Interview with trader Paleking: From a $30,000 retail investor to a fund manager handling $50 million—how does one develop the trading strategies of an expert?
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Interview with trader Paleking: From a $30,000 retail investor to a fund manager handling $50 million—how does one develop the trading strategies of an expert?
Abandon fundamental analysis and focus on trend trading of strong performers.
Navigating Web3 tides with focused insightsHost: FC, Founding Partner at SevenX
Guest: Paleking, Partner at MVC
Why interview traders? Because the most effective way to build trading strategies is to learn from those who have delivered results across market cycles.
Trading Journey: From EOS Onboarding, Trading in Bull Markets, Doing Nothing in Bear Markets
FC: When did you first enter the crypto space?
Paleking:
I started trading crypto in October 2017, and the first thing I speculated on was EOS. I turned 10,000 RMB into 100,000 RMB. Actually, I knew about EOS before I even heard of Bitcoin or Ethereum. So EOS was what brought me into this space—it broke my previous worldview and pulled me into crypto.
FC: What was your starting capital, how long did it take, and what exactly did you do to achieve your current results?
Paleking:
After that EOS trade, I funded around 200,000 RMB—roughly $30,000—to start playing in this industry. The years 2018 and 2019 were essentially wasted for me. I lost money throughout 2018 during the bear market, made a little in early 2019, but then gave it all back in a rollercoaster second half. I only began making significant profits from 2020 onward. The pandemic hit, the Fed flooded the market with liquidity, and nearly every asset class surged. I rode that wave of liquidity expansion to build my initial capital, growing it steadily since then. One key advantage through this process was avoiding major losses—mainly because I rarely used leverage and exited positions promptly.
By mid-2021, I clearly saw that the big cycle had ended, so I exited well before May 19th. In the second half of that year, while others were hyped on NFTs and gaming projects, I stayed out completely. Then throughout 2022, I just traveled and enjoyed life, only returning near the end of 2022 and early 2023 when I felt the market had fallen enough—Bitcoin was around $20,000—and it was time to re-enter. That’s where I’ve stayed since.
Ultimately, I’m a classic cyclical trader. My core belief is simple: trade actively during bull markets, and during bear markets, go date, travel, and do nothing. That’s been the broad arc of my journey in this industry.
Trading Strategy Explained Part I: Using On-Chain Data for Macro Market Timing
FC: How would you summarize your entire trading strategy in one sentence?
Paleking:
My main purpose in this market really comes down to two things: First, consistent profitability—I’m here to make money, not gamble. Second, I aim only to outperform beta. In any secondary market, there's a rule—the 7-2-1 law: 70% lose, 20% break even, and only 10% profit over a full cycle. And within that profitable 10%, another 80/20 rule applies: only 20% actually beat the market beta. So overall, only about 2% of market participants consistently profit *and* outperform beta. That’s the group I want to be in.
So my strategy is very simple: macro market timing. Enter at Bitcoin’s cyclical lows, believing that anything you buy will go up. Exit at Bitcoin’s cyclical highs, then sit out the long bear market doing nothing. I remember an old-timer from our 2017 cohort once said: “A coin that has already dropped 99% can still drop another 99%.” So during bear markets, don’t look. Just wait until everything is truly flushed out, and the next big cycle is about to begin—then come back.
FC: Is there a universal method for identifying cycle bottoms?
Paleking:
The key to spotting cycles lies in observing Bitcoin’s chip structure—its distribution of holdings. I believe that for any asset to rise, there must first be a "whale" or consolidating force that absorbs circulating supply, concentrating ownership. Once concentration reaches a critical point, prices can begin rising toward new highs. Eventually, the whale distributes (sells), spreading chips widely again—ending the rally. This "whale" doesn’t have to be a single person; it’s more like a market-wide force controlling large-scale holdings.
What metrics help identify this? I rely heavily on on-chain data. Glassnode offers several free public indicators that are extremely useful for spotting Bitcoin’s macro cycles.
The first is NUPL (Net Unrealized Profit/Loss). It measures the collective profit/loss status of Bitcoin holders and displays as a rainbow-colored chart—red, orange, yellow, green, blue, etc. When it turns deep red, it means nearly all Bitcoin buyers are underwater. When losses reach an extreme, weak hands keep capitulating, and their chips get absorbed—this signals a market bottom. Safe to buy. When it turns blue, it means virtually every crypto holder is sitting on massive unrealized gains. Once those profit-takers start exiting, the market collapses. So when I see unrealized profits hitting extreme highs and sentiment overly optimistic—that’s the top. Time to exit.
The second metric is HODL Waves, which tracks Bitcoin holder duration. It splits users into short-term holders (owning BTC for less than one month) and long-term holders (holding 1–3 years). During a brutal 70% Bitcoin drawdown, short-term holders panic-sell—their share drops sharply. When this group shrinks to a very low level, it suggests all weak hands have been shaken out—another sign of a bottom. Conversely, when long-term holders’ share drops dramatically, it means “old degens” are cashing out profits, while short-term speculators flood in—signaling a top.
