This is Eric Golden and my guest today is CL207, also known as CL or Cat, one of the most popular anonymous accounts on crypto Twitter. I have followed him since I got into crypto and, like many, have always wanted to learn more about the person behind the account. CL is academically trained in chemistry and had no finance background before he began trading crypto. He made no money for 2 years but over time has evolved into an extremely thoughtful and intelligent trader.
We start this conversation with one of the weirdest and most fun back stories we've ever had on the show. We then dive deep into CL's trading journey and bring this process to life with examples. We end the conversation on a variety of topics like fashion, anonymity, virtual reality and more. Cat is a highly original and interesting thinker. Talking to him was an absolute blast. 

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes
(00:02:23) - (First question) - Who Cat was before he started trading crypto and where his avatar came from
(00:06:48) - Where his convictions came from to stick out trading crypto with no experience
(00:10:21) - Finding an edge using intuition and mentally quantitative processes
(00:12:53) - Putting together behavior and patterns to find market opportunities 
(00:14:49) - Where he would start to get a sense of the market if he stepped away for a while
(00:16:25) - His average holding period and whether or not he trades based on news
(00:18:13) - What his trading day looked like today 
(00:19:23) - His trading track record and how what he’s learned as changed his relationship with risk  
(00:22:07) - Never working a job and being risk averse after becoming successful 
(00:24:22) - Digging deep until you find an edge in the market 
(00:26:13) - Sources of information and where the most alpha is amongst them 
(00:28:02) - Whether or not narratives and chats have influenced his trading 
(00:29:17) - How his focus has changed as he’s accumulated wealth 
(00:31:33) - Having a passion for fashion and what captivates him about it
(00:33:41) - Thoughts on anonymity and the pros and cons of it in the digital age
(00:37:10) - Engaging with an avatar that has expressive emotions 
(00:39:21) - Becoming Twitter famous and befriending Edward Snowden
(00:41:59) - Whether or not he misses being a chemist 
(00:45:07) - Giving your kid money to trade online hoping they get rugged 
(00:47:35) - The Vision Pro and being incredibly bullish on virtual reality 
(00:55:24) - The crossover of meeting someone in a virtual world that you’re interested in 
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Web3 Breakdowns is a series of conversations exploring innovation in the decentralized internet.

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This is Eric Golden, and my guest today is CL207, also known as CL or Cap, 1 of the most popular anonymous accounts on crypto Twitter.

I have followed him since I got into crypto and like many have always wanted to learn more about the person behind the account.

CL is actually academically trained in chemistry and had no finance background before he began trading crypto.

He made no money for 2 years, but over time has evolved into an extremely thoughtful and intelligent trader.

We start this conversation with 1 of the weirdest and most fun backstories we've ever had on the show.

We then dive deep into CL's trading journey and bring his process to life with examples.

We end the conversation on a variety of topics like fashion, anonymity, virtual reality, and more.

Kat is a highly original and interesting thinker.

So I'm very excited to have CL207, also known as Cat or CL, as my guest today.

For people that are listening to the audio version, I'm talking to an animated cat in a hazmat suit, and I couldn't be more excited.

The world brings you in really funny ways to what you're doing.

So, Cat, the first question I wanted to ask was, we did as much research as we could, I followed you for as long as I've been in crypto, but I was trying to figure out where CL207 came from, and I believe CL20 is a explosive of some sort, a chemical explosive found at China Lake by the Navy in California.

That's as close as I got to try to figure it out, and I'm not trying to dox you, but I thought a fun place to start would be, who was Kat before Kat was created?

Where were you before crypto began, and then where did this idea of creating an avatar come from?

Creating an avatar is quite a common thing amongst streamers who want to stream anonymously because a lot of them get stressed out putting out their real face because then they got to look good, they got to make sure their hair is not fucked up and if they're a girl they put makeup that takes an hour for them.

So it gets quite emotionally draining to do that for hours on a daily basis.

This thing started and then it's more like fantasy.

So just like the online world, I got this too.

But the origin was, I believe from 2019, another big trader called Light Crypto, you probably know him on Twitter.

He once spammed in my DM a bunch of cat pictures and there's a few levels of story to this.

I was like, you know what, this is what I always wanted to be for some reason.

