Without looking at candlestick charts, how can he understand the market through on-chain data and macro analysis | AlphaGem Series Interview with Traders in the AI Era

1. Entry Experience | From the Gaming Industry to Crypto Investment

01 From Game Development to Blockchain: Entering Crypto in 2017

Luis: How did you first enter the crypto industry?
Phyrex: I entered the crypto industry in 2017, initially coming in as an investor to engage with projects. Before that, I had experience in game development and product operations, so I paid close attention to the technical implementation when evaluating projects, hoping to find teams with real development capabilities and practical application value.
Luis: What technical directions were you particularly focused on at that time, and why did you later choose the Polkadot ecosystem?
Phyrex: At that time, cross-chain was a popular direction, mainly focusing on Polkadot and Cosmos. The team background and technical roadmap of Polkadot were quite appealing. We originally hoped to see real interoperability of assets and information between BTC, Ethereum, and other blockchains, but Polkadot's parachains and slot machines did not fully realize our envisioned cross-chain vision, so we reallocated some of our previous investment gains and part of the company's funds into ETH.

02 Facing the Market for the First Time: Having Money but Feeling Lost

Luis: You mentioned earlier that you allocated a significant amount of ETH; did you consider how to handle those positions when the market crashed?
Phyrex: Yes, that period was actually very confusing. We were primarily focused on investment, viewing projects through a financial investment lens, but we hadn't developed our own judgment system regarding the price trends of cryptocurrencies. When the market was rising, everything seemed great, but once it started to decline, we didn't know what to do next.
At that time, I had both personal and company funds, and I was hesitant about whether to sell to cut losses or hold on for a rebound. My partner and I were both quite lost and started looking at different analysts' opinions, but gradually you realize there are always both bullish and bearish perspectives in the market. Some believe Bitcoin can rise to $1 million, while others think it could go to zero; everyone can present a logical argument, but these viewpoints don't directly tell you how to manage your funds. Eventually, I felt it was necessary to establish my own judgment system; I needed to decide how to handle my own money.

2. Research Framework Breakdown

01 Not Understanding Candlestick Charts but Starting to Research On-Chain Data

Luis: When did you start systematically researching on-chain data and continuously producing content on Twitter?
Phyrex: Initially, it was because of the market downturn; we wanted to learn some technical analysis. My partner studied candlestick charts and would share some content with me, but I really wasn't good at it. If you showed me a candlestick chart, I would get a headache and couldn't understand it at all. Later, he shared an analysis article with me that referenced Glassnode's data, and I found that approach more suitable for me. It didn't rely on drawing lines to judge prices but observed market behavior through actual data and indicators, which I could understand logically.
Since then, I began researching Glassnode and frequently discussed related data with my partner. Initially, we just shared some analyses in our social circles, but as more people started to read them, we gradually created a public account, and later in 2021, we officially transitioned to Twitter for continuous updates. Actually, I started writing content primarily to learn because we were always investing and needed to keep up with what was happening in the market. If I just looked at it myself, I might forget it after reading; but if I had to organize it into an article, I had to think through the entire logic, and that process itself helped me learn.
Luis: So content output also became a way for you to study the market.
Phyrex: Yes. Many times when you study a piece of data, you might only know it has changed, but if you want to write it out, you must think further about why it changed, what it represents, and what impact it might have on the market. That's also why I've been producing content; it's not just for sharing with others, but it also helps my own research.

