Lessons from a weekend crypto sell-off with Kyle Reidhead

Transcript

GM good morning welcome to the milroad show The Daily Show where we bring you the crypto news as fast as no alls in the 100 meter I'm your host Jay Hamilton and today we've got an urgent and very important message right now is when a lot of people yes I'm talking about you will make horrible mistakes in their Investments why because these markets are scary and when they are investors make emotional decisions and times like these are when the winners separate themselves from the losers so here to guide us today is co-owner and head of research at milk Road Kyle reidhead Kai let's start off with when you found out

that the markets were dumping what did you do in terms of how did you react what questions did you ask yourself or did you freak out and panic what was your reaction uh yeah great question um so interestingly I mean as you start off at the top here you said noes who I I'm assuming won the 100 meter I don't even know you didn't know that no because I was away this weekend I was at a cottage the whole weekend I even signed off in Discord I said to whatever to our Pro members I like look might be a rough time you know we've obviously Friday was pretty pretty rough and I was like but I'm just going to have a beer I sent a picture of me having a beer out in the out in the lawn of the cottage by the lake and it was

like I'm out and so I missed everything that happened this weekend I was on a boat all Sunday and didn't have cell service my phone wasn't even there and so I didn't see any of it until I got home late at night I saw like we were down I forget what the prices were at but I didn't know why and and I didn't figure out until the next day so it's actually Monday when I started to figure out and that's when I actually started to ask questions so it's it's nice that you ask this the first questions I did ask actually where I literally came in the Discord because I knew the milk Road team was sort of on this and would have been know what was going on I could have scrolled through Twitter but speaking of emotions that's the last want to do is

like scroll through Twitter and see everyone's just Mayhem and so I actually just went and Discord I was like guys what is going on like why are we down so bad right now but the question I ask myself is one did my thesis break that's the key thing you always want to ask in moments like this is did your thesis break go back to why are you actually investing why did you buy the assets that you're holding right now so why I always say when you when you invest you want to write down your thesis what is your reason that you're buying this stuff for me there's two things that I care about here I'm buying crypto and investing in crypto for two reasons one I mean I think the the tech itself is revolutionary right I think it's something that is going to change the

world I think there's a big reason for institutions for people for everyone around the world that are going to want to use this stuff and so for me we're in a secular trend of crypto adoption same with like what we were in with the internet back in the 90s and 2000s and so my first question is well did the tech break did something happen right and I as far as I could see no ethereum was still rolling salana was still rolling Bitcoin was still rolling nothing happened into in terms of like the fundamentals of the technology it still is working people are still launching new apps the devs are still deving everyone's still doing things you know uh and so nothing happened there people didn't just wake up on Sunday and decide you know what crypto sucks I'm not g to use anymore so I was like okay

that's cool the other thing that I think about when I invest because I invest longterm which is another thing we got to talk about I think later in this episode is okay so we're in a secular trend of adoption of crypto the tech is working but I also like to optimize my investments based off cycles and so and this is the business cycle and so I asked myself what it's something change in the macro cycle I think this is the key one where I think maybe people were probably more confused confused with or unsure but ultimately the business cycle is driven by liquidity and regardless of what happened even if you don't really understand like I know the end collapsed and so they raised rates and that you know all whatever you want to go through you listen to the episode from yesterday where Lark I think broke it all down

that was a great episode everything that happened if you think about what's going on ultimately what's the answer to all of this whether it was the us is going to reception recession which is one of them whether it was the was going to collapse right whether it was we're going to go into war whatever all of those things are what's the solution to it lower interest rates raise liquidity and so no the macro cycle is still in order everything and if anything this is more in line with what should be happening with the macro cycle as we change and transition into a world where rates go down and liquidity goes up things break things happen and as I think about it oh a fiat currency failed or is failing that is bullish crypto right if we go into war that is bullish crypto what happened last time right

like anytime there's there's bad geopolitical things that happen it forces people to move on chain because they need to move locations they need crypto to do that when traditional markets and traditional Finance collapses that's bullish crypto because what are we doing we're fixing all the problems that we've created out of these financial markets right and so if we're going into recession means we need to print money well we're going to debase the currency crypto fixes that once again so like all of these things that happened didn't change anything around the thesis of why I'm investing in crypto and why the cycle should continue as normal and so for me that was all I needed I didn't need to go on Twitter or do anything else I just need to go oh this is just a typical bull back in the middle of a bull market everything

