♠️ 10 Lessons of a Card Counter to make it quickly in Crypto ♠️
In my journey to get rich quick I came up with the ridiculous idea to become a card counter.
Before we dive in: I just want you to know that I’m an ordinary guy. I don’t have a photographic memory and never particularly liked mathematics.
And I am certainly not some Math Savant like Rainman or Good Will Hunting.
Also most people don’t know that card counting is perfectly legal. The casino’s have however right to refuse entry to whomever they want. Worst case scenario is the casino “backs you off” and you’ll have to find another casino.
So let me explain the basics of card counting - (it’s easier than you think and only involves subtracting, adding and simple divisions):
Step 1 — Learn perfect basic strategy
The house has a simple but important edge over you in blackjack: if you break before the dealer does, you lose. This gives them an initial edge of around ~6%.
BUT if you play with perfect basic strategy, meaning the best decision with every card combination (when to hit or stand, when to split pairs, doubling decisions), this will will bring the house’s edge down to ~1%.
This means that when you play a large number of hands the casino takes on average 1$ of every 100$ that you play.
Step 2 — Hi-Lo system:
Assign a value to each card:
Low cards 2–6 = +1
Neutral cards 7–9 = 0
High cards 10- Ace = -1
Step 3 — Running count
Keep a running count based on those values. Count EVERY card. Yours, the other players, the dealer’s cards.You add/subtract EVERY card that is on the table until the dealer shuffles. This running count can be used with any number of decks.
How is this useful?
To give you an easy example:
If there’s 7 cards left in the deck and the running count is +7
(→ more low cards have been dealt)
In this instance there is a 100% probability that the next 7 cards are high cards (10- Ace), because the count needs to come to zero.
Step 4 — True count
Calculate the count per deck.
First guess the number of decks left.
Then do an easy division:
True count = (running count) / (# of decks left)
If you use the true count, your edge over the casino is now 1–2%. Yes, you read that correctly.
After all this, you still only have an edge of 51–52%.
They didn’t show that part in the Hollywood movies, right?
How To Beat The Dealer and Bring Down the House?
You’re playing basic strategy blackjack, betting small and biding your time…
Keep your downside to a minimum (49%), until the odds turn in your favor.
When the odds are in your favour, then you increase your bet size.
You win less total hands than the casino, but by doubling down at the right time and betting aggressively when the odds turn, you are winning in the long run.
So this all obviously takes quite a bit of practice and time to master. Now you’re wondering is the juice worth the squeeze?
Well, that depends on the size of your bankroll…
$1k Bankroll — $10/hr Expected Value (EV); 45% Risk of Ruin.
$10k Bankroll — low risk at $16/hr or 33$/hr at 10% Risk of Ruin.
$100,000 Bankroll ~$170/hr EV at 1% Risk of Ruin.
But keep in mind the winning and losing streaks! It can take 100s hrs for that math to work out!
So how does all this help your average Crypto Degen?
10 Lessons of a Card Counter for Crypto
1) Probabilistic Thinking
2) Position Sizing: Never Go All-In, You Retarded Ape
3) Find Your Edge
4) Perfect Your Edge
5) Emotional Resilience
6) Take Responsibility
7) Quantify
8) Marathon versus Sprint
9) Patience
10) It’s Not About Being Right or Wrong…
1) Probabilistic Thinking
Understand that it’s a game of probabilities. Some people get carried away and leave their net worth in the hands of hope and gut feeling. You might get lucky with a meme coin, but there’s a high likelihood you won’t be able to hold onto your wealth.
“The fastest way to make a small fortune is to go the casino with a large fortune.”
No one truly knows what will happen next. If you consistently bet with good odds, it’s just a matter of time. It’s just math if the probabilities are in your favor.
Want to learn how to master this skill?
Read Cobie’s piece on “probabilistic thinking”.
2) Position Sizing: Never Go All-In, Retarded Ape
Card Counting: Tommy Hyland, a legend amongst card counters, always said: ‘An aggressive bet spread overcomes a lot.’
What does this mean? Here’s an oversimplified example:
Normally you’re betting $20 every round, until the odds stack in your favor, then you’re betting big, $100. (In reality the size of the bets is a bit more complicated and dependent on the size of the odds, so it’s not just $100 every time the odds turn your way).
If you’re still betting $20 every round, and suddenly betting $200 when the odds turn, all you’ve done is increase the chance that you’ll blow up your account. The original bet spread was there for a reason. So instead an aggressive bet spread is betting $10 every round and still betting big $100. Sure, this increases the risk of people taking notice that you’re counting cards and getting kicked out of the casino. But it keeps risk low and +EV high.
In Crypto: Do you have alpha or inside information of a future partnership? Swinging big when the set-up is very asymmetrical in your favor overcomes a lot. But the market can stay irrational longer than you can stay solvent. And in crypto anything can happen. That’s why you want to have hard rules with yourself, such as:
Never more than X % in midcap altcoins.
Always Y % in dry powder for unforeseen circumstances or to buy the dip.
Never more than a Z % in high risk high reward shitcoins.
So even with asymmetrical set-ups, size your bets appropriately. Don’t get REKT.
