2 Years, 1M PnL and Life as a Solo Crypto Quant
Road to 50 Sharpe
This is a RT of an article I wrote on X.
Exactly 2 years ago, on this date - I took a step into the treacherous crypto order books. My first foray into crypto trading was a quasi systematic funding arbitrage strategy, which I executed by hand using some spaghetti code dashboard to filter for funding pairs on binance-hyperliquid.
1 to 10 Sharpe
In those days, funding arbitrage was already a well known strategy, but execution, variation and reach played a big factor in realised APR. New exchanges seemed to be budding left and right, with unique funding mechanisms.
This pushed me to quickly build out more exchange connectors and a gateway functionality that would allow me to automate funding arbitrage strategies across multiple exchanges in a unified interface, which would later turn out to be the quantpylib project, a code repo started by my followers and then later lead by me to be a tool for both quantitative research and trading.
At this point, other projects like ccxt and hummingbot existed, but the quantpylib project focused more on connectivity and composability of features without relying on an architectural framework, allowing traders with variable strategies to implement high to low frequency strategies according to their needs. It integrated binance, bybit, woox, paradex and lighter, exchanges I executed arbs across. 2.5 years later and 1000+ commits later, quantpylib is still a work in progress.
I had decent reach and okay execution, enough to land me in the 40% APR range, while earning points - which ironically turned out to be even more lucrative than the pnl itself, all thanks to The El Jeffe crew. These days, with tools like @LorisTools, the scale and reach of such arbitrage strategies are extensive.
Despite the ~10 Sharpe, it was a strategy with extremely low vol, and scaling the pnl meant I had to put more of my already small net worth on chain, a risk I was not willing to take. It also took many man hours of attention, taking time away from investing in my own technical capabilities. In young, 'skilled' workers, knowledge compounds over the remaining career lifespan.
I shut it down.
At the same time, I was in a desperate struggle with my own mental faculties. I was, at heart, a builder. I built things in public, in an industry where large doses of skepticism were warranted. I had the imposter syndrome bug. Was I just a peddler of snake oil? Some people (including those I admired) and the anti-substack mob seemed to think so.
Hanguk’s income is from his newsletter. All he can do is implement a momentum trading strategy. I find it funny that Hanguk teaches systematic funding arbitrage but has to record pnl manually.
You write on a blog, I do this for a living, I would know.
I saw it in X replies, Discord channels, Reddit communities. Maybe I am just a fucking fraud, and I will never be that guy. After all, trading is an incredibly competitive industry, and greater man than me have failed. I am still young, and I can still pivot into being a quant trader where all my friends are. I could get referrals, I would be ‘in the industry’ and I won’t have to deal with all these bullshit.
These dark thoughts would later crescendo into anxiety and panic attacks. By all counts, my ‘online blog’ was bringing me 200k+ in ARR, and my trading was comparably rewarding. I was living my life. I once had no income and no pnl, and had an unshakeable confidence that I would ‘figure it out’. Having somewhat figured it out, it turned out that there were many cracks in this facade. Crypto strats were going to be squeezed by TradFi, and AI was going to wipe me out, who needs ‘research’ when everyone had a PhD-expert on their fingertips?
Wakeup, Doomer
The truth is, there were many people supporting me. For every nasty comment, there were ten others who cheered my work on.
Claude Mythos, OpenGod or whatever - I was well equipped and adaptable enough to thrive in a post-intelligent economy. I spent some time talking to my Dad, who had the wisdom of life to slap the doomer out of me.
It’s all in your head.
I got over it by biasing towards action. Day after day, I would wake up in sweats and palpitations, and before the darkness paralysed me, I would have done a handful of pushups, hopped in the shower, and was headed out to write some code. If I kept moving, it couldn’t catch me. It took a few months, and slowly but surely, I was okay again.
Fear is good marketing. Do not be the product.
10 to 50 Sharpe
In the months to follow, I would have the most productive schedule of my life.
I had always wanted to go from mid-frequency to high-frequency strategies. I wanted to be knowledgeable in niche domains and be a respected engineer. There was a lot more to learn, and my mind was liberated.
I worked on hft research, tooling, infrastructure and trading. I built new features on quantpylib, picked up C++, sharpened my mathematical knowledge and was allowed to be dumb again.
I was new, and publicly so. It had been awhile, but I was in love again. I read, I experimented, I asked and made mistakes. I basked in the wealth of knowledge. I didn’t have a PhD at my fingertips to replace me. I had one to teach me.
The best way to learn is by doing. In my frenzy of learning, researching and experimenting, I arrived at my next gold mine. Months of research, screaming at the monitor - I got my next reward, my first (successful, I had many unsuccessful ones) HFT strategy:
I consistently topped the leaderboards, fin-fluencers were writing nonsense threads about me, and I felt ... vindicated.
Sunset
When the sun rises, it must set.
There’s no such thing as the goose that lays the golden egg forever. - Jim Simons, Renaissance Technologies
Nowadays, I battle with the immortality of the goose. I hesitated if I should write this article. I’m hanging in there, but I am no longer a leaderboard resident.
As the sun sets, I am dumb again. But there is more iron in me.