The Penning Drop: Timothy Hellberg, on the market sentiment & technical aspect of the current crypto space.

TRADFI
FX
TRADING1
FOREX
MONEY
BULLMARKET
CRYPTO
DEFI
By the Pen & Timothy Hellberg
Timothy Hellberg, Penning Group's Head of Fund Mgt. & Core team member
Timothy Hellberg, Penning Group's Head of Fund Mgt. & Core team member

Timothy Hellberg, Penning’s latest recruit to the core management team comes with over 12 years of deep experience in the trading and institutional investment management industry. He’s held senior management positions at leading forex trading companies and founded several financial marketing, trading, and trading technology companies. The Pen team sat down with Timothy to get his view on the current market sentiment and how he views the traditional financial world and the future of finance and investing.

COMING FROM THE “TRADITIONAL” TRADING AND INVESTMENT WORLD, HOW DO YOU VIEW THE DEVELOPMENT OF CRYPTOCURRENCY AND THE FUTURE OF THIS ASSET CLASS?

I think it’s a necessary development for finance as a whole. Traditional finance has a lot of toxicity and inefficiency in the system that it most likely will never be able to get rid of. Both due to a lack of transparency and technology, and also due to the unwillingness of large actors in the space to change. The whole system is built by, and for, the largest investors. Medium to small-sized investors can do their best to play, but it’s the big boys playing field, and we all have to play by their rules. That makes it really hard to have an effective ecosystem in the long run, and naturally, new systems will form like for example the crypto and DeFi space.

FX investing used to revolve around trading ”good country vs. bad country”. You looked for an economy with strong fundamentals and paired it against an economy with worse. Now, FX trading is about anticipating monetary policy in the form of quantitative easing and stimulus. Investing in equities used to be about finding value in companies. Now, with a few exceptions, the most successful players in the space care about fiberoptic cable speeds and proximity to the exchanges. My point is that TradFi has lost its core essence of what it was supposed to be, and for that simple reason, just as we moved on from radios to tv, from newspapers to Twitter, the world of crypto and DeFi had to be formed.

IN COMPARISON, WHAT ARE THE KEY DIFFERENCES AND SIMILARITIES BETWEEN THE TRADITIONAL WORLD OF FINANCE AND CRYPTO?

The biggest key difference in my opinion is that the playing field I mentioned is much more leveled in crypto. There is much more ”free money” floating around that any investor can benefit from, large or small. And although the space has seen setbacks due to bad actors, as an ecosystem in general it promotes innovation, efficiency, and the smartest brightest creators. And just like in TradFi, the largest issues we see come from people, bad actors, not the actual system itself.

And this is where the two really grow apart. The crypto world has the possibility to rid of such actors, and I would even say the ecosystem as a whole is built in a way where it’s actually impossible for bad actors to survive indefinitely. In TradFi, as long as you’re big enough, with enough power and influence, you can go on forever with bad intentions and bad practices.

If we look at it from a pure trading perspective, the two are the same more or less. Price action will always be price action no matter what the underlying asset is. Volume, technicals, fundamentals, and investor psychology will look the same on a chart, as long as you understand the specifics of what you’re looking at.

And in the end, in TradFi the most successful players will be the largest ones, the most powerful ones, and the most ruthless ones. In crypto and DeFi, the long-term winners will be the smartest, brightest most innovative people who have chosen to master their craft, and THAT is a true sign of a healthy financial system, and essentially the main reason why I decided to make the switch from TradFi to DeFi.

WE’RE OFFICIALLY ENTERING THE AWAITED CRYPTO-WINTER, DO YOU STILL SEE OPPORTUNITIES IN THE MARKET OR IS CASH KING?

There are two sides to that coin. Firstly, I would like to just point out that I see a general benefit in keeping a larger amount of liquid funds available when working in such a volatile market space as crypto. Just for the sole reason of being able to quickly adapt to markets, sentiment, and new opportunities. With that said, although crypto has faced some setbacks recently, and sure will do so moving forward too, I see some very healthy signs in the market as a base foundation.

