilliant. They had been doing advanced, systematic trading research from their dorm rooms or wherever they were hiding out. They’d have a day job, then spend all night doing the kind of mempool-scanning systematic analysis of meme coins that you’re talking about.

Two years ago, people were just building meme bots as side projects that were generating sustainable income for these kids. I was blown away. I was coming into crypto from commodities, thinking, “This market is frontier. Everybody’s going to be absolutely idiotic. There’s not going to be much systematic trading going on.”

In reality, when I got there, I was blown away by the sophistication of some of these young tech nerds who were building systematic and quantitative strategies to trade crypto. It was actually competitive.

Meanwhile, on the institutional side of things, in assets like commodities—or, frankly, CME futures in Bitcoin—you can clip an easy 15% to 20% just buying spot and selling futures. Coming back to the commodities market, what I’m realizing is that there’s a pretty low-hanging fruit here, because none of those kids care about jet fuel or gasoline. They all want to trade frog coins.

To wrap up this thought, I’m realizing two things. Number one, if you’re going to day-trade crypto, you have to be sophisticated. It’s not a market for idiots anymore, and it hasn’t been for a long time.

Number two, if this world of futurized, institutional-grade products like CME Bitcoin futures—and literally anything related to commodities—still has so much low-hanging fruit, I think it tells you that the walled garden of the CME and many of these other big exchanges just isn’t inclusive enough.

Maybe that speaks to crypto’s mission of democratizing finance. I think it’s kind of unfair that only a few people can touch some of these commodities and Bitcoin futures. Otherwise, there wouldn’t be this yawning basis arbitrage.

It’s literally arbitrage. It’s risk-free.

Basically, anybody who wants to touch it—or anybody who can touch it right now—is trading other things. They’re in other places. That tells you how much froth there is, how much perceived froth there is, and how much excess capital there is.

As a participant, you have to ask, “Where should I put my capital? What’s the best use for my capital?” When you have a basis trade at 20% or 25%, and a lot of people are voting with their feet and saying, “Not good enough. I’m not going to close that. I’m not bringing that to 20%,” that tells you the mindset.

It tells you how allocated people are. It’s a very disconcerting thing.

Bitcoin always tends to top in December or January, except for this January. This January, it ripped, but that was after a really bad year.

If you rally until the end of the year, I do think that over the next 2 weeks people are going to take some time off and liquidity is going to dry up. Everybody who’s allocated for the ETF is probably already allocated for the ETF at this point.

If the ETF gets approved before January, I don’t think people are making new allocations to the ETF until after January. That makes me think BlackRock probably wants this thing to go live in January anyway. Fidelity probably wants this thing to go live too.

My view here is: pullback, reset, wash people out, and then you start to get a rally. If Bitcoin sells off to $37K or $38K, you start chipping in at $40K. At $39K, you add more. If you get to $35K, you keep loading the boat on your cycle bags.

Post-ETF, we should run pretty hard. Maybe we pop into the ETF and then come off, but I think inflows are actually going to come in. I’m going to put my reputation on the line and say there are going to be some pretty substantial inflows—more than we expect.

When we talk about those inflows, I hope people go and listen to the previous episode of the 1000x podcast, “How Much Crypto Should You Own?”

I saw something recently in the news saying that million Americans own crypto. That’s a pretty pathetic percentage of Americans owning crypto. I think a lot of people are going to look at what 2023 was like in markets and say, “The S&P did well, but Bitcoin—what is this? The best-performing asset by an order of magnitude. Maybe I should have 1% or 2% of my portfolio in that, just in case.”

There’s an easy way to do it. I see a BlackRock commercial 3 times every football game. People might think, “Maybe I should buy some.”

Ultimately, I think you’re right. We’ve been saying this on the podcast for a long time: the ETF is going to debottleneck a lot of interest in Bitcoin that can finally flow in.

I don’t think there’s enough capital sloshing around in the little crypto space right now to front-run that, so I do think it’ll cause a run. I’m just worried about the volatility of all this, because other than the ETF, there is nothing. Society is not using crypto in new ways.

I think it will soon, maybe even next year, but until that happens, we’re not really seeing that. Solana is picking up on a narrative. It’s not picking up a bunch of merchants all over the country adopting it for payments.

It kind of is. Solana is really picking up on a narrative. It’s not picking up on a bunch of merchants adopting it for payments, but I think that comes with time.

I also know that in the beginning of 2024, you’re probably going to see a lot of new applications come out. Goldman Sachs has talked about launching products, and we’ve talked about this on previous podcasts, but there are a lot of people talking about launching tokenized products right now.