So COVID came and all these people were like putting on hazmat suit.

I actually had, what do you call it, lab coat.

So then I got artists to draw this thing in a nicer way.

And then it just kept evolving until now.

But going back to the chemical, like I used to be a, let's just say underground chemist.

I actually failed chemistry for a bunch of reasons.

But at the same time I do have, I hate bragging, but I would say they're quite high level writing and actually published academic journals on topics on like, yeah, explosives, because, you know, I love to blow things up.

I was pyromaniac as a kid and I was always interested in these high explosives.

I was doing a lot of research into safer and more powerful explosives because it's a direction that field was going into while I was studying.

It's commonly used in like rocket fields and all kinds of stuff.

It was just a passion of mine before crypto.

So I did it out throughout high school and college, wrote about it.

And then 1 day on a forum, like an amateur chemistry forum, and I say amateur because no 1 there has a real name, blow shit up

And 1 day, someone DM me on a post I made of synthesis of a theoretical compound that might be promising.

Just to introduce myself, I've worked at China like before.

And now I'm a professor at a big school in United States.

And I told him, I'm just like 18 years old, fresh out of high school.

And he's like, oh, no way, like come study under my department.

And I was like, oh my God, this is like my dream.

I didn't end up actually going and pursuing that PhD right after undergrad.

I need to worry about what if I can still Uber Eats next month.

So I was like, what can I do to make money?

I've heard about a crypto maybe a year before I got into trading.

I made no money for 2 years, but I think the luckiest part throughout my journey was my mom never really pressuring me.

She was just like, okay, go do whatever you're doing.

And after 2 years I became consistently profitable.

I just trade based on positions and a lot of people being squeezed up and down this market.

First of all, it sounds like you have a fantastic mom who lets you kind of follow what you're looking for, which is pretty far ranging from chemical explosive expert to trading crypto.

In the crypto market, as you entered, you've said it before that you were very poor, and this is all about trying to bootstrap and make money, and it didn't work for 2 years.

What gave you the conviction to stick with it?

I don't think you trained in finance or you didn't work for anyone.

Were you just alone trying to figure this out?

Yeah, so in 2018, I got in, bought some Bitcoin, swapped to some shitcoin, trying to make more Bitcoin.

It went okay, you know, I didn't lose much money, I didn't make much money.

And then I was like, you know, this is some weak stuff.

I bought Bitcoin at like 3, 000, it's now 12, 000.

My net worth went from like 3000 to 12, 000 and now I got to sell this stuff so I can buy some food again.

So I was like, this is not going anywhere.

Like buying Bitcoin, waiting for it to go up sucks.

I need to like actually make a lot of money.

Has to go to like 10 million bucks in the next month.

BitMEX had a terrible reputation because no 1 knows what they're doing.

Everyone is like, yeah, I made a BitMEX account and I lost it all.

Yo, I was like, you know, let me give it a try anyways.

And I lost a few grand, whatever I deposited.

I had just high curiosity for why price moves 1 way or another.

And I just kept digging like, okay, who bought today?

And I was like, go through all the exchanges, look at all the trade history.

Can we front run this while it's happening?

Can I gain a few bips on leverage if I see like a big consistent buying?

And I think after a while, it just clicked where I'm like, wow, all the trading actually happens on BitMEX back then, because that's where all the volumes are, all the open interest.

People are gambling 50 million, $100 million positions over if the next Coinbase buyer is going to buy a million or sell a million.

And then later on realized, wait, the price always go against like the majority.

If everyone was longing for like weeks on weeks, and then it tend to just start dropping because, you know, ultimately they got to close their positions and vice versa.

If everyone was just so bearish, you see spot selling and then you see futures shorting and it's like, okay, more likely than not, you know, these shorts are going to close, it might just bounce a bit.

So yeah, over time, I think I just learned how it works.

And honestly, the best part about trading Bitcoin was that there wasn't fundamentals.

There wasn't going to be like an earnings report that's like, oh, it's so bad that even though everyone shorted, it kept going down because the earnings sucked so bad.

So there was no fundamentals and the literal fundamental was only people's positioning and just general market sentiment.

So I thought this is the greatest video game on earth.

