Youngest Bitcoin Millionaire: Secret Sauce to Success

Anson Tan, often hailed as Malaysia's top quant trader and the youngest Bitcoin millionaire, shares his journey from a humble background to building a successful quant fund and trading bot platform. The discussion delves into his unique approach to navigating bear markets, his philosophy on what makes a successful trader, and his vision for the future of automated trading.

Here's a breakdown of his insights and experiences:

• Early Beginnings and Motivation:

  • Anson got into crypto at 19, driven by a strong desire to change his life and overcome a non-affluent background. He was "hungry" to make money, having always been conscious of price tags.
  • Initially, he explored various avenues like e-commerce and sales, but was inspired by "The Wolf of Wall Street" to enter financial markets, believing that's where the money is.
  • He actively sought opportunities in the financial market and was drawn to crypto around 2018-2019, a bear market period when Bitcoin prices were dropping significantly from their peak.
  • Despite the falling prices, Anson saw the long-term potential in crypto, viewing it as the "next big thing" akin to the dot-com era, and decided to dive in early.

• Learning and Taking Risks:

  • He pursued crypto education, even borrowing money from friends to attend courses at a prominent Mandarin-speaking crypto academy in Malaysia.
  • His initial trading capital was also borrowed, demonstrating a high level of courage and conviction despite not having a financial safety net. He acknowledges this wasn't a good demonstration of financial practice but was necessary for his unique starting point.
  • He learned about mining and Masternodes but ultimately focused on trading.

• Succeeding in Bear Markets:

  • Anson chose trading, especially in crypto, because it offers the flexibility to profit in all market conditions (bull or bear) through longing (betting on price increase) or shorting (betting on price decrease).
  • His "first pot of gold" came from shorting Bitcoin during a significant drop from $9,000 to $6,000. He used platforms like BitMEX, trading inverse perpetual contracts, meaning he used and earned Bitcoin, which aligned with his long-term goal of accumulating Bitcoin.
  • He admits to initially losing money and experiencing liquidations, but his persistence led him to understand the market better.

• The Power of Funding Rates:

  • Anson realized trading is a "zero-sum game," meaning someone loses for someone else to win. This prompted him to look for an edge.
  • He discovered "funding rates," a powerful indicator in the early days, which reflected the long/short ratio in the market.
  • His insight was to "counter-think": when funding rates were high (indicating many people were longing), market makers would likely "dump" the market to liquidate longs, as it was cheaper for them than paying out profits to a large number of long positions.
  • This strategy led to an impressive record of three consecutive months without a single losing trade, highlighting the effectiveness of understanding market maker behavior and exploiting naive market conditions.

• Building a Community and Self-Branding:

  • Anson started building his self-branding early on, inspired by a course that emphasized its importance. He believes self-branding accumulates slowly and tells a compelling story over time.
  • He used YouTube to journal his trades and build a community, anticipating that it would be a valuable asset to leverage in the future.

• Traits of Successful vs. Unsuccessful Traders:

  • Anson observes that 80% of traders lose money. For manual traders, a crucial trait for success is knowing "when to give up opportunity."
  • Successful traders understand that not every opportunity can be caught and that every trading strategy has its strengths and weaknesses (e.g., a trending strategy might struggle in consolidation).
  • Being unaware of when your strategy won't perform well can lead to blaming oneself, upsizing positions, and poor risk management, ultimately resulting in losses.
  • Truly professional traders can either stay out of markets not suited for their strategy or seamlessly switch between different trading systems, though he advises beginners to master one style, preferably trending strategies.

• The ONLY Indicator You Need (and Technical Analysis vs. Quant Analysis):

  • Anson champions the Moving Average (MA) as the simplest and most effective indicator, arguing that most other indicators are lagging and noisy. He notes that many experienced traders still rely on MAs.
  • Initially, he focused on "technical analysis" (TA) and non-price data like funding rates as a manual trader.
  • His transition to "quantitative trading" (Quant) was driven by the challenges of scaling an Assets Under Management (AUM) company. Managing human traders proved difficult and inconsistent.
  • He realized that only through computers could they manage multiple accounts, test various "alpha strategies" (strategies generating abnormal returns), and build more diversified portfolios, leading to better fund performance.

• Cyborg Trades Platform:

  • Cyborg Trades is his trading bot platform, designed to be user-friendly for retail investors.
  • It allows users to deploy their coded strategies (using Python, Pinescript, or TradingView Webhook) without needing to build and maintain their own servers.
  • Non-traders can also use the platform by simply plugging in APIs and following existing strategies, analyzing their performance using metrics like "Sharpe ratio" (risk-adjusted return) and "max rollout" (maximum drawdown) to match their risk appetite.
  • The platform leverages expensive data sources (costing $60K-$80K USD annually just for data maintenance) that Anson's quant firm uses, making sophisticated trading accessible to a wider audience.
  • The basic logic of quant trading is similar to TA: collecting data, backtesting, and finding "alpha signals" (unusual opportunities) through statistical distributions like the normal distribution curve.

• What's Next: The Future of Trading:

  • Anson believes the future of trading is intertwined with "SocialFi" (social finance), particularly "copy trading," where successful traders share their strategies for a profit share (e.g., 10%). This creates a "win-win-win" situation for platforms, traders, and investors.
  • He foresees trading becoming increasingly automated, noting that 70% of current trading volume is already executed by bots. This number will continue to rise.
  • With advancements like ChatGPT, he believes automated trading will become the norm, eliminating the need for manual trading.

• Important Tips for Traders:

  • Always cut loss: This is paramount. Knowing your "cut loss point" before entering a trade determines your risk-reward ratio. Without a clear cut loss, you can't exit rationally and will trade randomly.
  • Overcome loss aversion: People often fear holding winning positions while stubbornly holding onto losing ones. He advises adopting a "losing mental" when winning (don't care, keep going) and cutting losses fast when losing.
  • Do a lot of backtests: Backtesting your trading system is crucial for building confidence. Without it, self-doubt will lead to panic and deviating from your strategy when facing losses. Knowing your system works through backtesting allows you to stick to it and succeed.