Have you ever seen the real complexity of the outside world, a glimpse of how overwhelmingly complex everything is? Let me show you something.
Recently, I stumbled upon yet another post on /biz/ about some guy bragging about “finally made it” with a shitcoin. The attached screenshots show the chart of HiFi shitcoin (or whatever it was?) going “vertical” for a while. And, as usual, in retrospect everything was “simple” and “obvious” – the guy was “early” on a shitcoin after enough of trying. A classic story in some sense.
Now lets try to see things as they really are, which is, arguably, the only thing I am more or less good at.
Here is what actually happened. We shall begin from two basic principles which underlay the complex human which we call “investing” and “rent seeking”.
The first principle is the simplest one, and this is what makes Y-Combinator (these guys turned investing in a “conveyor belt” mechanical process) and other “early (“angel”) investing” possible – 100 will fail, but one might become “Facebook” or “Google”. This is exactly how it works statistically. With enough trying “every dog has a day”. Never give up and have deep pockets, preferably of other people’s money, and you will “succeed”, especially when “time in the market” is right (so “other people” are eager to give you their money).
The second principle is more subtle. It has been showcased in the “Dark Knight” movie (among others) – one shall build a .platform which others will use for whatever they want, and most importantly, the activity of these “users” shall “build up” your platform’s capacity. Google used location data from every Android smartphone to build up their Maps services passively, and this theme has been meme’d in the “Dark Knight”.
In general, one want paying tenants, packed as tight as possible, metered for every move and, ideally, for every breath. This is what AWS and other “Cloud” services aim for – to bill you for every single byte and, ideally, every single CPU cycle.
I don’t remember which good philosopher said this first (or even if one articulated this principle very clearly before), but everything what happened in the social world is ultimately driven just by dopamine/cortisol/serotonin swings of “other people”.
Even without manipulative ads everywhere about everything (usually based on a perceived by others attributes of a “higher social status”) and other pervasive cognitive and emotional stimulation, this is what drives everything – dopamine, cortisol and a couple of other neuromodulators are behind every human action, including so called “intellectual” or “creative” ones.
There was a series of famous experiments with cats (by non-freudian psychologists), when they put a cat into a “puzzle box”, in which there is a hidden “lever” by pressing which a “door” will be open so that cat could escape. The trick, of course, was to find the lever.
The cats just randomly (with various intensity and eager) bounce all around before they accidentally discover the lever. After just a few trials, they memorize where the lever is, and just go and press it, confidently, without panicing.
We are such cats, and this is another fundamental principle of biological life, no matter what impostors from some humanties faculties would try to convince you of.
Notice that some recurring patters in some social settings are as infallible as “physical” patterns which underlay biological life itself. Actions of biological organisms are driven by certain levels (or spikes) of dopamine and cortisol and nothing else.
There are whole industries which want to induce such “dopamine spikes” and benefit financially from these at a scale.
This is exactly what Binance is.
There is something to realize. Every given chart pattern can be traced back to the actions of market participants and ultimately to the cortisol/dopamine spikes of a large “crowd” of humans.
At any given time there is a set of currently hot, highly contagious “memes” and “narratives” or just stories, and some “temperature” (a degree of mass hysteria) among the market participants, which is pseudo-scientifically called “Time In The Market” (which always beats “Timing of the Market” for obvious reasons).
This “Time in The Market” form the trend lines and defines a “Bull” (or a “Bear”) market. Since most of the people are easily manipulated idiots, the most of the time we have a Bull market, with occasional short periods of facing reality, before “Returning To Normal”.
The most difficult thing in trading for more-or-less intelligent people is to accept (and absolutely stopping fight with) the irrational stupidity of the collective actions of the wast majority of the market participants, and the sheer idiocy of the current, most contagious memes, and just “ride the waves” as a surfer would.
Given that, lets define some very simple but ultimately non-bullshit probabilistic view of any social activities in general, of which speculative markets are just particular instances.
When one does not “know” anything about the actual causality of a possible outcome, every such outcome can be seen as equally likely. This is, of course, an abstract mathematical definition, which has literally nothing to do with reality.
