The “Great Pruning” of Crypto Has Begun
My degree is in Intelligence Studies. I also have a minor in Counterterrorism.This doesn’t sound at all like a path to a career in finance. Yet, it was. And as it turns out, many successful traders and analysts I know got their start in seemingly contradictory fields. Take the famous technical analyst I had dinner with years ago. His degree is in Film Studies. Believe it or not, he applies even those skills in his work. Think about it… Filmmakers are methodical. They think frame-by-frame. A big part of the job is removing things that look off. His approach to the markets is similar. He looks for things that seem out of place on charts. He thinks about what that means. Then he applies statistical modeling to his observations. He’s developed a series of popular indicators based on that idea. I’ve also met analysts with degrees in journalism, art history, and various sciences. They’ve all found ways to bring their experience to the markets. No matter where we land in life, we benefit from our backgrounds. Unique backgrounds can reward traders, because markets hardly ever reward those who follow theoretical models (like economists). They reward critical thinking and intuition. I think that’s why so many successful investment professionals have nontraditional backgrounds. Why they spend time studying the past, reading history, and consuming research from other major firms. All of this, in my opinion, is what makes great analysts and even better traders. But beyond my opinion, there’s some brilliant scientific research backing this all up.
Rapid Expansion, Radical Pruning
Morgan Stanley’s Consilient Observer is one of my favorite Wall Street reads.“Consilience” is a research style that brings together ideas from different disciplines to explain a complex idea. I never know what I’ll see when I open the report. The most recent issue started with data on how babies learn. Their minds start racing right after birth. Brain cells make thousands of diverse connections to other cells. Then, after about two years, brains start pruning unproductive brain cell connections. Those initial connections allow for options in development. The pruning eliminates wasteful connections. This maximizes brain power. What’s fascinating is this process also applies to technology. The chart below explains the idea.
Source: Morgan Stanley
This chart shows the number of car companies that came and went in the 65 years after the VERY first automobile.In the 20 years after automobiles were invented, the number of new companies making them exploded. 20 years after that, the number of companies was in steep decline. It might surprise you to learn the first automobile companies aren’t around anymore. Ford started making cars in 1903. That’s almost 20 years after the first company. GM was founded in 1909. That’s the time when the number of car companies was peaking. Chrysler began well after the peak in 1925. By then, exits exceeded entries. Just like the early development of the human brain, the auto industry went through a rapid expansion and an equally rapid pruning and consolidation. We see this pattern show up everywhere, even the places we might least expect.
The “Great Pruning” Is Hitting Crypto Now
That chart shows you don’t have to be first to succeed. We could draw similar charts for PCs, operating systems, even web browsers.Venture capitalists see this, and are moving into the market. That’s another sign of the market’s maturity. They are looking for winners — not just great stories. Mike Carr is also entering the market now. But unlike all these venture capitalists, he’s not looking at crypto as a long-term buy. Mike recognizes crypto for what it is: a hotbed of volatility still in its early stages. And trades that are this volatile are prime candidates for the exploitation of trading systems. His latest trading system on bitcoin, after months of tuning and refinement, performed exceptionally over the course of a seven-year backtest. It returned 138% a year for each of those seven years. And despite the impressive return of bitcoin in that same time, Mike’s system outperformed it by a factor of 5. Recently, Mike started trading options using his system’s signals. One of his first-ever call option trades returned 100% in just two days, while bitcoin ran only 10% higher. Crypto may be starting to mature, but it’s years away from any semblance of stability. Mike’s system is likely to continue outperforming bitcoin so long as it remains volatile. And that’s why he’s so comfortable calling it the trading opportunity of the century. You should know, Mike’s opened up access to this trading strategy at a steep discount. But that discount expires tonight at midnight. After that, the price is going up 300%. So if you’ve been on the fence and want to give Mike’s new strategy a try — along with his core SPY trading strategy — be sure to click here for the full details as soon as you can.The point is, first movers don’t always remain competitive over the long term. All new technologies share this trend. Even crypto. Right now, the crypto markets are experiencing what I’ll call a “Great Pruning.” It’s a time where the weakest companies are getting pruned out, and only the strongest will survive.
Regards,Amber Hestla Senior Analyst, True Options Masters