In this cycle, I entered at $18,000 and “topped out” in April 2021—all based on these two data points. I find them highly reliable, and expect they’ll remain effective going forward. As for macro trends, sentiment noise, and other fuzzy factors—they’re meaningless for timing Bitcoin cycles, in my view.
Trading Strategy Explained Part II: Finding Alpha via the “Zeroing Out” Strategy
FC: After timing the market, how do you find beta enhancement or alpha? Also using indicators? What’s your selection logic?
Paleking:
The way to find alpha changes depending on the phase—you need to adapt your approach to the market environment.
Between March 12, 2020 and Bitcoin’s halving in May, we noticed certain tokens mysteriously starting to rise on centralized exchanges like Binance, OKX, and Huobi—SNX being one example. Five months later, the market labeled this trend “DeFi.” In the second half of 2020, people started complaining Ethereum was a “noble chain”—gas fees were too high—so capital began flowing into Solana, Avalanche, etc. That year, I focused almost entirely on these two themes.
By late 2022, when searching for alpha again, we adopted a new strategy: “zeroing out.” We reviewed all projects from the 2020–2021 bull run that gained over 100x, and found five common traits:
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Born and launched during a bear market—indicating founders with strong resolve and willingness to act despite adversity;
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Attractive valuation—launched cheap, and further depressed by prolonged bear market conditions, becoming extremely undervalued;
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Favorable token unlock schedule—clean supply structure with minimal sell pressure. Big investors have already been washed out, while the team still holds substantial tokens and hasn’t profited yet—giving them strong incentive to pump;
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Strong backing from reputable investors;
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Listed on top-tier exchanges—ensuring immediate access to liquidity when the market recovers. At the time, Uniswap wasn’t mature, so we didn’t consider DEX listings.
Thinking deeper: what does a project meeting all five criteria represent? A founder with determination, with skin in the game, with motivation to pump, and with access to global liquidity. Such projects rose 100x in the last cycle. So from late 2022 to early 2023, we applied this filter to the top 1,200 projects, eliminating all tokens launched before October 2021—focusing only on those brave enough to launch during the bear market. After screening, we selected around 30 tokens and invested. By Chinese New Year, results were quite solid.
But I think the way to find alpha may shift again. The market is moving from a broad-based bull run to a structural bull market. “Altseason” will still happen, but differently: First, sector rotation—capital is limited, so when one sector rises, others stall, rotating cyclically. Second, extreme divergence—most altcoins won’t rise, or won’t outperform Bitcoin. Only a few will show alpha. So if you want alpha in the next three months, it’ll require a completely different approach than past cycles.
Trading Strategy Explained Part III: Abandoning Fundamentals, Focusing on Trend Trading Strong Performers
FC: Do you have any preliminary thoughts on what alpha might look like going forward?
Paleking:
This is something I’ve discussed extensively with my team. After six months of structural bull market education, I’ve actually developed a slight fear of the word “alpha”—to the point where I now believe beta *is* true alpha.
The market is widely seen as a “no-handoff bull market”—making alpha harder to capture. On one hand, high volatility and excessive theme炒作 reduce success rates for top-down thematic bets. On the other, even bottom-up fundamental picks often fail to gain traction with broader capital. Therefore, I suggest a more cautious approach: allocate most capital (80%) to large-cap, stable cryptos (like Solana, BNB) to capture beta. Use a smaller portion (20%) to hunt for potential alpha—playing for asymmetric returns. This “barbell strategy” aims to protect principal while still capturing upside trends.
Taking it further—what is my personal definition of alpha now? I’ve completely abandoned predicting sectors or fundamentals. I now focus on just one thing: buying here and selling there. Meaning: identify strong performers and ride the trend. For example, from November last year to before Chinese New Year this year, I didn’t care what was happening in the market or what Twitter was buzzing about. I followed one rule: chase nine-month highs. I had a monitoring bot that alerted me daily whenever a token hit a nine-month high. If I saw a flat base for nine months followed by a breakout, with no obvious red flags, I’d jump in. This strategy worked exceptionally well.
Why? Because crypto is a highly cyclical industry. Bitcoin runs on a four-year cycle; altcoins have their own mini-cycles. Generally, an altcoin’s lifecycle lasts about six months—three up, three down. If a whale plans to build a market cap, they must accumulate, pump, and distribute. So if a coin has been range-bound during bear market, quietly accumulating, once it breaks out to a nine-month high, its upside can be explosive. A major player spent months carefully building a position—they’re now committed. Their ambition is interstellar. You just wait for them to pay you. Solana, for instance, traded sideways between $10–$30 for nine months, then tripled. TON broke out at ~$2—about a 1.5-year high—then tripled. Same for RNDR, INJECTIVE, and others.
