How to Make Money Both Ways in a Bear market
Disclaimer: None of this is financial advice, I’m a moron on the internet that you’ve never met, can’t read or write and lost his lifesavings 100 times over. In the hypothetical scenario that I were to try to make money both ways, this is how I would go about it:
In a bullmarket everything goes up. You can literally just buy anything, wait long enough and feel like a genius.
You have probably found that your favourite youtuber or twitter influencer has grown quiet after telling their followers for months that another alt season is coming and to buy the dip, the actual dip and the dip of the dip.
Bearmarkets is where the more sophisticated traders stand out. They are able to preserve their capital. And only those who can look at a chart without their Up-Only bias, can make money.
So I’m hearing some noise on crypto twitter about shorting unlocks. For those unfamiliar with this new crypto niche: you’re basically waiting for a large amount of tokens that are vested to suddenly come on the market, with the assumption that the majority of people will want to realize a quick profit in these market conditions, thereby dumping the price. You short in anticipation of this event and make tons of money.
To make life even easier others have done the research for you on these unlocks: https://twitter.com/UnlocksCalendar
So all you have to do is set up your twitter notifications and short that ponzi to zeroo!
Who said being a bear isn’t fun?
But I’d be lying if I said it was that easy.
Let’s look at $ALICE unlock from last month: The green lines are previous unlocks. Alice dumped in anticipation of the unlock, but seemed to pump on the actual unlock.
People were anticipating the $ALICE unlock last month to be the 15th of June, and the team postponed the unlock a day and was not transparent about it. Retail traders were salivating at the idea of making it all back in one trade, shorted $ALICE high leverage and got REKT.
The funding rates were extremely high, so any small BTC pump and the correlation algorithms would short squeeze all of them.
$ALICE, 15min Timeframe, short squeeze pump (on the left) before the actual unlock (at the green line in the middle)
What you see here is the 15min chart of $ALICE with the unlock that was advertised to happen on the 15th of July. People went short expecting a dump, instead shorts got squeezed (on the left of the chart), and we saw a liquidation cascade upwards and we got a quick 30% price pump.
The green line is when the actual tokens unlocked. Giving a quick ~10% drop.
So recently, with all the attention and higher funding rates, shorting unlocks is a pretty bad risk reward, if you ask me.
How to short ponzi’s the right way?
You want to minimise your exposure to possible shortsqueezes. So instead of sitting in your short for the whole day and praying for the unlock to happen, you must base your entry on a strong signal:
The unlock can be seen on-chain and divided into two signals:
1st signal: The vested tokens get send out to all the early investors.
2nd signal: We make the assumption that the only reason people send their newly unlocked tokens to exchanges is to sell (usually because liquidity is better).
So let’s take $ALICE as a case study:
- 1st signal, the vested tokens got sent out. At 16 June at 13:00 UTC it unlocked giving a quick 10% dump. This on-chain signal gave you enough time to open a short.
- 2nd signal: I looked at the 18 biggest holders of the unlock. Some time after the unlock, the majority of whales still hadn’t dumped yet. To prepare for this unlock event I characterized every unlock whale and looked at whether they had a history of dumping. This gives you a rough sense of what to expect and how long to stay in your short.
And then during the $ALICE short this is how I kept track of the whales with alerts:
Here we see one of the unlock whales: He has a clear history of dumping within hours of his unlock two previous times:
The Blue spikes show he received the tokens and sold them in a day.
Here’s another unlock whale. He has a history of holding for a couple weeks and then dumping with some significant effects on price:
So if all the whales with a strong history of selling have sold, it’s time to close your short. Then you can always reopen a short whenever you get a notification that one of your big unlock whale is sending his coins to exchanges.
Here is the chart with the on-chain movements of unlocks and whales selling their unlocks later again:
Looking at the whales selling (red) it provides another short opportunity with good R/R
You can see that both provide good signals. And that the recent unlock which was so highly anticipated was kind of let down looking at the % drop vs. the amount unlocked.
So here’s the alfa:
The three biggest whales with a history of selling their $ALICE tokens all at once several weeks after the unlock to this day still haven’t sold their unlocked $ALICE bags.
Luckily I’ve got alerts set up ;)
Whale 1: 0x50cb435cb43cf6d936f257b8670f98b568d89832
Whale 2: 0x162a2a8d34a260404b588247a09bd8b05965f26a
Whale 3: 0x38c99653b389ec4bd24ccde560a290c7fe53ae65
Even with these on-chain signals I would always set a Stoploss. What if your assumption is wrong? You think they’re sending their coins to exchanges and doing an instant market sell. But what if they’re selling it slowly over time, or setting a limit sell order?
All this on-chain signal does, is give you a more favourable risk reward set-up than just shorting based on TA, hearsay or CT, but it’ll never be risk free, hence the Stoploss.
The $LOOKS strategic sale tokens (as well as team tokens) are being unlocked at block #15147012. https://etherscan.io/block/countdown/15147012
How would I theoretically play it?
I would only use signal 1 (on-chain unlock signal) for this. And here is why:
LOOKS has a lot more people getting the unlock and a lot more vesting contracts. So it would be a little bit more tricky to track individual wallets with the most unlocked tokens.
People usually send their tokens to an exchange because liquidity is better. And liquidity for LOOKS is better on Uniswap than a CEX. You can’t predict when someone will sell their tokens on uniswap, the way you can by people sending tokens to a centralised exchange. So there’s no way to track it other than in realtime and by that time it will be too late to short. Therefore signal 2 — tracking whales individually — is not worth it for LOOKS.
As you can see from below tweets, there’s some uncertainty around which day the unlock is on, all the more reason to trade it based on the on-chain signal, the vesting contract sending out tokens.
Look out for token movements around the 80million mark, or multiple smaller ones still in the million double digits.
Possible Vesting Contracts are:
(most likely this one) 0x465a790b428268196865a3ae2648481ad7e0d3b1
Next you want to follow the token movements and see what % gets staked for LOOKS revenue. If >80% of tokens gets staked and everyone is shorting and funding rates are high, you have what you call a bullish unlock. Shorts get squeezed and no one is willing to sell for these low prices.
And keep an eye on those funding rates to not get squeezed!
~ Educating you how to not get REKT in the world of DeFi
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