Fail better: Scott Melker on defying the odds with crypto trading – Cointelegraph Magazine

Scott Melker, better known as The Wolf of All Streets, is a trader and crypto advocate who is far more approachable than his online handle might suggest. A former DJ, Melker operates a small crypto advocacy empire spanning YouTube videos, podcasts and a popular newsletter.

Scott Melker is open about his initial intentions in the crypto industry. “I simply came to trade and make money,” he admits, getting involved after hearing friends go on about the gold-paved streets of the blockchain world where 100x weekly returns were common. Being familiar with the more conservative movements of the stock markets since childhood, Melker was lucky to learn proper trading before entering the unregulated crypto casino.

“XRP was like a penny or something then,” he recalls. Crypto was also popular in the DJ community, something Melker attributes to the community’s risk-taking nature. He attributes his success to lucky timing in early 2016, soon cashing out his initial investment to play with his winnings.

“There was this sort of groundswell in the DJ community. They understand technology, and they’re kind of wild and speculative. That’s how I first discovered it.”

The crypto beats stopped soon enough. The 2018 bear market meant that “If you wanted to stick around, you really had to justify it to yourself, and you probably went way further down the rabbit hole to understand the importance of the movement,” Melker explains. He began to truly appreciate Bitcoin’s fundamentals and “understand the purpose of individual altcoins.”

Trading

Though Melker has invested in hundreds of tokens over the years, he believes that “Bitcoin is the most important asset ever created” and that everyone should strive to have some exposure to it. Ether rises nearly to Bitcoin’s level of importance and may well have more upside, he says, while altcoins are akin to individual speculative technology investments.

Soon after changing his Twitter tune from music to crypto in 2017, Melker connected with Christopher Inks of TexasWest Capital, who became a mentor to him. Melker became something of an analyst for Inks’ fund, sharing charts and trading ideas. He clarifies that he did not trade anyone else’s money, and lacks licenses to do so.

The Wolf emphasizes that trading is not easy, whether in stocks or crypto. “To trade full time for decades, you are like a unicorn,” he explains, adding that the crypto markets are especially brutal because they operate 24/7, without pause, meaning that traders don’t have an opportunity to recharge while markets are closed. Of course, you don’t need to trade all the time — Melker himself uses leverage to trade Bitcoin only two or three times per year.

A curious aspect of trading is that as one’s portfolio grows, so do the sizes of bets one should make to remain profitable — doing otherwise would be akin to taking out $10,000 in casino chips only to spend all evening making $1 bets.

“When your portfolio reaches a certain size, you have to be willing to ratchet up the size of your trades as a percentage — and those numbers can start to become uncomfortably big.” 

Learning to fail

Melker is quick to point out that the odds are stacked against day traders. “95% of traders fail — they go bust quickly,” Melker states, explaining that those aspiring to be serious traders need to be prepared to lose their invested assets several times over. “Most don’t have the time or capital for that,” he says. In 2012, Melker invested his entire portfolio into ARYx Therapeutics, which went to zero. Despite such setbacks, Melker counts himself lucky for “learning the hard lessons before crypto.” He finds that most who first discover trading via cryptocurrency tend to lose everything to leverage.

“You have to be able to learn on the job and go broke multiple times and still stick with it.”

Though “Investors almost always do better than traders,” Melker strongly recommends those determined to trade study up on risk management. Long-term profitability, he explains, is not about selling tops and buying bottoms but rather “the way that you protect your capital and allow yourself to hit home runs.” He uses the example that a trader can be right less than half the time and remain wildly profitable if they know when to cut their losses. Even one win out of 10 can be a recipe for success.

“It’s a math game of taking small losses and big wins.”

Another piece of advice is to never risk more than 1% of one’s portfolio on a single trade. However, this is far from foolproof. For example, 30% of a portfolio could be spread over 30 altcoin positions, all of which suffer when Bitcoin takes an unexpected dive. Ego is the enemy, and emotional attachment to positions is to be avoided — something that may be even harder when it comes to NFTs. 

“To stay profitable long term is largely a result of your risk management strategy,” Melker claims.

DJ Bitcoin

Melker, 45, grew up in Gainesville, Florida, where his parents “hammered home the importance of financial literacy and investing and saving.” He began to experiment with the stock market at 13 when he bought stocks in Disney with his father’s help. He headed for the University of Pennsylvania in 1995, where he majored in anthropology. The school was very business-focused, Melker explains, with consulting and investment banking firms recruiting a large number of graduating students. The late ’90s, of course, coincided with the dot-com boom, and “It was impossible to avoid excitement around financial markets at school like that,” Melker recounts. He adds that there was an “up only” sentiment that is familiar in crypto circles.