First of all, there is no such thing as “randomness” in any context outside of pure mathematics. Randomness is a mathematical concept, derived from generalizing of observable complexity, the vastly complex causality of which one has no biological and cognitive means to comprehend.
There is nothing “random” in societies and social processes. Period. The fact that one “cannot see” what is actually going on does not imply that there are any “randomness” out there. It is just that one cannot see the actual causality at work at any given “decision” and any emerged, “happened” outcome.
One cannot even make an exhaustive list of all possible outcomes (not missing a single possible one , not adding any imaginary ones), except in artificially constrained, probabilistic models.
Yes, at any given time one may list all the possible outcomes of the “length” of the next candle, which is always a finite set, and a very small set. The [fundamental] problem is that this “means nothing”, literally.
What this “snapshot” has captured is the fact that, given all the previous conditioning and dopamine/cortisol levels of active market participants, the outcome (the sum-total of all actions at this time-frame) happen to be such and such. No more, no less.
There also can be an “intervention” at any given moment, by some automated trading algorithm of any institution involved, which, strictly speaking, even if it has been coded by humans, based on socially conditioned human assumptions, does not have dopamine spikes or a base levels of cortisol.
There are other “emergent” (unaccounted off) factors too, one does not even know (in principle) which and how many!
So, how to do they “make it” then?
The answer is – everything you read and see is [a socially constructed] bullshit.
Lets start from my favorite topic – the books. Do you have any idea how much bullshit are in the modern books? Suppose we search some pirate site, and come up with a title like “Machine Learning for Algorithmic Trading: Predictive models to extract signals from market and alternative data for systematic trading strategies with Python, 2nd Edition” (my ass!).
Here is something to realize – for any form of a predictive model to “actually capture” anything real (a non-imaginary, existing pattern) the system has to be “closed” and “stable”, which is like the physical environment in which our biological Life happen to evolve.
The properties of being a closure and of being “stable enough” (so the intermediate building blocks will not fall apart “at random”) are necessary.
Stability is a subtle topic, but it can be simple illustrated – although human languages are constantly evolving, they are “stable enough” (and changing at a very slow rate and very insignificantly) for not just us to understand each other, but even for LLMs to produce something coherent (in principle, given that they operate at the level of “syntax”, not the underlying semantics – meaning and intentions of the speaker).
So, it is “operationally” a closure for a long-enough period of time, just like everything in molecular biology and biological Evolution.
Trying to capture anything in the environments which constantly evolve and change behind your back at a very high rate, while various new factors constantly emerge, older ones lose relevance or even cease to be, any probabilistic model will, by definition (of the algorithms being used) will capture a “snapshot” of what isn’t out there anymore. Think of literally photographing waves or clouds in a storm.
This “law”, by the way, is as true (and as infallible) as the Second Law of Thermodynamics.
Everything in that book is ultimately bullshit, but the book has been written, published and sold, nevertheless.
There is a simple social patterns which make it happen – neither the author, nor the publisher, not even the readers care about the “truth” of the content, or about the content in general.
The author wants money and fame, the publisher wants profits and growth, the reader wants less cortisol and more serotonin and enjoys the dopamine of anticipation, manipulatively suggested by the title. Who the fuck cares that this shit cannot work in principle.
Again, dopamine, cortisol and serotonin of the author, publishers and readers and nothing else. At least not the “Truth”.
So what is [actually] going on Out There? How these guys were “made it”?
Well, we know for sure what Isn’t – it is definitely not “Machine Learning for Algorithmic Trading”, which is just another scam – a conspiracy between authors and publishers and even “scientists” to have a better lifestyle and a slightly higher observable social status. So what it is, then?
- Binance.
This is the world’s most liquid and the world’s largest trading platform. It has been [unimaginary successfully] bootstrapped with only one clear objective in mind – “To Charge You for Every Single Action You Take”, or to put it simple, to charge you for every simple dopamine spike, which results in a trading action, for which there is always a small fee. It is that simple.
Everything Binance does is just to fulfill this simple, well-defined objective. Everything, from intentionally convoluted UIs and APIs (the more mistakes you make – the better – every action has an associated fee), to confusing terminology and misleading and manipulative documentation and the “academy” articles.
