That upsets people who need a 47-page note from someone at a bank before they'll look at a chart.

Please feel free to disregard them.

A trader does not need to settle the great Bitcoin debate before taking a position.

You do not need to decide whether it replaces money, saves money, or is ultimately a shiny digital pet rock.

Many tend to focus heavily on the narrative, whether it is a positive view or a negative one - especially the media.

We tend to focus on what sort of profile the asset can provide you as a part of your portfolio.

And the key thing you need to know…

You need to know whether capital is flowing into it.

Then you need a process that proves you wrong that isn’t simply related to price.

That is the whole job.

Bitcoin is unusually clean in this regard. When it starts making sustained higher highs, the move can persist far longer than the commentators expect, because the liquidity and attention pile in behind it.

They are still arguing about intrinsic value while the price is telling you exactly what the market thinks.

And price is the only vote that settles your PnL.

Of course, Bitcoin is volatile.

So is a chainsaw.

The relevant question is whether the risk is defined, and traditionally, BTC has run at a higher 5y Sharpe ratio than other assets (see chart below).

And this is something investors tend to confuse - volatility with risk.

If you buy after confirmation, decide in advance where the position is invalidated, and size it so a loss does not damage the portfolio, volatility becomes a feature of the payoff profile.

The upside can be very large relative to the amount you are prepared to lose.

That is risk-adjusted return.

But then plenty of investors call a stock safe after it has fallen 60% because the valuation screen now says cheap. There is no defined floor. There is only hope, usually accompanied by a very detailed X thread.

That is not risk management.

It is inventory.

The same principle applies to US equities.

The strongest trading ideas emerge when the factor profile of an asset supports the move, a powerful theme is drawing capital, and price confirms that buyers are already in control.

You then manage the trade with a system.

You know what gets you in.

You know what gets you out if you are wrong.

And you have a process for holding the names that keep doing their job.

If that process is missing, every decision becomes a fresh argument with yourself. You sell winners early, keep losers too long, then blame the market for behaving like a market.

Keep relying on narratives and isolated charts, and your portfolio will keep reacting after the move has already happened.

David Belle