continues and so for me that just immediately should if you understand it alleviate your nerves and you can start to make decisions based on there is there something you need to do sometimes you do need to change things but that instance I was like no my my strategy my thesis all remains I don't have to do anything here all good you say it's bullish crypto but obviously that didn't appear or show itself in price Action Now explain when you say it's bullish crypto I'm guessing that's more a result of time it's bullish crypto in the long term Maybe not immediately does it have that impact talk about us about when you think about your investment thesis in moments like this how do you think about

time and your time Horizon your investment the yeah I mean so when we launched milroad Pro or portfolio back in what was May I think we said okay we're investing for the long term so the secular Trend which means the next 10 years but we want to optimize for the cycle we believe the cycle ends somewhere late 2025 and so we're 12 to whatever 16 months whatever we're at now originally when we we first uh launched the pro portfolio we said it was 12 to 18 months when I personally started investing I mean this was a long time ago but I loaded up during the bare Market of this cycle and said okay at some point 2025 2020 that's when I plan to take profits and and kind of change things around and so this is a more medium to long-term time frame that I have others might be more

short-term and trying to trade around and make moves on a daily basis a weekly basis if that's the case for you then it's different okay if you were holding your assets and this thing pulled back 30% and you meant to trade around that then okay you made a mistake but what I think about is did I [ __ ] up here the fact that I was still holding my bag I'm kind of Allin on crypto right now did I mess up and it's like no I didn't at all because I don't know what happened I don't know the end result yet because this isn't my time frame I don't really care what happens right now or next month or the month after that because that's not my strategy that's not why I put money into this Market I put money in this market to take profits in a year

from now not today and so and I did that expecting that we would have pullbacks I mean how many times have we written in the milroad newsletter or said on this podcast I think we had nine pullbacks in the last cycle we had 13 in the cycle before that most of those were 25% Plus this was 30% in the last week in Bitcoin that's nothing we have had I mean just last cycle we had a 60 and a 70% I think it was just before covid or during covid and so like and then we've had a ton of 20 and 30 and 35% pullbacks and so like this was just a normal typical pullback as long as your time frame is long enough obviously if your time frame was like Hey I'm investing for like the end of the month then like okay that really

sucks probably you shouldn't do that crypto's a very very volatile asset and if you want to reap the benefits of crypto which is massive upside as we say 150% per year on average in just the least riskiest asset if you want to capitalize on that you need to expect and be okay with the volatility which means 30 40 50% pullbacks what happens here though in these instances is when you don't think of that a lot of people have this like pullback of 30% they're scared it feels bad I mean your gut even mine like I seem like I'm calm and cool I was not my gut was like oh my God I want to puke you know and I know a lot of people felt that way but what happens is if you don't calm your emotions and like calm your mind here a lot of people

think coming out the other end this was I screwed up I should have known that I should have sold right because they see someone on Twitter that's like oh I sold the top and then I'm buying back in at the bottom it's like no no one did that okay maybe someone did it by like chance someone just got lucky and that's fine if they did that great probably didn't do it because they thought the pullback was coming because of the end and whatever it just happened randomly right and so so you need to manage your expectations realize like one that's probably not why you're investing I'm assuming most people listen to this are more long-term because that's what we teach and so you need to understand like you did not mess up it's okay for you to hold through 30% pullbacks you don't need to do anything differently to make

up for it or anything the market will make up for it on its own as long as crypto remains in a secular Trend and we're still in a macro cycle and the business cycle is still pushing forward we're going to have more liquidity and rates are still going to go down like you're all good as long as you hold through then you actually didn't make a mistake and you did exactly what you were supposed to do but a lot of people can't really wrap their head around that and they think they they messed up and now what they do is they go okay I'm going to be more active I'm going to trade more I'm G to try to learn more about technical analysis so I don't have to hold on to a 30% pullback and it's like I tell you right now that's not