Yet, one has to use the most liquid “exchange” for obvious rational and mathematical reasons, so, surprisingly, the most people do, and this is why it is by far the world largest trading platform to systematically and efficiently milk you out.
As a side note, Binance is absolutely remarkable in a few other aspects – no central office (so, no rent), no developer’s HQ, no “standups”, no “middle managers”, no any form of a social bloat whatsoever. And they run everything on just a bunch of servers, managed by “other people”. Simply amazing. This is how to use software, really.
Now, when you know nothing about anything [relevant], for you everything is a 0.5 probability or simply “random”.
But suppose you know that the “Time In The Market” (among degens) is so called “Alt season wen?” and that the current narrative is that “shitcoins has to go to the moon” at least for some brief period of time (simple because hundreds of thousands of active, dopamine induced impulsive degenerates seek to find them and thus it eventually becomes a self-fulfilling prophecy for a this or that “random” shitcoin).
Not random, you know. Recall that Binance is out here for a reason – it “wants” (has been carefully designed) to maximize its profits by making more impulsive, stupid people do a lot more of impulsive stupid shit on their platform (and thus to make more errors ad mistakes and then emotionally trying to fix them) so they can collect the fees automatically.
When you know nothing but that Binance is “about to list” or already added a new shitcoin, especially in the “Futures” section, you definitely know something about the real world – some shitcoin became “hot” enough that Binance is expecting to see a high level of trading activity around it, and thus there will be a much higher level of trading activity.
So, it is not “Deep Learning”, but monitoring recently listed shitcoins on Binance.
- Leverage.
One has to use leverage (other people’s “borrowed” money), period. Yes, Binance is designed in a way that one can “borrow” and always forcefully return, “with a fee” other people’s “staked” shitcoins. They, of course, will also have some “small” fee for the privilege. Not using leverage is plain stupidity.
Leverage allows one risk (and lose) less of their own money for the price of occasionally being liquidated. Whether or not “exchanges” organize and manufacture “liquidation events” is not even really a question. Our only hope is that they do not go after tiny positions, and unless there is a substantial profit due to way too many degens traded in one side.
So, there is, finally, an emergent pattern (to know what actually works is largely in knowing what doesn’t, and this is why real learning takes so damn long and is so painful – one has to go through all the bullshit).
MYX, HIFI, PYTH and other utter shitcoins have been “pumped”, some even up to 100x, due to two definitive factors:
- The Time in the Market is “an [always upcoming] altseason”.
- A shitcoin has been been listed on BInance Futures.
This alone can be the basis of a much more consistent (and much more profitable – 100 will find, one eventually will shoot) trading strategy.
No “deep learning”, no abstract, academic “statistical models”, no “time series analysis”, and other scams – just basic sociology, applied (observed) crowd psychology and the universal dopamine spikes.
In a roaring stream of exuberant bullshit on /biz/ (and plebdit) there are rare occasional posts about random shitcoins being listed on Binance. To realize that this is a true (or at least better) signal among all the noise requires to know a lot of such shit (briefly outlined above).
The most difficult and challenging part is to know for sure that almost everything is just bullshit.
There is, of course, a lot more to trading (which is why no one has and never will “solve” it algorithmicly, even using such clever techniques as Deep Learning, which can capture any real, existing pattern in principle, with a careful-enough training).
So, at the end of the day, the principles, formulated and popularized by Elder, Shiller and a few others, are still infallible – an Irrational Exuberance, which keep chaining and evolving “at a speed of synaptic gaps” as we speak, and nothing else.
To see and understand things as they really are and to occasionally find the “glitches” is how to make money. No “deep learning” and shieet.
Deep-enough pockets, coexistence and persistence is the universal, timeless recipe. And knowing what is irrelevant (and especially why it is so) is the biggest challenge. Do not fight stupidity, ride the waves (and even tides) it creates as a surfer somewhere, to actually achieve that “Never Ending Summer”.
It took me some 5 years of pain and suffering to write this down in a couple of hours on a whim. But there is no other way.
And yes, these “mooned” shitcoins have to be shorted with a maximum leverage, of course. I once had a set of shoring positions, liquidate by a cascade (I used non-isolated margins) that could make me “made it” right after the $64K BTC top. Still never fully recovered form this.