So I just did that all day, every day for like years.

I would literally wake up, do this thing in my room and then pass out.

In my dreams, I'd be dreaming about charts going up and down.

And then I woke up and do this again years go by.

And I think I got better at it over time.

I think ever since I started becoming quite profitable and I cashed out to buy some stuff, I've actually never had long-term drawdowns.

During that period, because I've heard rumors about this with you, that some people, when they get into trading, they're super curious, just like I was when I was a kid looking at like, oh, I bought a stock.

And I remember as a kid, I told my father, someone bought me a stock, and I'm like, this is just legalized gambling for adults.

And they're like, no, no, no, it's investing.

And I ended up going to this rabbit hole, and I read all these investment books and went into finance, but it was a question to me of the differences between gambling, speculation, and investing.

And as I was listening to you waking up, going to sleep, dreaming about charts, the thing I've heard about you is that you didn't build quantitative systems or an algorithm that you literally just trained yourself to be staring at charts.

And that your edge is something intuitive that you've built over time.

It's not like a thing of code you're running.

It's a bit of both, a bit of intuition for sure.

I think everyone that trades, they built up this intuition over time.

Something that's hard to describe, but the more quantitative part is just watching orders come in.

And then I try to memorize every position that I've ever opened, which is maybe a bit insane.

I would just stare at BitMEX, open interest ticks up a bit, this guy bought, okay, he fucking long.

And then like, I'll memorize that position.

I'll try to imagine where he might invalidate, where he might take profit.

And then I try to remember throughout the days, damn, everyone's been buying for like the last 3 days.

Last 4 times this happened, it haven't gone very well.

If it goes up too much, I'll just be wrong or something like that.

And I probably risk approximately this amount on this trade and that's it.

So A lot of it is kind of intuitive in terms of risk management, where I should enter.

But there is also the quantitative part, which is how much people are paying to keep their positions open.

Because in crypto, there's no fundamentals.

As too much buying happens in futures, too much selling happens on futures, They tend to drive the lending rates up and down.

How much does it cost to borrow another dollar right now to buy more crypto?

Or how much does it cost to borrow more Bitcoin right now to short more Bitcoins?

And These are very powerful information to have, and these are all public information.

Just double-clicking on that, because I know that as you started kind of sharing your knowledge, you were 1 of the experts or people that Others would look to about how futures worked and options markets.

And so you were trying to build basically a profile of buyers and sellers, understand how the market was positioned and how you want to be positioned against it.

When someone puts a futures trade on, there's someone buying and there's someone selling.

So in your example, were you looking at funding rates?

Everyone wants to know that information, but that's not always easily available.

First, every long people say there's a short.

In reality, people that make the market, they're not gonna be degenerates and be like, okay, if everyone longs, I'm just going to be short against them.

They'll blow up sometime if they just took on these directional risks.

So they will try to obtain the same amount of spot against their shorts.

I think most of these firms are delta neutral or if they are exposed, it's kind of short or very short amount of period.

So I'm not a market maker, but I know they don't take crazy amounts of risk over like anything more than hours or days.

So if you long, there is a short, yes, but that short is backed up by a real spot purchase because you bought futures, which is backed up by spot.

So the buyer have invalidation, the buyer have a liquidation level or the buyer can be buying on leverage.

A while ago, there was like a profile of average amounts of leverage use.

So, you know, if everyone long 10K, if we go to 9K, you can expect a lot of people to get liquidated who's on 10X.

Even if they're not on 10X, they're probably invalidated and they're just going to sell.

So a lot of these is, I think, intuitive, where people get invalidated, and there's a lot of quote-unquote stop-loss hunting, whatever bullshit terms people try to come up with, but they are real.

People can't take so much more loss after price go against them for a certain amount of time.

I've heard you in the past talk about invalidation, the seasoning of a position, how long or when do people own it, like what is their price?

So an interesting way to ask this would be, You were in Japan on a vacation, having a lot of fun, and you didn't check the screens for a week.

If I brought you back, and I said, Cat, I wanna get a pulse of what's going on in the market, where would you start to start putting that picture back together, if you hadn't seen it for a while?

I try to not just straight up trade unless it's somewhat stupidly obvious, but that's kind of rare.