I think that’s going to be a driver. They’re probably going to use public infrastructure. They’re probably not going to use their own internal infrastructure, at least for now.

The user experience of Solana has gotten so much better—swapping tokens, navigating, storing your wealth. It’s coming. It’s actually quite nice and easy to use, so merchant acceptance is probably coming soon too.

Jonah, do you have a Saga phone?

I don’t. Did you pick one up?

No, man. I’m married. I don’t need to impress anybody with this crypto shit. I’m good. I’ve got an iPhone—an iPhone Mini, actually. Check it out. It’s tiny and really light.

The Mini?

At this point, I’m wondering whether we need a new use case spreading its tentacles into the traditional world in order to sustain a crypto rally. Do we need that?

Let me pose a question to you. Let’s say that in mid-2025 the federal funds rate is 1%. Is Bitcoin up or down?

You don’t need to pitch me on being bullish Bitcoin. I’m literally so bullish Bitcoin that I can’t see straight.

However, watching what ETH did during this huge rally, and how spectacularly it underperformed, has made me wonder whether we could end up in a world where Bitcoin just gases higher because it has a true use case, while a lot of these other things don’t.

That’s a fair point on Ethereum. I think Ethereum is in a really tough spot right now. I think it will get a rally because the narrative will be the ETH ETF that comes out. That will happen, and you probably want to buy ETH/BTC for a month or 2 after that.

But Ethereum is in such a bad position because all these meme coins popping off on Solana have made people go to other chains. They’ve made people realize just how much better the user experience is on basically every other chain that exists, including all the L2s on Ethereum.

The propensity of people to launch products, and the types of people who are going to go build on Ethereum, have changed. The crypto world is much less ideological than it used to be.

I think that’s a very crypto-native take. I’m not saying you’re wrong, but going back to the 80/20 rule you mentioned earlier: if the ETFs that garner the most attention in the beginning wind up dominating, why wouldn’t the chains that have garnered the most attention in the beginning of crypto gain long-term adoption over the long run?

Using Solana is great, and I’m sure Solana will be thriving for years, but Ethereum might thrive too. The NFT ecosystem is built entirely on top of Ethereum. The L2 ecosystem is built on Ethereum, and there’s tons of money being pumped into that.

Ethereum is the security layer for decentralized information. Just because it’s getting left behind right now by one particular narrative—meme coins and degeneracy on Solana—doesn’t necessarily mean that this is the new state of crypto.

That argument is tough when you’re not seeing a ton of innovation happening on ETH right now. Fundamentally, introducing L2s weakens the value proposition for Ethereum.

Unless L2s really explode in the short term, Ethereum would have seen much higher burn without them. With L2s, it’s going to see lower burn. What ends up happening is that transaction counts and user activity have a long path to catch up with throughput.

Throughput has been jumping, and then it’s a slow grind for transactions to catch up. It isn’t an instant fill. Because it isn’t an instant fill, you drive fees lower and lower and lower.

A big part of the Ethereum narrative is that people watch the burn. That has been taken out of the narrative. So why should Ethereum rally? Solana fees are tiny.

I think Solana is deeply underallocated relative to Ethereum.

You’re making me want to sell ETH/BTC. You’re making me want to rotate a lot of my ETH into Bitcoin. Looking at ETH right now, I see a very easy, structured short. You can short here, stop out above 0.056, and you’re probably looking for 0.04 to 0.045.

That seems like a really good trade. It’s trending lower too. It’s smooth. It’s a time-based trade, and I would close it on the Bitcoin ETF announcement.

I think it’s a reasonably good trade. There’s just not much interest in Ethereum right now, and it’s going to be very hard to get that interest back until people are willing to look at the next catalyst and start pricing in the ETF more seriously.

Here’s a contrarian scenario for you. Let’s say ETH is chopping around, going sideways, or doing a Litecoin—becoming something forgotten—while Bitcoin is ripping. Will anyone care if an ETH ETF launches? Will they want to buy into it?

An ETF isn’t necessarily a bullish catalyst. It’s a bullish catalyst for something that people want but can’t easily get.

I think it’s a short-term bullish catalyst.

The futures ETF was a catastrophe, for what it’s worth.

The futures ETF is just a bad product.

Right, we agree. It’s hard to extrapolate from that.

I think the likelihood that ETH radically underperforms BTC over the next year is pretty substantial. My best guess is that ETH bottoms around the ETF announcement, rallies 30% to 40% against Bitcoin, and then starts to peter out if we haven’t seen increased activity on Ethereum.

Realistically, the meme-coin mania and the NFT mania on Solana are very different from what happened in 2021. In 2021, it was all copycats moving over from Ethereum, and then there would be a rotation play. Solana would pump, Avalanche would pump, and all these other things would pump.