So my simple outlook for the next three months? I can’t predict sectors or fundamentals—so I’ll return to first principles: watch for whales at work. I believe my next alpha won’t come from picking themes or projects, but from riding price momentum in strong performers—earning trend-following returns.
Trading Strategy Explained Part IV: Identifying Which Assets Outperform Bitcoin Is the Ultimate Alpha
FC: From $30K to $50M, how has scale affected your trading system?
Paleking:
Massively. Scale is the enemy of returns. The larger your fund, the lower your potential multiple. With large capital, you need high liquidity and volume—forcing you into bigger, more liquid assets. It also constrains strategy: fewer swing trades, less tactical entry/exit. You shift toward long-term, stable investments. Larger institutions must be more selective and adjust strategies accordingly to maintain returns.
Frankly, most complex info, so-called alpha plays, ecosystem projects—they’re irrelevant to us now. Too small. For a serious fund manager, simply identifying which of the top 20 assets will outperform Bitcoin is already the strongest possible alpha.
Trading Revelation: Simplification Leads to a Personal Strategy
FC: What were the key moments in forming your trading strategy? Who influenced you? What knowledge shaped your approach? If someone wanted to replicate your path, what should they do?
Paleking:
My strategy evolved through a process of continuous simplification. In 2018, I didn’t trust crypto—I just wanted to make money. Back then, I treated it purely emotionally: follow hype, chase whatever’s trending. In 2019, during a weak market, I learned to “embrace strong whales”—viewing the market from the whale’s perspective. I started with technical analysis, but soon realized it was superficial—TA indicators reflect outcomes of whale behavior, not causes. So I shifted focus to understanding whale intent: Why let it drop? Why pump it? Why volume surge up vs. down? Why quiet decline? Analyzing what the whale is doing to anticipate their next move—this is now my core approach.
Second evolution: I gradually stopped focusing on fundamentals. I don’t deny their value, but within my framework, I’ve minimized them. I now attribute price moves to only three drivers: capital, supply (chips), and sentiment. My view on fundamentals: I don’t care about objective fundamentals per se—I only assess the sentiment they generate, whether that sentiment forms consensus, and whether capital flows in to support it.
FC: During trading, what triggers your most anxious state?
Paleking:
My worst anxiety comes when I don’t understand why I’m making money—when a trade isn’t based on my framework, but pure FOMO. Humans are emotional—we hear everyone shouting, and it sounds convincing, so fear of missing out kicks in. But whenever I buy for that reason, I’m never comfortable holding, and usually don’t profit.
FC: Do you have a stop-doing list? Like no FOMO?
Paleking:
I have one core principle: small wins, small losses, occasional big wins—never big losses. My stop-loss isn’t per asset, because volatility is high. Instead, I manage total portfolio risk, keeping swings within the small win/loss range. I never allow deep drawdowns—if my total portfolio drops significantly, I immediately liquidate everything.
FC: I think a crucial point is maintaining market sensitivity. How do you keep improving? Who influences you? What are your information sources?
Paleking:
Two people impacted me deeply. First, my former boss—he taught me to see the market from the opposite side of retail, giving me a fundamentally different perspective that greatly improved my trading. Second, someone who gave me a large sum of capital, allowing me to scale up my trading size. Now, our fund is ten times my personal size—this forced maturity upon me.
As for information sources—truthfully, I don’t consume much info anymore. For CEX-listed assets, I don’t talk to anyone. This bull market is in its final leg, so I ignore trends and themes. I focus solely on my positions, judging them by price strength. Recently, many alts are holding price—possibly because whales haven’t fully distributed. So always weigh risk versus reward.
FC: Any book or person you’d recommend that could help others?
Paleking:
I recommend reading *Blossoms* (*Fan Hua*). The battle over the garment company stock—where A Bao and Qiao Mujie duel—is nearly identical to how many crypto tokens behave right after listing. If you can deeply understand that battle, trading crypto will feel like having divine assistance.
FC: Final question: what mechanisms help you stay sensitive to new things and alpha opportunities?
Paleking:
Three methods.
First, organizational structure change. We use a segmented portfolio model—each partner manages their own allocation—increasing overall win rate and alpha generation.
Second, eliminate bias and follow price action. Take Ordinals (Ordinals), for example—there were many entry points, but many friends of mine already made millions on it. I hesitated to join after it had already 10xed, and missed out due to mental barriers.
Third, clarify your position in the information diffusion chain. A theme goes through stages: birth, spread, mainstream adoption, then finally retail FOMO. I map the people I know onto this A-B-C-D diffusion chain. When everyone starts talking about something, I don’t focus on the thing itself—I observe *who* is talking, where they sit in my diffusion map, and then decide my conviction and position size based on my own place in that chain.
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