going to help you doing technical analysis on crypto is rarely a good thing unless again it's for long-term technical analysis and also like if you're not doing it all day every day and like a pro at it and I mean 80 hours a week at this stuff then you're not going to do well on this and so I think you need to just be okay with kind of battling through these and if anything adding on the dip if you can and that's that's the clear strategy at least if you have a long-term one like I think and uh I think that really will just help you manage and actually like stick to your strategy over the long term here if you're listening to this and you are a long-term investor and when I say long-term a cycle-based investor make sure you subscribe to this channel so

that you stay up to date on all of our updates that we are giving you every day to make sure that moments like this don't [ __ ] up your Investments because these are the moments when most people [ __ ] it up so subscribe right now and also hit us up in the comments and let us know if we we match your style or if maybe you are a Trader and you're a short-term investor we'd love to know what your guys investment thesis is Kai you mentioned Bitcoin down 30% one part of our thesis the milk Road Pro thesis that you've talked quite a bit about and we've produce a lot of content about is Bitcoin dominance versus ethereum that part of our thesis has not come true so far does that make you pause and think that we need to change the thesis and

change the plan or is it just that we're being short I'm being s shortsighted basically in the fact that it hasn't come true yet yeah great question so Bitcoin dominance is up like I think it hit 57 close to 58% uh yesterday when all this happened and so it's we said two things one Bitcoin dominance go down we all said the eth Bitcoin ratio would go up and eth would start to outperform now again it's short-term thinking like yeah we're down right now but we're also down versus the dollar you know since May and like it's not like we were and and so like what are we going to give up on that too like everyone is down versus the dollar over the last I don't know since March and so like did you fail it's like no you just haven't held long enough again if you're in a secular

Trend and the macro cycle continues the same thing is true with our theory around the Bitcoin dominance and around eth BTC is when we go more risk on when we reach the second phase of the bull market is what we've always said we believe that that's when eth in the alts will start to outperform okay we have not reached that yet we are still in that transition period we hoped it would happen sooner maybe when the ETF came it hasn't that's okay right we needed looks like we needed more things to break in the FI in the traditional market for us to lower rates and print more that's fine that happens all the time right and so again sure we aren't right on that yet okay and maybe we will be wrong I don't know nothing is a guarantee in anything that we say right we're still

bullish on bitcoin we just think eth probably outperforms but again it happens when we go more risk on a d leveraging event is is risk on it's the opposite of what we're investing in right but again this deleveraging event is a short-term thing a small thing that's going to happen maybe takes a couple weeks and then all of a sudden we probably power through it when we reach the second phase of the bull market the end the tail end of the business cycle again following our strategy of what we're doing here rates lower liquidity much higher risk assets go off that's when we start to see or at least we think eth in the alts outperform and so we haven't got there yet and so no I don't think we failed I don't think we were wrong we maybe are early in in the way we could have done it but again

we're not sitting here trying to TI markets perfectly I was never trying to buy you know Bitcoin dominance at the very top and write it down to the very but like I never try to get the tops because I'm I'm not smart enough to do that and I don't think most people are to completely honest and so I don't think that should be your expectations I think if you can get around like I think we bought you know eth with Bitcoin dominance around like 55 or 56 whatever it was in May so like we're a couple percentage base like percentages off I'm okay with that you know uh we'll see what happens at the end but typically eth dominates by and all it's dominate by a lot at the tail end of the cycle and so not talking a few percent a lot of percent like Bitcoin dominant should

go down to I forget what it is maybe it's 30% or something so like we've got a long way to go here in terms of these percents but also in terms of you know 12 14 16 18 months whatever that is so no don't think we're wrong I think we're still just on track as usual just taking some time to play out patience man it's so difficult uh so what are the lessons that you remind s of during a moment like this and what are the lessons that other investors can take from these very challenging moments honestly I think the best thing you can do well I mean so a few things one is build conviction which means just learn in what you're investing in It's So Hard to Handle in stomach volatility if you don't know

what you're investing in that's why we don't hold a lot of random Assets in our portfolio like holding meme coins through this would suck because it's like well did your thesis play out is it still playing out like I don't know is the tech broken like I don't know there is no Tech right so it's like in those instances I don't know that's why I also don't go invest in like I don't know other industries that I don't really understand but I spend every single waking hour I have basically learning about this industry and so when these things happen because I have so much conviction I understand it so well it's easy for me to be like okay is my thesis still intact right because I get it I understand it I know what's going on so one is build conviction two try to learn