True story. It took 6 days for the Axie team to find out about a $600 million exploit.
Position sizing is key in case that wasn’t clear yet.
If you have a 70% odds that the dealer blows himself up and goes over 21, you need to size your bet accordingly. You want to bet more than your normal bet, but not that much that several of these losses will wipe you out.
With a 70% winrate there’s still a likelihood of losing 5 times in a row.
Never bet the farm and blow up your account just so you can make it quick.
You have two assets: your brain and your bankroll. If you overbet your bankroll, there is sooner or later a moment where you’ll blow up your account.
If you’re an Ape and are struggling with risk management & position sizing, this video is an absolute must watch:
3) Find Your Edge
Card Counting: Learn to keep the running count and true count. This will give you that 1–2% edge over the casino.
Crypto: The possibilities for finding edges are endless. Because it’s a nascent market, there’s so many market inefficiencies still there to be exploited.
Over time you’ll notice that you have a knack for something. It might be on-chain analysis, it might be whale wallet watching, it might be finding NFTs early, it might be finding low cap gems, arbitrage, options: calls/puts, it might be TA, swing trading, day trading, scalping.
Whatever it is, don’t try to master everything. Initially focus on your edge and exploit it.
Rinse & Repeat.
Keep printing money!
If it starts getting boring, you’re on the right track. Once you find an edge, don’t mix it up just because you’re bored. You’re not here to chase dopamine hits, you’re here to make money.
4) Perfect Your Edge
Perfecting your edge takes time and practice. Lucky traders and apes come and go, but those that grind and focus on their methods and perfecting the process will win in the long run.
Card counting: It literally takes hundreds of hours of training to become a profitable card counter, many people don’t stick it out. Even a card counter who plays the game to perfection will still lose their hands often. Forget about winning or losing. Perfect the process and create consistency.
Crypto: Similarly many people don’t put in serious time to develop an edge and rely on luck, shills from CT or their favourite tiktok or youtube influencer.
It takes serious effort and studying to be consistently profitable.
If you’re a tracking wallets, you need to put in the time and keep updated with new information. Finding the right information can give you an insane edge especially in crypto where fortunes are made literally on the daily.
If you want to make it this next bullrun or in a short amount of time and don’t want to rely on luck, you want to stack the odds in your favor. You NEED to develop an edge; Whether that is flipping NFTs, finding shitcoin gems, trading, finding the right network to rely on to give you alpha. Again the possibilities are endless.
And of course don’t be salty if a 14 year old yolo-ing into a meme coin will still out-trade you.
Well, there’s another caveat. This doesn’t go for the hodlers. Those who take advantage of Metcalfe’s law can just sit on their hands and be very profitable in the long run.
We’re in the early adoption phase at the same rate as the internet in 1997.
5) Emotional Resilience
Do you think the Casino gets anxious when they lose 5 hands in a row? No, because they trust their edge and then stop second guessing themselves.
It’s just an absurd question, right?
Yet it happens to all of us. Why do you think there’s the expression that 95% of traders lose? What do we all share? The same psychological mechanisms. The small profitable minority have overcome those hardwired emotional systems, backtested their systems and trust probabilities to take care of the rest.
Card counting is a great way to learn the traders psychology. Where in crypto we have a bull run and a bear market. Those same swings happen to your portfolio as a card counter and it can take hundreds of hours of winning streaks and losing streaks for the math to work out. Meanwhile you are there experiencing every losing hand and having to deal with the emotions of those losing and winning streaks.
You learn to become cold blooded in your analysis and risk management. It will be second nature to be on guard against euphoria & greed as well as depression & anger.
Most crypto investors take one or two cycles to become accustomed to the volatility.
6) Taking Responsibility
Card Counting:
Whatever happens is the result of your actions. The math doesn’t lie. If you’re unprofitable after 10.000 hours of sitting at blackjack tables, there’s no hiding it any more. It’s not the dealer, it’s not the cards, it’s not the cute waitress who distracted you, you’re at fault.
Crypto:
Crypto investors who are not ready to take on this FULL responsibility of their actions will find themselves in a dilemma:
How can you take part in an activity that allows complete freedom of choice, and at the same time avoid taking responsibility if the outcome of one’s choices are unexpected and not to one’s liking?
Example:
You’re spending a lot of time doing market analysis and planning your trades or developing a fundamental thesis for a certain shitcoin. Then your favourite Youtuber or CT animal character shills this new token.You feel the FOMO, the Inner Ape gets the best of you. The shilled shitcoin gets smoked, and your other planned trade did well.
This is a classic instance of how we become susceptible to unstructured, random investments— because we want to avoid responsibility.
When we act on our own ideas, we put our creative abilities on the line and we get instant feedback on how well our ideas worked. It's very difficult to rationalize away any unsatisfactory results. On the other hand, when we buy on a hunch and invest in an unplanned, random way, it's much easier to shift the responsibility by blaming the youtuber or CT avatar for their bad ideas.
The hard reality that you have to accept if you want to create consistency is that you have to start from the premise that no matter what the outcome, you are completely responsible. It takes effort to create the kind of disciplined approach that is necessary to become a consistent winner. But, it's very easy to avoid this kind of mental work in favor of trading with an undisciplined, random approach.