Avalanche has pumped, but it hasn’t seen the same organic trading community and attention that Solana has seen. Even though Avalanche has actually outperformed a lot, it hasn’t seen that organic community.

It’s not about the price action. It’s about the organic community, and that worries me. Ethereum’s moat was always that it had such a strong community behind it. The memes would launch, the NFTs would launch, and they would attract new retail. People were flipping things on Uniswap. Now they’re on Raydium.

There’s been this huge cultural shift away from Ethereum, and I don’t think you can understate how important that moat was for Ethereum.

Now I look at ETH and think, “They’ve kind of just got the ETF.” What you could see happen—because it always feels darkest before dawn—is that the ETF catalyzes everything. By the time ETH is up 30%, we’re saying, “Why did we ever hate ETH?” Everybody has come back, nobody’s trading anywhere else again, and meme coins are popping off because ETH is popping off.

That’s a reasonable potential outcome. But that moat has been degraded.

Avalanche is a weird one. I think there’s been a lack of meme-coin activity and a lack of interesting projects on Avalanche. I think it pumped because people missed Solana.

I hate Avalanche. I always have. I don’t get it. It doesn’t make sense to me. It’s the third-best solution for literally any of crypto’s use cases at best, or at worst it’s just useless.

What I don’t understand about Avalanche is that they went all in on gaming. What the fuck is going on with that? All the big games that are going to launch in crypto over the next couple of years seem likely to happen on other chains. I hear a lot about L2s, and I’ve heard about a couple on Solana. Where’s the payoff?

That’s a very good question. They definitely made that bet. I think they’re pivoting a bit and trying to become an RWA chain now, as far as I can tell.

Of course they are. Everything is trying to do that.

I like the Avalanche team. I think they’re good and competent. It’s just a very crowded area. The L1 space is extremely crowded, and the reality is that there aren’t that many product developers or project developers.

I view Avalanche, MATIC, and all these other L1s outside of Solana and Ethereum as good trades at some point. You can always trade them. Look for when they’re underallocated, look for when they’re shorted, look for what they’re correlated with, and look for where transaction counts are trending up.

Long term, I’m just not super bullish on them. NEAR is kind of a funny one. They’ve rebranded to AI, and they’ve been pumping that narrative because everybody loves crypto AI. It’s the new, new, new big thing.

Jonah, as somebody who used to run trading at Cumberland—and you’re also a programmer and developer—what trading strategies would you be thinking about developing right now? Is there anything you saw that worked during the last bull market, or that works when things are ripping?

I would try to bucket tokens into similar categories and then play the catch-up trade. You could take all the L1s, and when a certain percentage of the market cap of your basket has rallied a certain amount, you can place long bets on the rest of the basket.

That might have worked with Avalanche during those huge rallies on basically nothing, just following Solana. The alt-L1 category tends to trade in step over the long run, but not in the short run, so you can play for mean reversion in the pair.

In terms of broader trading strategies, basis is the obvious one. If you’re retail and sitting at home, maybe you can’t even touch futures, but even if you can, it’s hard to scale that trade. At the institutional level, I don’t know why there aren’t 150 new companies coming in and buying spot while selling futures with institutional capital.

Can you lever up that trade easily?

Yes, you can. It’s arbitrage. It’s a little bit harder when basis is negative, because then you have to borrow the coin to short it, but right now it’s literally just buying the coin and selling the futures.

Selling the futures is easy. That’s what the CME is there for. It’s not a very systematic trade, although there’s some math and more involved thinking around when and where to scale into it.

You leg into it with discipline, models, and systematic rigor.

What are the models like? What are you looking for?

You’re looking at historical intraday ranges, intraweek ranges, and intramonth ranges. You’re trying to say, “If we’re at one of these defined extremes, this is where we’ve pre-decided to add a certain amount of dry powder and deploy it into basis.”

Obviously, I’m not allowed to disclose anything about DRW’s trading strategies, but this is how anyone should think about a risk-free cash-and-carry trade. You don’t want to blow your entire wad when basis widens from 0% to 1%.

You want to think about how wide a range the thing has traded in the past, set some rules for yourself, and maybe back-test them. The back-test is going to look great, obviously, because it’s risk-free arbitrage.

One thing I always think about when I’m running these types of trades is that when you go on the short leg—whether it’s on the CME, Binance, OKX, or anywhere else you’re trading futures—you’re constrained by the fact that you might get blown out on the leg where you have leverage.

For example, let’s say I have $10 of BTC and post $5 of collateral to go short that BTC. You have to manage that leverage really effectively. Sometimes you can use the BTC as collateral, and sometimes you can’t, depending on the exchange.

