How to Use the ‘Lead-Lag Strategy’ to Profit From Crypto, Trader Explains

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Martin Cheung is an options trader with crypto-trading firm Pulsar Trading Capital in Hong Kong. He breaks down the “lead-lag strategy” he deployed to generate huge profits in the crypto market. Cheung also shares one of his favorite digital asset tokens and his thoughts on the recent crypto price correction.

When bitcoin briefly fell below its key $ 30,000 support level earlier this week, 12-year-old trading veteran Martin Cheung was not fazed.

“No one can guess where the bottom is. Trading is all about managing risk,” the options trader at Hong Kong-based crypto trading firm Pulsar Trading said in a recent email interview. .

Cheung, who first bought bitcoin in 2017 at around $ 3,000 for his personal investment, knows a thing or two about risk management.

“Never put your whole investment in at one time, divide it into portions. If it goes down, buy more,” he said. “For example, if you only take 5-10% of your net assets to invest, if it increases by 10 or 20 in the next 10 years, it will be much better than your pension fund.”

In the very long term, he has the same view of the price of bitcoin as famous Ark Invest CEO Cathie Wood, who predicts that the largest cryptocurrency will reach $ 500,000 and reach a market cap of $ 10,000 billion. .

The way forward to get out of the current drop in crypto prices

Cheung, who thinks Ark’s aggressive price target is “certainly achievable,” is also not fazed by the recent drop in crypto prices. He shares five observations that indicate the health and growth of the crypto ecosystem.

Unlike the previous cycle, the number of people owning cryptocurrencies around the world has grown to around 2% to 3% from 1% three years ago, according to Cheung. Their growing popularity is expected to contribute to the efficiency of global payments given the “decentralized and borderless” nature of crypto.

Another sign of good health is the number of transactions going through chains such as Ether (ERC20), BNB (BSC), Harmony ONE (HRC20) and some of the Layer 2 solutions. He noted that the volumes of these blockchains were all skyrocketing and getting healthier and healthier.

Investors should also keep in mind that bitcoin went from $ 10,000 to over $ 60,000 in less than a year. Instead of seeing transaction volumes crashing in the last multi-year bear market, Cheung continues to see huge volumes of activity related to decentralized finance and non-fungible tokens.

“For 2021, I don’t expect a lot of hot money to enter the bitcoin market, so I don’t expect a big bull market to come,” he said. “Instead, I think its prices will continue to rise slowly and healthily, $ 40,000 to $ 50,000 is the level I would look at.”

Deploy the lead-lag strategy for short-term profits

In the short term, Cheung likes to deploy the so-called “lead-lag” strategy, which would force traders to use more fundamental analysis and quantitative research.

For example, when bitcoin led the crypto market in October of last year, investors and traders laser-focused on the largest cryptocurrency for profit opportunities. This was exactly when Cheung started buying altcoins, which only started to rise in January or February of this year.

Early entry into altcoins and digital asset tokens ended up being one of his “very profitable strategies”.

Another way he executed the strategy was when Binance Coin (BNB) experienced its first wave of bullishness, going from around $ 30 in October of last year to $ 300 in March. During the same period, there were a lot of laggards in the centralized exchange token industry such as FTX (FTT), OKB (OKB), Huobi Token (HT) tokens which ended up advancing months more late.

“To give you an example, if you see bitcoin is up 10% today and the ether is not doing anything,” he said. “If you believe in the lead-lag strategy, then you would buy ether and expect a 10% gain.”

One of her favorite digital asset tokens

Cheung has no doubts about bitcoin’s dominance in the crypto market, but he personally likes blockchain tokens built on the proof of stake system for the simple reason that they are more environmentally friendly.

He’s also bullish on tokens looking to solve ecosystem issues like slow transaction speeds and high transaction costs etc.

Cheung said Harmony (ONE) is one of his favorite tokens. The blockchain platform, created to facilitate the use of decentralized applications, seeks to create blocks in seconds and charge fees 100 times lower.

He adds that there are many reasons to love the first layer channel, which is “fast, cheap and grossly undervalued at that level.” He expects to see “multiple returns” from the token.

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