But I would first look at price of everything and then be like, okay, cool.

Maybe the biggest caps like Bitcoin, ETH, Solana, stuff like that.

And then I would pull up Binance futures, Bybit, maybe OK, X.

These are some of the biggest venues right now.

I would say most price are driven by these 3 venues.

So I try to go back, see, look at these trading.

And sometimes it's not as simple as just how much buying, how much selling, because the buying can be hidden in the form of a bid.

And then on the trade history, it would show up as a sell just because they kept chasing a bid.

So it takes a while to like go through all of that and be like, okay, that was actually a bid, even though people were selling nonstop on Coinbase, but that was just bids chasing and refilling and chasing.

So kind of go through all of that and then go on futures.

Is Bitcoin getting banned for the 10th time?

Let's look at a bit of everything, get an idea.

So right before we were supposed to talk, the Wall Street Journal published a headline, which is a really weird headline that the SEC said BlackRock and Fidelity ETFs might have had inadequate information.

The funny thing about that is, and I posted this on Twitter, if you read it, which I've never seen this happen before, so maybe I missed this, But it was kind of giving an answer to the test, which said they wanted them to declare where they were gonna trade.

So I don't think it was as negative as the market thought, but the market moves rapidly.

And something like that, we had to delay for you to do some trading.

And then a follow up to that is like, what is your average holding period?

Is it you're in and out in a couple of minutes, hours, days, weeks, months.

Honestly, if you're trading futures, no 1 do month.

If you do months, chances are a price have gotten up and you haven't taken profit and then gone against you to the point you had to close.

I would say the average position holding for the average traders days, weeks, which is why this market is so crazy.

I believe it's similar in stocks and the analogy that people buy for a short term or midterm gain, They don't think in decades, unless it's some retirement dude that's just like, yeah, I'm just going to buy Apple for the next 10 years.

There is that kind of people in crypto, but like their flows are not strong enough to be like pushing price up 5% up and down each other day.

These are all short-term traders, probably on leverage, probably spending a lot of premiums on options, just gambling on these stuff.

Maybe they're gambling, maybe they're like somewhat informed.

I like to think they're not super informed, which is why I'm also pretty short term where most of the action happens and where most of my money was made, just somewhat pretty short term days, hours, something like that, yeah.

So walk us through today to the extent you can share.

What did Cap's trading day look like today?

Well, I woke up and Bitcoin was already like, that move already happened.

It dropped like 4% or something just because they're like, oh, this filing looks inadequate.

It's a great reason to sell, especially if you saw the news first, if you're long on your own leverage, you're like, dude, no way.

You're holding that risk through the next few hours.

That's just crazy to hold if you were leveraged.

So it does make sense price drop and some alts have rallied after that move, which also kind of makes sense.

Alts have been crushed against Bitcoin in terms of their ratios.

And it's because Bitcoin just had such a great narrative for you to just hold it.

Why am I bidding this shit coin if the legit people are trying to get an ETF going?

So I was trying to bid ETH, and by the time I brushed my teeth, it was already up another half a percent.

I went to Cumberland, and I'm like, what are the calls right now?

After I code, I price went up another .2%.

I kind of just gave up buying calls and I bought a bit of perps and called it a day.

I want to talk about your track record of trading.

So I know that you've done very well at this, but from following you, it seems like there were times you started with nothing and then you got to extreme levels of wealth and then maybe it was FTX or other situations that you lost a lot of it and you built it back up over time.

I'm curious what you've learned from those ups and downs and then How does that make you think about risk today?

The idea of using leverage or exposing yourself to a big drawdown.

First time I lost everything on whatever I deposited was BitMEX.

Back then, that was where all the liquidity is and all the trading happened.

So, I think in 2018, 19, I've deposited like 2 grand.

You know, I would do quite well and then just lose it all again, back to 2 grand.

And I'm like, Jesus Christ, maybe I'll just never make it.

And I noticed sometimes I just take positions randomly.

I'm betting on some data point that's so trivial.

Why am I betting against 5 traders when I could be waiting for like 50 big traders to short before I long?

And just like giving up on your position.

For a while I was like, nah, this has to go back up.

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CL: The Chemist Turned Crypto Trader