7) Quantify
Your edge is not constant, but constantly changing.
Card Counting: There can be systematic flaws in your system. Monitor! Tipping the dealer too much? You just lost all your gains. Losing track of the count because of that one whiskey? Systematically underbetting, because you’re afraid the casino will back you off?
In Crypto: Does your edge work the same in a bull market as in a bear market? Is your edge losing because of a change in narratives and trends? If you monitor consistently you’ll be able to pick up on these early, and change as quickly as the narratives change. Also you can stop systematic flaws in your system and optimise your edge even more.
Be like water.
This goes hand in hand with taking on responsibility. Quantifying in the form of keeping a trading journal, a spreadsheet to keep track of your investments on a weekly basis etc. is a logical next step after taking complete responsibility. If you don’t monitor, you’ll never know what you did right/wrong and therefore never learn.
8) Marathon versus Sprint
Hollywood depicts card counting as a sprint. As I started on my card counting journey I fantasized about making fortunes overnight. The reality was a stark contrast. It is a marathon. You now understand why I called card counting to get rich quick a ridiculous idea (if you start with a small bankroll).
Just as there is a bullrun and a bearmarket in crypto, there can be winning streaks that go for hours or days. Losing streaks can last hundreds of hours even if you’re doing everything right. Every single hand you play, you experience the extremes of emotions.
Don’t chase money.
Do you think the casino is worried about individual hands? If you get into that mindset that you’ve lost a certain amount and need to get it back, you forget that this is a marathon and not a sprint. With this mindset you’ll go balls deep in shitcoins or overleveraging yourself and get REKT.
Remember: you’re not trying to win any hand, any game, any trade.
Lose the battle, but win the war.
9) Patience When You Don’t Have an Edge
Card Counting: There can be times when you spent several 6 decks keeping a running count and true count. And at the very end you end up with unfavourable odds. So there’s no asymmetrical bet for you. In these conditions you just have to be patient. So you’re playing basic strategy blackjack, betting small and biding your time. Keeping your downside to a minimum (only giving away 1%), until the odds turn in your favour.
Crypto: Adapt to the environment. Is it a PVP environment or raging bull market? Sometimes that means no trading and sitting on your hands. Instead of always having to be in a trade, let the trade come to you. Wait for the big crashes and the generational buying opportunities to swing for the fences. During a downtrend don’t try to catch every knife. Or as a momentum trader don’t get chopped up and face death by a thousand papercuts by gradually eroding your account in trying to breakout trade a rangebound market.
10) It’s Not About Being Right or Wrong…
Card Counting: For most card counters who start out with a relatively small bankroll, there is a small chance that you’ll blow up your account before the math works out. Instead of letting every hand that you lose make you feel depressed, you accept the risk and know it’s a game of probabilities. It’s not personal or about being right or wrong.
Crypto: There’s no shortage of hopium in the crypto world. A quick scroll through the subreddit crypto moonshots will show you all you need to know.
We degens are fixated on the 100x, probably because of your screwed up dopamine systems as much as the excitement of how that money can change our lives with that money.
But how often do you ask yourself, “What if I’m wrong?”
Where is your invalidation point?
You’ll benefit from writing down your invalidation point for your investment thesis beforehand. Because for most of us as soon as you hit that green buy button, your judgement becomes clouded and cognitive bias is a given.
Would you rather lose money than admit you’re wrong and cut the loss?
Last Words of Advice From a Card Counter
While my career as a card counter was short lived, in the process I learned some valuable lessons that continue to serve me today in the world of crypto.
If you’re here to gamble, to get lucky and get that dopamine hit, by all means YOLO into that meme coin. In my opinion your upside is higher in the crypto casino than in an actual casino.
However, if you’re here to make money consistently and beat the casino, you need another strategy. Card counters live and breathe this. This statistical mindset is very hard to master and those that do will make it quick in crypto.
Keep your downside to a minimum first. Your bankroll is all you got. Protect it from your own greed. Risk management first.
Then focus on optimising an edge and practicing consistency.
Mindmap: A picture says more than a thousand words:
This was a long article. If you made it this far here is an awesome mindmap from @coyotevn on twitter that helped me summarize everything for you visual learners out there.
Similar Reading
I am by no means the first to write about the similarities between financial markets and poker, blackjack or other things casino. If you enjoyed this and want to read/hear more in the same vein. Have a look at these three resources:
“A Man For All Markets” by Edward Thorp.
Edward O. Thorp was a mathematics professor and THE inventor of card counting. After making a fortune beating casino’s, Thorp shifted his sights to “the biggest casino in the world”: Wall Street. Devising and then deploying mathematical formulas to beat the market, making millions in the process.
Edward Thorp credits the lessons he learned as a card counter for how to identify an edge and exploit it and manage his risk.
If you want to know more about card counting and financial markets, I highly recommend his self-written autobiography:
A piece by @thedefiedge on how Poker gives an unfair advantage in crypto.
Here is another classic. Crypto OG LightCrypto who comes from a poker background talks about trading with Su Zhu and how poker gave him a good mindset for crypto.