Apparently I once had a goatee. This was 2007. Steve Aoki took this photo. At the time, he was transitioning from being open format DJ Kid Millionaire to his present EDM identity. The first song he played that night was Sexyback. #TBT pic.twitter.com/9bN4n5bHbq

— The Wolf Of All Streets (@scottmelker) October 10, 2019

Having taken piano lessons from a young age, Melker was consumed by music and began working as a DJ alongside completing his studies. This began with house parties, which soon led to him playing gigs at downtown nightclubs. In those days, DJing involved far more skill and investment than today, when someone can simply hook up a laptop to a sound system. “This was the full vinyl era. I had to have four friends travel with me anywhere I went to carry all the equipment,” he recounts. “Hot girls thought it was cooler than the piano,” he says with a laugh.

Despite having the option to follow his peers into investment banking after graduation, Melker decided on the entrepreneurial route, founding nightlife startup Philly2Nite in 1999, which marketed events happening in the Philadelphia area. In 2001, he founded 101 Magazine, which he describes as a “lifestyle rag — a magazine for everything that was happening in Philadelphia, along with the sort of snarky content the likes of which I now post about crypto.” The magazine was a success and eventually merged into the larger Frank Magazine, which saw Melker move to New York as the firm’s global brand ambassador in 2003.

He worked for various other companies, including as a music director and business developer and a short stint in marketing at Vice Magazine. Melker moved to Miami in 2012, where he worked as a realtor, only to return to Gainesville in 2017 to be closer to his parents after having children of his own.

Throughout his career, Melker continued to perform and produce music under names such as The Melker Project,​ Funkontrol and MBS. Over the years, this resulted in him gaining a significant 40,000 followers on Twitter.

“One day, I stopped talking about music and began posting charts and talking about magic internet money.”

As he continued endlessly posting about crypto, he saw his Twitter following drop by half. But soon, new engagement began to appear. “When you want to go from one thing to another, people tend to dismiss it,” Melker states. He explains that in his early days of crypto, he faced mean-spirited comments like “Shut up, DJ” when he brought up crypto. 

That’s when Melker came up with his Wolf of All Streets moniker “as a message to people that you can be more than one thing.” The name stuck, and he takes care to point out that it was merely a play on words, that the real Wolf of Wall Street was a criminal and not someone he wants to emulate.

$BTC Dominance

Here is some Grade A China White Hopium.

Every time RSI (which is a meme on dominance, really) has been this overbought on Bitcoin Dominance, we have a massive altcoin run.

Not saying it will happen, just showing you what has happened in the same situation. pic.twitter.com/pog7VclA0K

— The Wolf Of All Streets (@scottmelker) May 28, 2022

“I become hyper-focused on that thing, and everything else disappears,” Melker explains regarding his sudden turn from music to crypto. Like previous Journeys interviewee Carl “The Moon” Runefelt, Melker has attention-deficit/hyperactivity disorder, commonly known as ADHD. “There’s a lot of ADHD in crypto,” he says, explaining that he considers it a “superpower” because it allows him to place total focus on his passion.

“I followed all the big accounts. I was trying to learn, I was commenting under their tweets, trying to engage with them.” This engagement could soon be seen in his follower count, and Melker grew more confident in sharing his ideas. Considering Twitter “very shorthand,” he started writing a newsletter, which soon came to resemble a full-time job. He was charging $15 per month and offering a limited free version, but he later made everything free because “I don’t want to monetize my audience in any way, shape or form.”

By all appearances, Melker is driven more by passion than money. This did not, however, prevent controversy from blowing up last year amid a market downturn when he was criticized for deleting so-called “shill tweets” relating to low-market-cap coins whose price could theoretically have been influenced by a highly visible account like his. “My account has grown to a size where I cannot tweet about certain things,” he commented following the controversy. He says the blow-up resulted in threats against his family.

I used to hang out with a lot of celebrities in my DJ days. pic.twitter.com/92ylU3d3Lz

— The Wolf Of All Streets (@scottmelker) February 25, 2022

The newsletter’s success prompted Jason Yanowitz, co-founder of Blockworks, to approach Melker and suggest he start a podcast. “I literally asked, ‘What’s a podcast?’ as I had never listened to one,” Melker recalls with a laugh. Today, he considers podcasting “the best job in the world,” partly because he feels he can get almost anyone onto The Wolf Of All Streets Podcast.

With multiple sponsors, the show has become a business — but not one devoid of purpose. The overarching goal, Melker says, is to “create content for the next wave” of crypto investors, like grandma or the average person on the street. He sees himself as a crypto advocate, easily able to list the ways Bitcoin and crypto proliferation will benefit society. Considering the breadth of his YouTube channel, Twitter account, newsletter, website and podcast — which are full of thoughtful, measured commentary — it’s clear that new followers will have no shortage of support.

“I wake up every morning at 4:30, excited to write the newsletter. I can’t sleep because of the thoughts that I want to get down on paper.”