Thoughts... This cycle I am adding a new mental model to the way I analyze my trades, which is what I am calling Market IQ. It sounds stupidly simple, but I had to go through a ton of complexity to get to this simplicity, as it usually goes. I think about it through three things: Asset Marginal IQ, Trader IQ Range and Cycle IQ. Asset Marginal IQ is the cognitive sophistication of the marginal participants trading an asset, meaning the people setting its price at any given moment. Every chain and every token has one, and understanding it tells you a lot about how that asset should be traded because price behavior is ultimately a consequence of the people setting the price. There is an old Keynes idea that markets work like a beauty contest where you are not trying to pick the prettiest girl, you are trying to pick the girl everyone else will think everyone else finds prettiest.....Game theory later got at something similar through level-k reasoning, where one person reacts, another thinks about how that person will react, and someone else thinks one level beyond that. That is the foundation of Asset Marginal IQ. Some markets are populated by people playing several levels deep. They are less interested in whether something is bullish in isolation and more interested in whether everyone else already knows it is bullish, how much of that expectation has already been priced and what the next person is likely to do with the same information. These markets can understand complexity earlier, but they are also harder to trade because the participants are constantly trying to anticipate one another. (High IQ) Other markets operate much closer to the first level, where the distance between seeing something and acting on it is shorter. That creates different strengths because simplicity makes coordination easier and conviction tends to survive things that would send a more analytical holder into ten different branches of thought. Once price itself starts reinforcing the thesis, this can become especially powerful because the guy who keeps interrogating the trade can end up selling to the guy who never felt the need to interrogate it in the first place. (Low IQ) High IQ is inherently better for price or low IQ inherently worse....They just create different markets, which means using the same mental model for both will zero you tf out. Once you have the spectrum, you can start placing assets along it. On a higher-IQ asset, your leverage comes from understanding something the other smart participants have not fully understood yet. On a lower-IQ asset, the leverage comes from understanding how easily the idea spreads and whether the people entering need to know much before they are willing to buy. IMHO the whole game of trading comes down to thinking strategically about what other participants are going to do, which leads into the second part of Market IQ: Trader IQ Range. Most of us have a range where we naturally play well and another where we have to force ourselves to adapt. Kind of like being right- or left-handed, except here your preferred way of thinking can become the exact thing fkng you. Some of us are great when a market requires five levels of reasoning and terrible when it requires one....we simply cannot stop thinking. You see a bunch of retards buying something for a stupid reason, correctly conclude that the reason makes no sense, and then watch the token do 30x because making sense was not what the market was paying for. In that scenario, intellect becomes a positioning error because you are solving for a level of the game that the marginal buyer is not even playing. The reverse exists too.....Someone who is very avid at trading attention and instinct can dominate a simple market, then get murdered when the read shifts toward understanding some mechanic that takes more work to see and is being priced by people playing several levels deeper. Which is why I pay so much attention to IQ mismatch now. You first need to know the Asset Marginal IQ, then understand where that sits relative to your own Trader IQ Range. If you can move across the spectrum, great, because being able to play at 150 IQ when the market requires it and then happily drop yourself to 60 when the market moves there might be one of the most useful abilities a trader can develop. If you keep trying to adapt to one side and repeatedly get smoked, there is information in that too. At some point you have to accept that there are parts of the curve your brain just won’t go to, and stop trading assets in that IQ range. The third part of the model is Cycle IQ....I do not think the market stays at one cognitive level throughout an entire cycle. My suspicion is that what we have seen coming out of the bear has been a relatively high-IQ environment. If you look at the TL, good ALT traders (+ RH infra trade), have destroyed pure meme traders on returns... Which suggests the environment has been paying more for understanding something before everyone else understands it than for pure coordination and attention. There is a weird ecological analogy here that I think helps explain this pretty well. Different environments reward different survival strategies.....When resources are scarce and competition is harder, specialization becomes more valuable because there is less room for shit that survives only because conditions are generous. Once an environment becomes rich and open again, weeds suddenly have an advantage because sophistication matters less than having enough resources and enough open ground to spread faster than everything around them. Markets seem to have some version of this.... When liquidity is scarce, assets need increasingly specialized reasons to survive because capital is selective....Once liquidity begins expanding, the hurdle for survival falls and the advantage starts shifting toward things that can spread faster. Which is when I think Cycle IQ starts moving left. As the bull grows, the market has to recruit a progressively larger pool of buyers, and complexity starts becoming friction because every additional thing someone needs to understand before buying narrows the number of people who can participate. Think about it.....the thing capable of absorbing the next million participants has to be understandable by those million participants, which means simplicity starts becoming an evolutionary advantage as the cycle expands. Which leads me to an even stranger idea from evolutionary biology called Fisherian runaway, where a trait can begin as a useful signal but, once enough selection starts happening around the trait itself, the original reason for wanting it matters less and the trait keeps exaggerating itself....such as the peacock tail becoming so enormous that it actually hurts survival, yet it keeps being selected because peahens continue preferring enormous tails. Sounds a lot like the final stages of a bull market right? Something starts going up because it has a desirable property, then people begin wanting it partly because other people want it, and eventually the amount of desire surrounding the asset starts becoming more important than the thing that created the desire in the first place. At that point the market begins selecting for whatever can attract the most attention and recruit the most buyers, even if the thing itself becomes increasingly ridiculous....Peacock tail keeps getting bigger until the smartest people in the room know perfectly well that the fucking tail is too big and buy it anyway. True euphoria requires Cycle IQ to keep moving left. ATHs require progressively larger amounts of capital from progressively broader groups of people, so the game eventually has to become simpler if it wants to keep expanding..... Even high-IQ traders then have to willingly reduce the number of levels they are playing because continuing to outthink a market that has stopped rewarding that kind of thinking can become its own form of stupidity. Self-imposed retardness.....Some capacity for it is necessary if you want to trade the entire cycle rather than only the part of the cycle that happens to match your brain.