But if you have a no-liquidation account like what Alameda had, in theory, you can print infinite money.

They literally did print infinite money. They printed FTT—yards and yards of it.

How? Losing money should be a completely foreign concept to you if you have a no-liquidation account in crypto. All you do is buy the underlying scam asset, short the futures against it, and sometimes you see blowouts of 100%. Then it comes back in and you make 100% in a month. You think, “Wow, that was simple and easy. Collected some nice funding there.”

A no-liquidation futures account is amazing. So much of trading boils down to having a lot of VaR and not getting stopped out.

Some of the best traders I’ve ever met—guys with hundreds of millions of dollars in their bank accounts, or in a couple of cases billions—weren’t doing anything much more complicated than hanging on while everyone else couldn’t.

How did they get there? Maybe some political savvy. Maybe they were actually doing something smart at the beginning of their careers and their investors backed them with no-stop-out funding. Or maybe they were Sam Bankman-Fried and his Alameda crew of misfit clowns, for a little while, until they screwed even that up.

VaR is so important. So, to anyone listening right now: stay in the trade. Don’t get thrown off the mechanical bull.

I put out a joke tweet about how you need $20 million to retire, and a nontrivial number of people responded, “Yeah, I agree with you.” That’s completely insane, isn’t it? It’s bananas.

You don’t need $20 million. It’s really about your lifestyle. There are so many people who live happy, good, successful, productive lives while never making more than $100K a year—never making more than even $75K a year.

I think a little bit of crypto is escapism for people. It’s their lottery ticket to financial success. That’s a very dangerous mindset, because if you have $250K and sit there thinking, “I need $20 million,” you’re naturally going to make very bad decisions. You’re going to do risky things to get to the number you think you really need.

You have to understand that, at the end of the day, it isn’t about the money. Not to get philosophical, but I’ve made many decisions in my life that optimized away from money. I optimized for learning, happiness, and health.

If I had 3 times as much money as I do right now because I had chosen a different path, I don’t think I would be happier.

Taking it back to market theory for a second, one of the seminal books of finance that most people read is Reminiscences of a Stock Operator. You could say there are a few big ones, including Liar’s Poker by Michael Lewis, but everybody reads Reminiscences of a Stock Operator.

It was written by a stock trader about 100 years ago, on whatever the stock-trading pit or floor in New York was called back then. He shares an anecdote about seeing a really nice fur coat. He looked at the price and said, “I’m going to go to work the next day and put on trades that will make me enough money to buy this coat.”

What happened was a series of horrendous trades, and he lost pretty much all of his money.

The lesson is that if you target a certain P&L and trade to make a certain amount of money—if you’re trading to make a coat, buy something, or buy a house or an island—you’re going to lose. Trade what the market gives you.

Don’t trade toward some aspirational, capitalistic outcome in your personal life. Equally, if you trade not to lose money, you just lose money. You can’t focus on trying to make a certain amount of money to buy something with your day-to-day trades, and you can’t be so afraid of losing money that you focus on avoiding losses.

You’re trading to make money, not to lose money. You have to take what the market gives you, keep your eye on the ball, and not be so afraid of losses that losses are what you focus on. It really involves a lot of discipline.

Once a month in this market, there comes a trade where you look at it and say, “This is so obvious.” Then you take it and size it correctly. You never want to size it in a way that can blow yourself up.

A lot of people want those quick hits and quick wins because they see everybody else getting them. Sometimes you can. Sometimes you find a dogwifhat, put in $1,000, and turn it into $200,000. But those opportunities don’t come along very often, and you can’t force them.

A lot of people see that and think, “I really want to find the next one.” Sometimes there is no next one.

If you try to 100x the $200K you just made on dogwifhat on the next thing, you’ll probably fail. You can’t make money out of thin air.

Warren Buffett had this great quote: “Most people want to get rich quick, and people just can’t get their heads around getting rich slow.”

You have to be comfortable making incremental gains sometimes. If there isn’t a huge swing to take, you can’t always get rich quickly.

On your point about what it takes to live and retire, if your goal is to trade crypto until you have $20 million, $30 million, or $40 million, and then retire with $1 million or $2 million a year in expenses while living la dolce vita in New York or Paris, maybe that’s how much it takes.

But I don’t think crypto should be anybody’s ticket to that—certainly not anybody who’s trying to get it right, as opposed to people who are just playing the lottery.

You need to understand what actually makes you happy. Is it playing the game? Is it winning the game? Is it the money? Is it what the money affords you?