The last bull run was propelled by speculation and greed. That sentiment has been ruthlessly flushed out now and I only see that as something positive. The next expansion cycle will be built up by strong fundamentals and some seriously great and efficient technology created by some of the smartest people on this planet. That will bring a whole new narrative to the space, and I think this will also attract more long-term capital from institutions and large-scale investors.

As such, although the retail investor would experience peak levels of FUD (Fear-Uncertainty-Doubt) right now, I think the professional side of the market is really sharpening its sights. Because the accumulation of the next expansion face begins now, long-term professionals will want to start building NOW, not halfway into the next bull cycle.

When the sky is dark, the air heavy with rain, and the soil mudded and wet, that's when you put on your big boy pants and start planting the seeds. Not when the sun is shining its brightest.

WHAT IS YOUR UNDERSTANDING OF THE CRAZINESS THAT’S GOING ON IN THE WEB3, DEFI, AND CRYPTO SPACE, AND HOW DO YOU SEE WE GET THROUGH IT IN THE BEST POSSIBLE WAY?

I think it’s a combination of the whole sector still being very young and as such struggling with a lot of ”child bugs”. Just like a human child is sensitive to all kinds of bugs and viruses, so is the creation of a new financial ecosystem. And at the same time, the unregulated nature and ability to limit transparency will attract bad actors in the beginning. This has a tendency to sort itself out over time as the efficiency of the space grows.

Additionally, I think we are right in the market cycle for actors like Penning to step in and provide structured and safe access to these markets by working in a regulated and tightly monitored manner. I think this way of acting sort of like a bridge between both worlds (TradFi and DeFi) is necessary to attract long-term, professional investors.

And as more and more of these long-term professional investors enters the space, the ability for bad actors to continue gets heavily disrupted and as such, I think we will see a very, very bright future for this new financial ecosystem.

FROM YOUR EXPERIENCE IN THE FX TRADING AND TRADITIONAL FINANCIAL WORLD, HOW CAN STRATEGIES FROM THAT SPHERE BE ADAPTED AND APPLIED TO THE CRYPTO WORLD?

To begin with, I believe you need a core set of values to work out of. For me, that tends to be adaptation, diversification, capital preservation, and potential. This applies to all types of investments, even the ones outside of finance in one's personal life.

In finance, this applies to all markets. I want to be ready to adapt to what the market tells me. To be able to do so, diversification is everything. Diversification in assets, investments, and trading styles.

Additionally, I want to have my risk clearly outlined, direct and indirect, and I want the ROI potential to heavily outweigh the risk. The risk-to-reward ratio is the finance god's first commandment.

Technicals will be technical, and you just tailor them to the asset in question. Fundamentals on the other hand vary from the different asset classes. And although the methodology of identifying value in a DeFi project theoretically is very different from identifying value in for example an equity investment, practically you are still doing the same thing.

You are looking for that good old SWOT analysis. Strengths, Weaknesses, Opportunities, and Threats. Whether it be a long-term project or a short-term trade.

Adding to that, I think my background of not being a part of the very first crypto hype can provide me with a different approach to reviewing investment opportunities and strategies from a very unbiased point of view. I’m not ”in love” with any tech solutions in the space. I hold no biases. I simply have my core values to apply with my methodology of identifying value, and as such, I believe I can approach investments in this space with a very black-or-white bottom line, just as I would in for example FX.

In general, no market moves by itself, and I have never focused on just one asset class even if I’ve at the time only traded one asset class. Because correlations are everywhere, and the big mover of most assets tends to be risk sentiment, which ties into all asset classes. As we stand, for example, the value of Bitcoin will always be affected by what’s going on in the US dollar and for example the NASDAQ. In my opinion, Intermarket analysis is key to fully understanding any asset class, and finding these correlations is absolutely necessary to be able to do a correct SWOT analysis of an investment.

