Day Trader Shares 2023 Investment Strategy: 100% Cash, Shorting Crypto

• Day trader Mark Szemeszki spent last year getting into oil trading and shorting bitcoin.
• On a recent podcast, Szemeszki shared the macroeconomic indicators he tracks for his trades.
• He also explained why he currently holds 100% cash – but why shorting altcoins may soon make sense.

As global markets plunged into negative territory last year, day trader Mark Szemeszki tactically shorted bitcoin, a practice he says helped him stay in the green.

Luck also worked in his favor, as he was already playing this trade when FTX collapsed last November in one of the crypto world’s biggest black swan events, sending asset prices back down.

Szemeszki, who lives in Denmark and has a master’s degree in accounting and finance, also jumped into oil trading just as the Russia-Ukraine crisis began, giving his investments an additional external shock that boosted prices of the commodity. When all was said and done, he claims he saw a 380% return.

Szemeszki’s opportunistic bitcoin short is part of a broader strategy that involves tracking the correlation between

It’s not just about lucky timing. Szemeszki’s primary investment strategy is based on tracking the correlation between the S&P 500, bitcoin and altcoins, which typically move in step with risk assets. When he spots a dislocation, he will make a trade.

“Those are really rare cases, and they open up possibilities, which means something is wrong with market prices in the short term,” Szemeszki explained on the March 7 episode of The Contrarian Investor Podcast.

As for altcoins, he usually focuses on those with small to medium market caps, usually between $100 million and $200 million. He also prefers to consider specific macroeconomic indicators rather than zeroing in on a cryptocurrency’s fundamentals and technical factors, as he is not a big believer in the rationale behind decentralized finance or specific coins. “My honest opinion is that 99% of cryptocurrencies are useless,” he added.

Some of the macroeconomic indicators Szemeszki focuses on include the performance of gold, the US Dollar Index and the CBOE Volatility Index, or VIX – a volatility gauge – to properly position trades over the long term. For example, if an altcoin shoots up 200% to 300% while Szemeszki’s macroeconomic indicators predict a recession, that’s when he knows the altcoin’s new price is unsustainable.

“I always try to place it so that even though in the short term I may not be right, in the long term I will be right in the end,” he explained.

Moving to cash in the face of a recession

With inflation persisting in higher prices, robust wage growth and an inverted yield curve, Szemeszki’s macroeconomic indicators now show that a recession is more likely in the near future than a soft landing.

The Federal Reserve’s rate hike cycle, the ongoing Russia-Ukraine crisis and the Chinese economic reopening and expansion have also contributed to the market’s increased volatility.

Given the heightened macroeconomic uncertainty and the fact that his parameters currently do not indicate a clear direction, Szemeszki is currently 100% in cash. For him to shift out of this position, it would take a significant shift in overall bitcoin market sentiment — whether through a change in likely liquidations, futures prices, or order flow. A meaningful transition towards a more recessionary environment can also provide great returns for investors.

“Shorting these altcoins is a pretty good strategy if I think we’ll have a recession and the Fed won’t cut interest rates,” Szemeszki said. But while he’s not necessarily a believer in crypto, he also wouldn’t short bitcoin in the long run, as he doesn’t think its value will ever fall to zero.

“People are drawn to narratives … this herd effect can generate such momentum at times,” he explained. “Certainly I think bitcoin will have a very tough time, but it can go up pretty high knowing that narratives can drive people.”