02 From On-Chain Data to Macro Analysis: Lessons from the 2022 Market

Luis: You initially relied heavily on on-chain data, but later began studying macro factors. What prompted this shift?
Phyrex: When the market was rising in 2021, I had a lot of confidence in on-chain data. I was looking at Glassnode and following analysts like PlanB who proposed price models. During that phase, many data points supported a bullish perspective, and I felt that the data seemed to explain a lot.
However, after the Federal Reserve began raising interest rates in 2022, the market's performance deviated from my previous judgments. I started to wonder why so much data indicated the market should rise, yet prices were stagnant. I'm very grateful to Frank, who helped me a lot with macro research at that time. It was then that I began to truly understand the impact of Federal Reserve interest rate hikes and dollar liquidity on the market. Previously, I focused more on internal data within the crypto market, but in reality, BTC is not a completely independent asset from traditional financial markets. Changes in the macro environment affect funding costs and risk preferences, and these factors also transmit to the crypto market.
Of course, I later realized that studying macro alone wasn't enough. For example, in 2023, the market was still in a rate-hiking environment, but BTC showed a significant rebound. At that point, it was necessary to consider more factors rather than just fixating on one indicator.
Luis: When BlackRock applied for a Bitcoin spot ETF in 2023, what was your market judgment at that time? Did it differ from mainstream views?
Phyrex: Many people believed that once the spot ETF was approved, the entire crypto market would experience a comprehensive rally. However, I leaned more towards the idea that this round might be a localized bull market, primarily benefiting Bitcoin and Ethereum. The reason is quite simple: when traditional financial capital enters the crypto market, it will first focus on assets with good liquidity and high market recognition. Bitcoin and Ethereum are more likely to become targets for institutional allocation, while other smaller coins may not receive the same influx of funds.
Later, on January 11, 2024, the Bitcoin spot ETF was officially approved, and the market did indeed show noticeable changes. This further confirmed for me that analyzing the crypto market cannot solely rely on internal narratives; one must also pay attention to where the funds are coming from and which assets those funds ultimately flow into.

03 Three Dimensions of Market Research: Macro, On-Chain, and Capital

Luis: If you were to summarize your current research framework, what do you think are the most important dimensions?
Phyrex: I believe it should be a comprehensive view, including macro factors, capital, on-chain data, and price trends. On the macro side, I mainly focus on the Federal Reserve's monetary policy, dollar liquidity, U.S. Treasury yields, as well as the yen exchange rate and Japan's monetary policy. These factors influence the overall funding environment of the market; on the on-chain side, I pay attention to the inflow and outflow of BTC on exchanges and changes in holder behavior. Most BTC transactions are actually completed within exchanges, so changes in the BTC supply on exchanges can serve as a reference for observing market buying and selling behavior.
Additionally, I monitor institutional capital, especially the flow of funds related to Bitcoin spot ETFs. I observe the changes in funds for products related to institutions like BlackRock to see whether large investors are increasing their allocations or reducing their holdings. Looking at all these data together can help us understand the market more comprehensively; focusing on a single indicator can easily lead to incomplete conclusions.

3. Investment Strategy Sharing

01 The Sixth Accumulation Signal in the Last Two Years? Why Continue to Buy BTC

Luis: I saw you previously mentioned that BTC may have entered the sixth accumulation phase in the last two years, and you have been actively buying around $79,000 to $80,000. What data primarily informed this judgment?
Phyrex: It mainly comes from the net outflow data of BTC on exchanges. We can start with a hypothesis: since most BTC transactions are completed within exchanges, the increase and decrease in BTC supply on exchanges can reflect market participants' buying and selling tendencies to some extent. Over the past two years, I have observed five significant large-scale net outflows, and after these net outflows occurred, Bitcoin generally corresponded with an upward trend. The recent one is the sixth instance I've observed.
Of course, historical data cannot guarantee that the future will repeat, but if previous patterns still hold some reference value, then large-scale net outflows often indicate that market participants are increasing their holdings rather than rushing to sell. Additionally, I also referenced the historical performance of U.S. stocks. According to my observations of historical data, in most cases, the stock market is in an upward trend three months after the U.S. midterm elections and presidential elections.
Considering all these factors together, if the current market has shown noticeable buying behavior and the price is at a relatively acceptable level, then I believe that allocating at this stage is reasonably justified, so I have continued to buy BTC recently.

