When it comes to navigating market cycles and emerging technologies, few have as much wisdom and experience as legendary money manager Stanley Druckenmiller. The former apprentice of George Soros and long-time hedge fund titan, Druckenmiller, has thrived through over three decades of diverse market environments.

As crypto now captivates investors worldwide, Druckenmiller's principles provide guidance for this new asset class. Having been developed to perform through bubbles, crashes, and revolutions, Stanley's insights apply well to the ever-shifting crypto landscape. Just as Druckenmiller emerged ahead of trends decades ago, his philosophy offers clues for investors aiming to ride crypto's uncertain future.

There is no guarantee of performance using his or any great investor's philosophy, but Druckenmiller has a lot of good advice for this or any asset class. Let's take a look at the fundamental investing principles that make up the philosophy of "not investing in the present" from this legendary money manager and how they apply to digital assets:

Look Beyond the Present

Druckenmiller focused on future catalysts and trends, not current conditions. Similarly, crypto requires a long-term view of technology adoption, not just recent price swings. In 2019, at the depths of the bear market, many people gave up on crypto. Still, those looking beyond the present had many signs of continued market adoption, such as major corporate projects starting in the space (like Facebook's failed diem), regulatory discussions spinning up (first House Financial Services Committee discussion March 14th, 2018), and the start of new financial products for institutional crypto onboarding like the CME futures contracts that launched at the end of 2018.

Embrace Contrarian Thinking

"Get in when no one else wants to," Druckenmiller advised. While this isn't a guarantee of success, we've seen this repeatedly from the crypto luminaries. For an example, we can look to Chris Burniske. He helped build Ark Invest's blockchain products in 2017-2019, and co-founded Placeholder VC in 2019 (with rumored triple digital returns still on paper during last year's bear market). He attributes this success to taking the contrarian view in his book, Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond. He states, "In 2017, the market was still focused on things like big promises, lots of media hype, and unrealistic expectations. We purposefully veered away from those types of projects and focused on teams actually building and protocols actually being used, even if they weren't getting much hype yet. The market eventually caught on to the solid fundamentals."

Let Winners Ride

Druckenmiller let his best ideas compound over time. In the early 1990s, Druckenmiller took a leveraged long position in German Deutsche Marks. The Berlin Wall had just fallen and Germany was reuniting. Druckenmiller foresaw that massive investment would flow into East Germany, strengthening the German economy and currency.

Most managers would have started unwinding the profitable trade as the profits accumulated into significant gains of 20-30%. However, Druckenmiller held his conviction that German economic strength would persist for years following reunification. He let his profitable Deutsche Mark trade keep riding higher, ultimately resulting in gains of over 100% as the Deutsche Mark surged over several years.

I'd compare this with those who immediately took profit vs. those who held after the initial Ethereum Coin offering. From its launch, it took nearly three years for ETH to outperform BTC. Still, those who understood the fundamentals and held, believing in its ability to majorly outperform as it expanded the use cases for blockchain-enabled digital assets, knew this was a possibility.

Ethereum was sold for 30 to 64 cents worth of Bitcoin during its ICO in 2014. Since Ethereum began trading in 2015, the price of its native cryptocurrency, ether, has seen dramatic volatility. ETH hit a low of $0.42 in 2016 before surging to highs around $1,400 in early 2018 during the crypto bubble. In 2019, ETH traded from approximately $100 to $350 as crypto sentiment cooled, and many traders were relieved to have taken profit / or sold on the way down to this level. Shortly after, ether breached $1,000 again in early 2021 amid resurgent institutional interest in cryptocurrencies, reaching a peak of $4,866 in November 2021. Despite declining in 2022 along with the broader crypto market sell-off, Ethereum's price remains substantially above its early trading days. It demonstrates cumulative solid growth since inception, with annual returns in the triple digits during bull market periods like 2017 and 2021.

Cut Losers Fast

However, Druckenmiller also knew when to admit mistakes. Crypto's volatility requires decisively cutting losers before they run.

The TerraUSD (UST) stablecoin collapse in May 2022 underscored the importance of swiftly exiting losing positions. UST, which was algorithmically pegged to $1, had been a mainstay of stability in the crypto world across 2021 and 22.  When UST rapidly fell below its $1 peg due to a breakdown in its mint/burn mechanism, holders took different actions in response. Those who quickly sold their UST the moment its peg was lost could salvage much of their capital. However, holders who averaged down on their UST or waited in hopes the $1 value would return saw total devastation, with UST plunging to practically zero in value. As Stanley Druckenmiller preached, cutting losses early before they spin out of control, those who exited UST right when its fundamentals changed avoided total disaster. The UST unraveling exemplified the virtues of swift and early exits.

The cost associated with averaging down on speculations gone awry is potentially huge and should not be taken lightly.

Risk Management Rules

"Lose the least when wrong," Druckenmiller preached. Crypto's swings demand tight risk controls. Use measured position sizing and judicious stops. Manage the downside first.

Here at AltTab.Capital Ltd. ("Alt Tab") we believe that the volatility of the crypto market underscores the critical importance of managing downside risk and protecting capital. Rather than seeking to maximize gains, we believe that investors should focus first on minimizing potential losses. Strategies like prudent position sizing, using stop losses, ladder buying, and avoiding overexposure to any single asset are key. Also, limiting the use of leverage helps contain drawdowns when prices fall. Hedging by shorting or using options to hedge spots exposure manages tail risks. Holding stable assets like USDC reduces portfolio declines during bearish periods. Remaining disciplined about taking profits on the way up helps lock in gains. A risk-first mindset is essential in crypto investing. By adequately preparing for adverse scenarios, the maximum upside can be pursued within defined parameters for downside exposure. The asymmetric payoff profiles Stanley Druckenmiller targeted can be achieved through crypto portfolio techniques focused on the risk side of the equation.

Finally: "If you can't spot the pigeon, you are the pigeon," warned Druckenmiller. Crypto manias or panic sell-offs could be very enticing at times, but prudence is required to determine your next steps. Make independent appraisals of value.

This one speaks for itself, but another way I like to put it, especially when considering yield opportunities both centralized and decentralized, is: "If you don't understand what is generating the yield, you are the yield."


As we have explored, Stanley Druckenmiller's renowned investment principles have much to offer crypto investors navigating today's turbulent markets. Investors can traverse the volatility and realize crypto's potential by taking a long-term view focused on future fundamentals, embracing contrarian positions, letting winners ride, swiftly cutting losers, and managing risk first. Druckenmiller's wisdom forged over decades of varied market environments provides a guidepost for the new crypto asset class. Just as Druckenmiller emerged ahead by avoiding the pitfalls of present thinking, crypto investors can succeed by adopting his philosophy. Though a different market, the future-focused critical thinking and discretion Druckenmiller mastered applies as much today to crypto as it did to his storied career.


Michael Silberberg is Head of Investor Relations at AltTab Capital


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