TL;DR:
- This was not the worst week I have ever had in markets, but it was one of the most instructive
- The original trade made sense: long ETH, short BTC as a hedge for an ETH/BTC relative-strength thesis
- The real mistake was that the hedge quietly became the trade
- I had built rules for when the trader within me should be switched off, but not for when he needed to switch back on immediately
- Big losses often do not come from one absurd decision, but from several individually defensible ones that gradually worsen the position
Last week was one of the worst weeks I have had in markets.
Not the worst. That distinction belongs to another story.
But it was bad enough to hurt, and interesting enough that I do not want to waste it.
What made it especially instructive is that the story did not really begin at a trading desk.
The weekend before, I had been walking in the mountains. I am on the last stretch toward turning 40, and I had been thinking a lot about the kind of evolution I want to go through over the coming months and years.
I love markets. I love the intellectual game of them, and I certainly love making money from them. But I also want to build things I can be proud of. There is more to say on that in time, but for now I am deliberately letting some ideas brew rather than talking too early.
Earlier this year, I created a framework for how I want to allocate my life. I think in categories: health, wealth, relationships, learning, work, creativity, and so on. Markets occupy one of those categories, but they are not supposed to consume the others.
Part of this evolution has involved redefining the role the trader within me gets to play.
The idea is not that he disappears. Quite the opposite. The trader within me is useful. He is sharp, obsessive, pattern-sensitive, and capable of locking in hard when conditions demand it. The change is that I do not want him running the whole operating system all year round.
I want periods when he is switched off, and periods when, because the opportunity or risk warrants it, he is very much switched on.
For most of this year, that has worked well.
I have spent less time mentally attached to every price movement. I have had more space to work on AI, exercise, see friends, make music, and generally live my life.
What I had not properly written down was the transition rule.
I had built rules for when the trader should be switched off.
I had not built a clear enough rule for when he needed to switch back on immediately.
That omission turned out to matter.
I had also recently started jiu-jitsu, which in retrospect provided a rather appropriate metaphor for what was about to happen.
In jiu-jitsu, the choke is rarely the first mistake.
Usually, several smaller mistakes happen first. You give up a grip. Then position. Then space. By the time the choke is actually locked in, your available escapes are already narrowing.
This trade felt like that.
A Hedge That Stopped Being a Hedge
The original position was not unreasonable.
I was long ETH.
My thesis was that ETH was showing relative strength against BTC. If crypto sold off, I thought ETH would probably fall roughly in line with BTC, perhaps even hold up a little better. If crypto rallied, I expected ETH to outperform decisively.
So I shorted BTC as a hedge.
There was nothing inherently wrong with that structure.
Initially, the BTC short was sized appropriately for what it was supposed to be: protection around an ETH-led relative-value view.
Then BTC moved slightly higher.
I added to the short.
That was the first important mutation.
The position was no longer simply an expression of the ETH/BTC thesis. I had started getting a taste for the short itself. The hedge was quietly becoming a trade of its own.
This distinction looks obvious when written retrospectively. It was less obvious while watching numbers move around in real time.
But it matters a lot.
Long ETH plus a correctly sized BTC short is one trade.
Less ETH plus an oversized BTC short is another.
Psychologically, though, it is easy to slide from one into the other without fully acknowledging that the nature of the position has changed.
That is one lesson I will keep: when the size of a hedge changes, force yourself to restate what the position actually is.
If you cannot still describe it honestly as a hedge, stop pretending it is one.
Then Wednesday Happened
On Wednesday, Treasury Secretary Scott Bessent made comments that the market interpreted as significant for Treasury buybacks.
Markets started moving hard.
Unfortunately, I was doing almost everything except sitting calmly at a trading desk.
I had just come back from the gym. I was shopping for an apéro at my place. Friends were coming over. I also rent my car out from time to time, so I was dealing with a renter returning it, the usual app bureaucracy, and the required photos.
Then a small logistical complication appeared.
I had told one friend she could use my parking space. The person renting my car returned it much earlier than expected, which meant I suddenly had to go and collect the car and find somewhere else to park it.
None of these things matters.
That is precisely the point.
Individually, they were normal life things. Good life things, even. Gym. Friends. Music. Hosting. Administrative nonsense. The sort of life I had consciously been trying to make more room for.
But they were very bad circumstances in which to manage a suddenly important leveraged position.
This is where the missing rule showed up.
If I want trading to occupy less of my life, I need better rules for recognising the rare moments when it deserves all of my attention.
Wednesday was one of those moments.
I did not respond to it quickly enough.
Reasonable Decisions, Bad Aggregate Position
As the market moved, ETH ripped higher.
With ETH up sharply on the day, I started selling some. My thinking was that it had already moved hard and could easily retrace.
