Exclusively for Covesting: Interview on Cryptocurrency Trading with Eric Kovalak, President at Entramarket Capital Management LLC

Eric is an experienced hedge fund manager. After a number of years as an options trader, his interest for quantitative strategy development led him to found his own firm, Entramarket Capital, manager of a volatility arbitrage hedge fund. Recently, Eric is currently leading a research pipeline to apply recent advances in machine learning and convolutional neural networks to cross-asset volatility and systematic derivative trading strategies. 

Eric holds a BA degree in Economics from Hillsdale College, and a Masters in Business Administration (MBA) from Devos Graduate School at Northwood University. He serves boards and advisory roles of private companies, and also on boards of nonprofit organizations. He has passed NFA Series 3 and 65 license examinations.

When did you start trading? 

I was an undergrad studying economics in the early 2000’s. This was probably the peak of popular interest in retail day trading and so I opened my first accounts and started actively trading the year I turned 18. At this time you could still find an edge with simple strategies and make a little money. I traded a lot of options and strategies which would allow you to have a very strategic engagement with the market. Trading is a hard business. It’s smart to start when you’re young and begin to develop the intellectual and emotional rigor required for this business. 
Why did you decide to start trading crypto? 

I was philosophically excited about crypto long before understanding blockchain. As a millennial, I missed the original Silicon Valley boom by just a few years, and it was clear to me that Blockchain’s technological and cultural wave could be the most transformative period in my lifetime. I started to explore how my background in stock and options trading could apply to crypto markets.  In many ways, crypto markets are very similar to regular currency or publicly traded markets. It’s often difficult to tell if you’re looking at a chart of Apple stock or Bitcoin. Some technical differences to apply, such as the inability to establish a short position directly in a crypto asset. I found my background in traditional markets to be very helpful for crypto markets.  

Please describe a typical trader's day.

Crypto is global and trades 24hr a day. First thing each morning. I read the overnight news and begin to align this with our allocation profile. My partners and I have relationships with many crypto development teams and we are frequently checking with ground level sources to understand recent movements and consensus which could move markets. While 24hr markets can seem overwhelming to new traders, it’s a great advantage to never be rushed to get an order through before the closing bell. We may change our allocation at any time throughout the day or even after hours if it best fits our strategy.  

What tools and signals do you use while trading? 

I spend a lot of time using excel sheets. These are still a great tool for importing data and creating easily adaptable algorithms. I tend to follow changes in market capitalization, market momentum, and combine these with fundamental research.  

What is an ideal crypto exchange for you? 

Crypto’s largest theft events have happened on exchanges, and so I have concerns about trading and holding assets on exchange ledgers. I like exchanges that have quality security protocols and are able to provide market liquidity.  

How do you see the future of cryptocurrencies? 

Blockchain is here to stay, and similarly cryptocurrencies. Whether crypto ever replaces G20 currencies is difficult to predict because that would require a historic overthrow of centralized currencies. It’s possible economic forces cause this to happen, but I think it’s much more likely we have many years of cryptocurrencies acting as a preferred store of value alongside fiat currencies. Once crypto has a mass adoption moment, people could rekindle interest in using crypto primarily as a transitional currency.

What assets are you currently interested in?

I am currently watching middle market digital assets, those with market caps from 1 to 5 billion. I think some interesting things could happen for these assets as they rotate in and out of leadership in the next year. 

What would you advise for a trader who wants to be successful in crypto trading? 

Know your edge. You must be able to communicate your edge as quick as an elevator pitch or otherwise, you’re subjecting yourself to the swings and randomness of markets.