Thread by @mrjasonchoi

Risk appetite for young full time traders/investors in crypto

1/ I remember reading about a prominent tradfi HF who would give greener analysts more discretion in sizing, since they had no fear vs. grizzled PMs

Fearlessness came from not having lived through extended bear markets and not almost losing your job.

2/ In crypto, I used to think the insane risk appetite investors in their 20s have is because greener investors don’t have the experience of handling big crashes (eg 90s tech bust, 08 crisis).

But crypto had 4 cycles already, with more -60%+ mini cycles for specific sectors!

3/ My guess is the time associated with acquiring principal is relatively short for young folks in crypto.

Many acquired majority of wealth within 1-2 yrs.

4/ If you’re in your 40s+, worked a mid-pay job and blow $500K PA on a trade, that’s a decade of work gone + kid’s college funds.

5/ Another guess is because crypto has extremely high vol and the opportunity to “make it all back” is perceived to be more abundant than in slower moving markets.

“So what if we draw down 50% today? Market can 5x in 2 months”

6/ This thinking obviously works both ways - just ask any young traders/ fund managers who lost their shirt in 18, in March 2020, or post-DeFi summer

Or the nance apes who treat their margin like lotto tix

7/ This probably also means people go log wealth over time as the time associated with acquiring principal increases

8/ If you spent 24/7 on crypto markets for 2 years to make your first bucket you’re probably less inclined to take the same risks even if life circumstances = same

9/ As with the last, over the next cycle, we’ll get to see what investors generated returns because they took on more risk in a market that favored risk, and who can deliver actual alpha