At the same time, BTC was also up aggressively. I assumed there was a decent chance of a retracement there too, especially around obvious resistance.
That logic was not insane.
This is part of what makes the whole episode useful to examine.
The anatomy of a bad trade is not always one obviously stupid decision followed by disaster.
Sometimes it is:
Reasonable decision. Reasonable decision. Reasonable decision. Completely unreasonable aggregate position.
I had not sold all the ETH, but I sold a meaningful chunk. Meanwhile the BTC short remained too large for what the portfolio had now become.
So the more I adjusted the winning leg, the more exposed I became to the losing one.
Again: the choke was tightening.
The BTC rally then started to take on the feel of a brutal coordinated short squeeze. Open interest was building. Liquidation levels were becoming increasingly relevant. Funding was shifting. The market kept finding ways to look stretched, but it also kept refusing to roll over cleanly.
At several points, I found myself reading more and more information in an effort to determine whether the underlying thesis still held.
Funding.
Open interest.
ETF flows.
Liquidation maps.
Treasury mechanics.
Bessent.
The significance of $80k.
None of that information was useless. Some of it was important.
But there is a subtle trap here that I think many traders will recognise if they are honest enough.
At some point, gathering more information stops reducing uncertainty and starts helping you remain attached to the position.
You feel more informed.
You may even be more informed.
But that does not necessarily mean you are more objective.
Sometimes it just means you have acquired more sophisticated ways to explain why the market has not proved you right yet.
The Choke Hold
This is the jiu-jitsu part.
The catastrophe was not the original position.
It was not even one single add.
It was the sequence.
Short BTC as a hedge.
Add slightly as conviction in the short grows.
Fail to fully appreciate that the macro information set has changed.
Remain distracted by ordinary life at exactly the wrong time.
Sell part of the winning ETH leg.
Retain too much of the now-directional BTC short.
Watch the market push into the areas where squeezes become nonlinear.
By the time the choke is properly on, the question is no longer, “How do I win from here?”
It is, “Where do I tap?”
That is what this felt like.
And there is an important lesson in that too.
The goal is not to never get caught in difficult positions. If you trade long enough, you will.
The goal is to recognise much earlier that you are giving up position.
Attention Is Part of Risk Management
The clearest lesson from all of this is not, “I should have stared at charts all year.”
That would be the wrong conclusion.
I do not want to go back to living 365 days a year mentally attached to every blinking number on a screen. That version of trading extracts a cost from everything else.
What I do want is a better protocol for the transition moments.
When I have material risk on and the information set underlying that risk changes abruptly, attention has to become absolute.
Not forever.
But immediately.
The problem last week was not that I had broadened my life beyond markets.
The problem was that I did not switch the trader within me fully back on when the situation demanded it.
That is a different lesson, and a much more useful one.
It means the trader is not being demoted toward extinction. He is being given a narrower but more precise remit.
He does not need to dominate every day.
But when the market presents one of those big, consequential moments, he needs to be reachable instantly.
Structure Still Matters More Than Conviction
There is another uncomfortable aspect to this.
Earlier this year, I wrote about structure in markets and in life. The basic idea was simple: in volatile environments, the key question is not just what you believe, but how you are positioned for what happens if you are wrong.
Last week was a practical examination of that principle.
The original thesis around ETH relative strength was broadly right.
That did not save me.
Why?
Because good reasoning can still be wrapped in bad structure.
Because a hedge can mutate into a trade.
Because reducing one leg of a position can accidentally magnify the other.
Because attention itself is part of structure.
And because markets do not pay you for being approximately right if your positioning is wrong in the wrong window.
What I Will Carry Forward
There are a few rules I think this week has clarified for me.
First: when a hedge changes size, restate the trade from scratch.
Second: if I have meaningful market risk on and the information set changes materially, normal life gets interrupted. Temporarily. That is not an argument for obsession. It is an argument for decisiveness.
Third: I need transition rules in both directions.
Civilian to trader when circumstances demand it.
Trader to civilian when the risk is gone or the thesis is invalidated.
And fourth: I want to become more sensitive to positional deterioration before the full choke is on.
The market will always be capable of humbling me. That part does not change.
But there is a big difference between being humbled by a difficult environment and helping the market tighten the submission on your behalf.
This was not a glorious ending.
Had the market reversed violently straight after and proved me right, the story would have been more satisfying.
It would also have been more dangerous.
Because outcome has a nasty habit of flattering process.
Instead, I got the messier version.
The one where the trade kept refusing to die on my terms.
The one where I had to look more honestly at structure, attention, and identity.
The one that hurts more in the short term, but is probably worth more in the long term.
That is not the postmortem I would have chosen in advance.
But it is the one the market gave me.