02 Not Waiting for the Lowest Point: Persisting with Dollar-Cost Averaging + Buying on Dips

Luis: Is your current BTC investment strategy still focused on long-term holding and dollar-cost averaging? How is it specifically executed?
Phyrex: Yes, basically no changes. I started dollar-cost averaging BTC in 2024 when the price was around $65,000. At that time, many of my friends thought it was too expensive and hoped to buy when it dropped below $50,000 or $55,000. Later, the price did drop to around $56,000, but many still didn't buy because they thought it might drop even lower. I think this is a common problem for many investors: they are unwilling to buy when prices are high, and when prices drop, they think it will continue to fall, so they end up waiting and miss the real opportunities. My approach is simple: as long as I believe the current price is within my acceptable range, I will start buying. If the price continues to drop, I will increase my buying amount; the more it drops, the more I buy.
I have always believed that I am not an excellent trader, so there is no need to force myself to find the lowest point. Even if I wait for the lowest point, I might not dare to buy, thinking it might drop further, and end up missing the opportunity. I started dollar-cost averaging in March 2024, and my average price is $72,000. The average price of the BTC I bought in the last year is about $83,000. Although there are some unrealized losses on the recent purchases, it doesn't matter much to me. I have always believed that as long as I recognize Bitcoin's long-term value and can withstand the current price fluctuations, continuous buying is a feasible strategy.
Luis: But now the macro liquidity is not particularly loose. If dollar liquidity continues to tighten and on-chain data shows accumulation signals, which side would you prioritize believing?
Phyrex: I think it still needs to be judged comprehensively. If macro liquidity is poor, I wouldn't make large-scale investments just because there is a positive signal on-chain. At that time, I might only use a small portion of funds or continue dollar-cost averaging BTC and buy on dips, rather than significantly increasing my position all at once. Additionally, I will observe the funding behavior of large institutions, such as BlackRock's Bitcoin spot ETF. If I see investors starting to buy in large quantities, I will start preparing.
I have always believed that if you are not a particularly skilled investor, you can actually learn from the practices of large institutions. They have more data resources and professional research teams. When these institutions start increasing their allocations, it is at least worth our time to study why they are doing so. Of course, I am not following them 100% in buying, but I take these funding changes as a reference for myself. Especially when prices drop, if institutional funds are still continuously buying, I will consider whether to increase my own allocation.

03 No Selling Plan for BTC: Hope to Leave it for My Son to Hold

Luis: You have held BTC for a long time without selling. Have you thought about when to sell a portion in the future?
Phyrex: I plan to leave BTC for my son, and I even hope he won't sell it. If you don't lack money for daily needs, why sell? First, you believe it has long-term value; second, you don't have pressure on using the funds, so what is the reason to sell? Moreover, I don't think I am a particularly excellent trader. If I sell now and the price goes up later, I will likely find a way to buy back, complicating what was originally a simple matter. My overall BTC cost is relatively low, mainly because I started buying early and have not sold. Since this method has been validated by me, why change it?

04 Not Just Crypto Assets: Seeking Arbitrage Opportunities with Price Differences

Luis: Besides long-term holding of BTC and ETH, do you participate in other market trades, such as US stocks or commodity markets?
Phyrex: Yes. I do some trades related to stocks and commodities. For example, I shorted crude oil before and also traded SK Hynix. However, there is a distinction here: I shorted SK Hynix not because I was pessimistic about its fundamentals, but because there was a significant premium between SK Hynix and its ADR at that time, reaching about 67% at its peak, which gave me an arbitrage opportunity. I focus on the price difference between the two rather than the company's future operations. If the premium is too high, I will consider shorting the relatively expensive side. This type of trade accounts for less than 10% of my overall funds; I mainly focus on long-term allocations and also dollar-cost average into VOO and QQQ.
Luis: So your current investment framework is essentially long-term allocation in mainstream assets, plus a small portion for arbitrage trading?
Phyrex: Yes, that can be understood that way. Most of the funds are still allocated around mainstream assets like BTC and ETH, and I will keep a portion of funds for trading in stocks and commodity markets. The liquid funds are mainly allocated to short-term US Treasury bonds, such as products with one-month or two-month maturities.
Luis: How do you view the future risks of US Treasury bonds? Many people are discussing the scale of US debt and the possibility of US debt default.
Phyrex: Personally, I don't believe US Treasury bonds will directly default because that would not benefit either party in the US. There may be disagreements on the debt ceiling and fiscal budget, but it is unlikely that the US Treasury bonds will actually default. As for how the US will solve such a large debt scale in the future, I think it will require a relatively long process and cannot be solved all at once. Regarding solving US debt through stablecoins or cryptocurrencies, I also think that notion is unrealistic.