At a certain point, recognize that everybody’s on a hedonistic treadmill, but it’s actually quite easy to step off. You just need to have perspective.

I know for myself, for example, I could keep going until I can buy a 747. Do I want to? Honestly, no.

I’d rather wake up in the morning with a 787. They’re pretty cheap now. I saw one at Burning Man.

How much do those go for?

The Dreamliner. That’s what you want.

Exactly. It’s such a nice plane. Cathedral windows.

They’re about $900 million for a private Boeing 787 Dreamliner.

Maybe that’s too expensive. I prefer to have my health and happiness.

Some levels of success require sacrifice. That level of success requires a tremendous amount of sacrifice. You basically need to make your life entirely about your work. You need to be obsessively focused.

Those are all admirable qualities, but they come with drawbacks. You need to get older and be around these people, which teaches you a lot about what you want your life to look like and what you can be happy with.

There are people who can be happy with $5 million. There are people who can be happy with $1 million. There are people who won’t be happy with $20 million.

You have to make sure it’s really you—not what society is telling you, what the people around you are telling you, or what your original dream was versus what reality is.

I see this over and over. There are people who spend 14 hours a day in front of their computers digging for things in crypto, at the expense of their health, relationships, and lives. I don’t necessarily think that’s a great trade-off.

It can be, if that’s really what you want. But it’s worthwhile having the perspective that it doesn’t have to be that way.

I also think you can be successful in crypto working 3 to 4 hours a day if you actually focus. You do what you need to do instead of spending 8 hours talking to people on Telegram about nonsense, and you build a process.

With the right alerts, watchlists, and analytics tools, you can probably spend 3 to 4 hours a day on this and be in the top 1% of traders. I genuinely think that.

I agree. If your passion is trading crypto because you’re interested in the market and it gives you that intellectual tingle, it’s definitely worth spending a lot of time on.

If you’re thinking, “This is the amount of money I want to have. It’s more than I have now, and crypto seems to be the thing that could go up the most, so it’s probably my ticket,” I wouldn’t necessarily recommend putting too much of your net worth into crypto, other than maybe Bitcoin.

Bitcoin probably isn’t going to get you anywhere if your position is small. It depends on your size. If you want to make it big, Bitcoin might take you into another category, but it probably won’t change your life.

Let’s say you have $5,000. You’re probably going to bet on a bull market and put your money into things like AI coins or Bitcoin beta. Those have much better odds than double zero.

I take your point. That’s a really good analogy.

I really like the story about the fur coat. Anytime you have a goal in mind for your trading, it forces you to create opportunities where there might not be any. In your mind, you’re thinking, “I need to hit this target. What can help me get there?”

The right answer might be, “There’s nothing right now.” But when you’re in the mindset of looking for what will get you to that target, you find things. Humans look around and see faces in things. If you’re a trader looking for a trade, you’ll find one.

Here’s a little systematic pearl of wisdom—a nice rule of thumb. The one exception to the fur-coat rule where you can actually target a certain amount of P&L is when you have a back-tested strategy.

You can say, “This strategy seems to work consistently over time. Let me dial up the risk to try to make $X in a year.” You can understand the drawdown that comes with that.

Let’s say you’re trying to make $1 million in a year with a systematic strategy that has a back-tested Sharpe ratio of 2.0. You’ve geared your risk so that your target P&L is $1 million.

If your Sharpe ratio continues to be 2 as you trade, the largest 1-standard-deviation peak-to-trough drawdown during the year is going to be your target P&L divided by your Sharpe ratio. In this case, that’s $1 million divided by 2, so you should expect at some point during the year to draw down by $500K from whatever P&L number you’re at.

If you’re actually going to try to go for the fur coat—which you probably shouldn’t do anyway—you’d better have rigorously back-tested your trading process, adhere to it, and be stone-cold sober and mathematical about how much money you might lose at any given point during the year.

That’s a really helpful way to keep your head screwed on straight when you’re losing money and not do stupid shit.

Wow, what a sober and thoughtful note to end on, Jonah.

What? We started with the froth. Avi, we’ve got to reel it in.

As always, it was a pleasure chatting with you. We went in some good circles this time.

Yes, we did. We’ll see you next time. Since it’s going to be New Year’s, we might push it until the new year, so this might be the last podcast of the year.

We’ll see you guys soon, and we’ll keep bothering everybody on Twitter and pissing people off. If you’re upset or angry, or feeling kind of bummed out this holiday season, just tweet some angry shit at Avi. He takes it really well. Just troll him.

I’m better at handling trolls than Jonah.

Yeah, I can’t take it. I suck.

None of this is investment advice. It will never be investment advice. I’m bad at investing. Nobody should listen.