YOU’VE BEEN AROUND LONG ENOUGH TO HAVE EXPERIENCED VARIOUS MARKET DOWNTURNS, WHAT SIMILARITIES DO YOU SEE IN THE CURRENT TURMOIL IN THE CRYPTO AND WEB3 SPACE COMPARED TO HISTORICAL MARKET TURBULENCES?

We tend to say markets move out of fear or greed. Most market cycles are produced by sentiment, which is just a different word for mass psychology. What triggers that fear or that greed can be numerous amount of different factors, but in most cases, it’s just a natural part of the market cycle.

When the crypto markets went parabolic to the upside over a relatively short period of time, one would naturally believe the next downturn would be equally as violent.

When these things happen, you hear all types of doomsday scenarios and I tend to view them as nothing but noise. I wanna look at the facts and the data, not emotion and opinions.

With the latest developments in the crypto markets, I hear various people talking about ”the end of crypto” etc. And I can’t help but think how I got my first professional employment in finance in 2010, right as the eurozone sovereign debt crisis was unfolding, and subsequently peaking between 2011 and 2012. In the following years, Greece actually defaulted. In 2011, the US had its credit rating downgraded sparking talks about the USD being finished as the world's reserve currency. If I had a penny every time I heard actual market professionals saying the USD was going to be worthless, I would probably be cozying it up with Elon and Mr. Buffet these days.

My point is, the crisis will come and the crisis will go. It’s just part of the natural cycle. Nothing goes up forever and nothing goes down forever. If it does, there is something else at work.

I’ve been brought up in the finance world to have more of a trading approach to markets rather than an investment approach. What I mean by that is I don’t see the crisis as anything else than opportunity if handled correctly. I’m not emotionally invested it’s just numbered on a screen, and a short trade can be equally as interesting as a long trade.

Back in 2011, I had a junior colleague come into my office, and with fear, in his eyes, he told me ”the US just had their credit rating cut! The US dollar is going to zero!”.

I simply smiled back and told him ”if so, we’ll short it all the way down there”.

No matter, if it’s a natural disaster, a global pandemic, or a big exchange blowing up, my experience, has taught me that there is no room for emotion in the professional trader's mindset. You can have an opinion creating your prediction for the future of a certain asset and that's fine, but in general, how you handle the journey to that final destination of your prediction tends to matter more than the actual prediction.

ON A FINAL NOTE, WHAT ARE YOU PERSONALLY MOST EXCITED ABOUT THE FUTURE OF THIS SPACE?

From a professional point of view, I must say it’s the abundance of opportunity we stand before, and what the next expansion cycle will actually look like. It’s an ”investors market”, with everything on sale for a discount at the moment, whilst at the same time starting to finalize the foundation stage of which we are going to build up in the next bull run.

From more of a personal view, removing the professional approach to it, I would say the next 5-10 years will entail technological advances of such scale that we can’t even imagine yet. I think we will see society as a whole benefit tremendously from the technology coming out of this space creating a more efficient society in so many ways. And let me just leave you with a quote that sums this up quite gracefully:

"Once you have glimpsed the world as it might be, it is impossible to live anymore complacent in the world as it is.” - Anonymous

*Disclaimer: This interview and article is not financial or investment advice, nor should it be perceived as such. Penning Group, the interviewer as well as the interviewee shall not be held accountable for any misinterpreted information by the reader. If you are interested in learning more about investing in the DeFi space, please get in touch with us.

STAY UPDATED ON NEWS FROM THE PEN TEAM

READ OUR PREVIOUS DROPS FROM THE PEN

The Penalyst - February Market Outlook
BTCUSD
ETHEREUM
BULLMARKET
BITCOIN
By Timothy Hellberg
14 Feb 2024 - 4 min read
The Penalyst - Market Overview & Outlook
NASDAQ100
MINING
FX
MONEY
BULLMARKET
INVEST
By Timothy Hellberg
30 Jan 2024 - 5 min read
The Penalyst Special Edition - 2024 Outlook
USDX
BTCUSD
NASDAQ100
TRADFI
BULLMARKET
BITCOIN
By by Timothy Hellberg
09 Jan 2024 - 7 min read