The Crypto Conundrum: Why Prop Traders Talk More About Crypto Than They Trade It
■ TL;DR
- Prop traders lean technical – and crypto, with no earnings, balance sheets or central-bank backstop, looks like the purest technical asset of all.
- But crypto isn’t actually fundamentals-free. Dollar strength, Fed expectations, ETF flows and regulatory headlines still drive it – often violently.
- Charts don’t measure sentiment, only its expression. In crypto, technicals and psychology are the most tightly entangled of any asset class.
- Mainstream prop firms still see roughly 40-50% Forex, 25-35% Indices, 10-20% Commodities, 10-20% Crypto – but perpetual crypto futures volume hit $61.7T in 2025, more than triple spot.
- A good trader stays a good trader by reading the environment with fundamentals and executing with technicals – in crypto, more than anywhere else.
By now (“now” measuring over a decade if you look at when the first firm was established, six years if you look at the Corona Lock-Down period when prop trading exploded), it’s become almost an established truth that most prop traders are technically inclined rather than fundamental. Whether it’s because the industry – traders and brokers – love measurable behavior (“limit risk to x% at support level y”) or because traders are mostly intraday, scalpers or short swing traders, plodding behind a news release or a slowly developing equity can often close you out due to daily loss limits and short-term volatility.
Also – let’s face it – analyzing balance sheets, management teams or interpersonal squabbles at the FED can sometimes be boring. Colorful charts – especially the animated ones – make for much better Twitter, TikTok, and Telegram visuals.
So why, the question is begged, do more traders not focus on assets that are purportedly net void of fundamentals and that rely absolutely on trader sentiments and technicals? Assets that provide the purest expression of crowd psychology?
Like cryptos!
The Crypto Misconception
Let’s begin with the claim that cryptos rely only on technicals. Although – unlike equities – cryptos offer no earnings reports, balance sheets, or central bank policy back props, they are still subject to fundamental activities. These may include major currency movements, FED expectations and rates environments, ETF approvals, and other regulatory activities, even – often – macro-market trader risk sentiments.
What makes cryptos feel entirely technical is that the main information source traders can work with is price action, which technical trading can, to some extent, analyze effectively: support/resistance, liquidity zones, order flow, volatility, and momentum.
But charts do not actually measure sentiment, only its expression. However, given the dearth of other available information, cryptos are the one asset where the technicals and trader psychology are most strongly intertwined. Unfortunately, this also means that policy headlines, for example, can have an unproportionate affect on price action.
And that, in prop trading, could be fatal. Better swing towards an asset that is more clearly influenced by the fundamentals, but also tempered by them. A good trader remains a good trader in any form of financial trading environment – examining the environment with the fundamentals, and executing based on the technicals. Using the former to identify a trading opportunity and the technicals to structure it.
Calibrating the Context
Are we looking at the classic siren story – are we often most attracted to that which seeks to destroy us? Or are we merely trying to recoup those huge profits we could have made had we purchased bitcoin for the price of a pizza? If it’s the former, then remember that trading by gut instinct is usually an invitation to indigestion (at best); if it’s the latter, well, remember what they say about revenge trading – only good when served cold and even then, politely ignored by all diners.
At present, the prop trading environment can be broken down asset-wise in the following manner:
- 40-50% Forex
- 25-35% Indices
- 10-20% Commodities
- 10-20% Cryptos
(notice that for the day-trader, bonds and shares barely make it past the starting line).
But this may be changing.
Last week, Reuters reported that the “U.S. Commodity Futures Trading Commission is expected … to allow trading in perpetual crypto futures” after the trading volume on perpetual futures on cryptos reached $61.7 trillion USD last year – more than tripling the $18.6 trillion traded on the spot crypto market.
Drawdown rules may inhibit trader thirst for volatility; it doesn’t make that volatility any less attractive. And yet, being right on direction won’t pay a dividend if your trade’s been removed due to an unfordable price swing. Prop trading firms quite often will enact rules that are tighter than a market’s natural volatility – not necessarily to thwart or inhibit, but simply because in the long run that’s what’s profitable for them! Overnight or weekend gaps, any move to which a trader has no time to react – any of these can turn a great setup into a drawdown violation.
So, the rules may be strict, but prop trading is based on discipline, consistency, emotional constraint and the ability to control risk. It starts with your very first challenge and continues through enforcement. Prop traders may prefer technical analysis because they rely on precision and survival, rather than being “right” on the economy.
And prop trading firms prefer traders who are right more often than they are wrong.
About the Author
Barry Sadovsky is a leading Analyst covering the Financial Markets for the last 20 years. Find more about Barry on his LinkedIn Page →