from the past right I wasn't around in 2015 2016 2017 that market but I can tell you exactly what happened in that market I can tell you the amount of pullbacks I can tell you the prices it hit I can tell you when eth passed Bitcoin like I can tell you everything that happened at market and I did not invest in crypto I didn't know what crypto was back then but I did it because now I study it because you know what oftentimes you know history doesn't repeat but it often Rhymes right and so again if you weren't there doesn't mean you shouldn't go look at it go look and understand how Market structure went in the last three Cycles it's a gift to you to be able to have that it's so easy to do just open up trading view I mean I think we actually have a newsletter that

came out today talking about this and just look at the structure from then how many pullbacks did we see then right and you can start to understand how these markets work don't even look just in crypto understand that crypto is a new technology and so go look at how technology has developed in the past if you want to take the best example look at internet companies from back in like 2000 they were super early small market cap way less than a trillion dollars at the time right so very similar to the size of crypto back then and what did they do they had multiple 90% pullbacks people don't realize that but Amazon in 2000 had like a 95% pullback it had a 75% pullback a few years later and another 70% pullback a few years after that it looks so similar to crypto in terms of Market structure now once it

became a trillion dollar asset class or an asset sorry then all of a sudden it didn't have these massive pullbacks it still has 30 and 40% but not these like 90% And so you can say oh it's because it just had adoption right and that's the same thing as What's Happening Here with crypto and so again if you just start to study markets and maybe even study a little bit outside of crypto and think of it more broader you can start to understand like this stuff is pretty normal right these 30% pullbacks are so scary to someone who just came in and who doesn't know what they're investing in they aren't so scary when you get markets and you get crypto right so it's all about knowledge knowledge is power and you just need and it's all available to you on the internet you know and so

like just go learn it and study it and that will change everything for you one last thing even without you can have as much knowledge as you want but if you can't manage your emotions you're going to be completely screwed and investing is 80% emotions I say this all the time right how many people wanted to sell over this weekend or got scared and thought crypto was going to zero probably most of our listeners here right and when you get emotional you get fear you get greed that's when you make mistakes this is true outside of investing too just in life in general when you start to get very emotional you make erratic decisions irrational decisions right and so how can you start to manage that journal right every time you have these moments that were so crazy in markets your emotions went nuts go write down what you felt over this

weekend how you reacted to that what did you notice about yourself right and then the next time this happens because it will happen four months five months whatever it is this will happen again I promise you go back and open that up see how you felt and then maybe follow up in a week from now go right and be like here's what happened the following week after this crazy 30% pullback like markets are now back to where they were a week ago you know it's like it actually wasn't that big of a deal and like I'm all good like everything is okay the world's not ending right maybe it takes a week two weeks for like the markets to figure that out but assuming that happens like we're obviously things could still get worse I don't know but whenever that happens or if it does go

and write that down because then the next time something bad happens you can go back and go oh [ __ ] I also thought the world was going to end back in July 2024 and it didn't right now we're twox higher than we were then right and so the more you can start to understand your emotions and like relive them in these moments it'll really really help you make better decisions here and just like become a little bit more rational when things happen because it's really really important as an investor to remove emotions and just invest based off data is your thesis still intact that's all that matters fantastic Kai thanks so much for walking us through all those wonderful tips I want to know of you guys how are you feeling are you feeling emotional are you feeling stressed did you buy the dip did you

freak out and sell did you get liquidated on anything we always love to hear how you guys are doing and your Investments and if you want direct access to us make sure you go pro as Kai said at the beginning of this episode the first place he went was the mro pro Discord which is our Discord where the mro pro team is active every single day so you can ask us questions about what the [ __ ] is going on and how you deal with it so hit the link in the show notes Go Pro today as well we'd love to have you as a subscriber so make sure you subscribe so many of you listening to this are not subscribed to the show and if you're not subscribed you're not getting the latest updates and then you're going to make mistakes in your Investments so make sure you subscribe

smash the like button while you're at it it helps us out so much remember investing in crypto is risky none of this is financial advice you should only invest what you can afford to lose thanks so much for joining us today everybody see you next time have a wicked awesome day