Four, Trading Methods in the AI Era

01 From Dual-Currency Products to Self-Developed Options Tools

Luis: I saw you previously shared your self-developed BTC dual-currency tool. What made you think of creating this product?
Phyrex: Because many people think trading is very complicated and believe that only particularly professional traders can make money in this market, but I think that is not necessarily the case. For example, if you recognize BTC and believe that buying at a certain price is reasonable, you can design some strategies around that target price. The dual-currency product is one such method. Simply put, if the current BTC price is $80,000 and you are willing to buy at $75,000, you can set a target price and deadline. If the price does not drop to $75,000 by the expiration date, you will receive the corresponding profit; if the price reaches the target, you will buy BTC at the agreed price.
These products are somewhat related to options strategies, but the platform will also take a portion of the profit. So I was thinking if there was a way to implement similar strategies through options myself, allowing me to earn premiums while buying BTC at a price I recognize. Later, I tried to develop a tool with the logic: if a transaction occurs, buy BTC at the pre-set price; if not, retain the options premium profit. This reduces dependence on platform products and allows me to set trading conditions more flexibly.
Luis: So essentially, it still revolves around the price you recognize for buying, using options to gain additional profits?
Phyrex: Yes. The premise is that you are truly willing to buy BTC at that price. If you do not recognize that price and are only doing options to get a higher yield, then it is meaningless.

02 AI Responsible for Development and Monitoring, Trading Still Decided by Oneself

Luis: Returning to the theme of "Traders in the AI Era," there are more and more AI tools now. What do you mainly use AI for in your trading process?
Phyrex: I don't believe AI can achieve perfect trading right now, so for me, it is mainly an auxiliary tool. I now use AI to develop many software applications. For example, for the SK Hynix ADR arbitrage I mentioned earlier, I wrote a program using AI to automatically calculate the premium ratio. When the premium exceeds 45%, it automatically sends me a report, and I then decide whether to trade based on the actual situation. So AI mainly helps me develop tools, process data, and monitor the market, while the actual trading is still done by me because there are still many risks related to AI, and I am not comfortable directly entrusting my funds to AI.
Luis: Are you currently using multiple AI models in collaboration, such as ChatGPT, Claude, and Grok to complete research tasks?
Phyrex: I currently use ChatGPT as a task coordinator and assign different tasks to Claude and Grok. For example, I first present a research requirement in ChatGPT, have it break down the tasks, and then assign them to other models for execution. After they complete their tasks, I gather the results for cross-validation, and finally, ChatGPT organizes them into the content I need. This method can improve efficiency, especially for research work that requires handling multiple tasks.
Luis: Do you think the current Agent tools can truly improve the efficiency of traders' work?
Phyrex: I think it depends on specific needs. If you need to write code, conduct quantitative research, or develop monitoring software, then these tools can indeed help improve your efficiency. However, if you are just an ordinary user who mainly watches the market and does some simple trading every day, then having one more robot entry may not bring significant changes to your work. The key is whether you have specific application scenarios. If you are just using an Agent for the sake of using an Agent, I think it may be more of an experience and not necessarily a true production tool.

03 AI Can Filter Hotspots, But Cannot Replace Personal Research

Luis: Besides trading, do you also use AI in your daily content creation?
Phyrex: I let AI help me filter the hot topics of the day and organize some related materials, and then I decide which content is worth writing about. However, for specific analysis and writing, I still prefer to complete it myself. For example, if I ask AI to summarize what I did in the past 24 hours, it can list all the things, but if I want it to understand why I focused on those things and the themes I really want to express, it may not be able to do that.
So I think AI can help me save time in organizing information, but it cannot completely replace my own research and judgment.

Five, Advice for Newcomers

Luis: One last question. If a newcomer just entering the crypto market wants to start learning macro analysis, where would you suggest they begin?
Phyrex: I think the simplest method is to read the content of Jin10 Finance for 24 hours from start to finish every day for a month. There is no need to rush into learning particularly complex indicators or using many AI tools from the beginning. Just understand what is happening in the market every day, what macro data has been released, what new policy information the Federal Reserve has, and why the market is changing. After sticking to it for a while, your understanding of the entire macro market will naturally increase.
Luis: Okay, thank you very much, Phyrex, for sharing today. I look forward to our next exchange!