Best Trading Strategies Used by Cryptocurrency Companies

Introduction

Proprietary trading firms don’t rely on vibes or virality. They trade with their own capital—and they survive by building strategies that are disciplined, repeatable, and tailored to risk, not emotionally gratifying or optimized for Twitter engagement. Their edge doesn’t come from being the first to jump on some obscure narrative coin; it comes from executing the same setup hundreds of times with military precision, while having enough flexibility to know when not to. Proprietary traders aren’t necessarily clairvoyant, but they operate with structure—and, more importantly, with rules. Strategies are tested, risk is contained, losses are recorded, analyzed, and managed. And while it may not sound glamorous, this is what keeps them in the game long after the weekend warriors have rage-quit their Bybit accounts (looking at you, Mubite users). This article breaks down the five most commonly used trading strategies in crypto proprietary firms. You don’t need to master them all—but understanding how professionals think (and trade) can help you level up your own game. And if nothing else, it might just save you from another poorly timed 25x leverage position based on a “feeling.”

Momentum Trading

▸Momentum-focused strategies often involve identifying:
▸A strong surge in volume that confirms participation
▸High relative strength compared to the broader market or sector
▸Breakouts of key resistance levels

If there’s one thing cryptocurrencies have in abundance, it’s momentum. When a coin starts to move, it doesn’t just stretch—it can explode out of control. For momentum traders, this volatility isn’t something to fear—it’s the whole opportunity. At its core, momentum trading is about getting in when the price starts moving quickly in one direction—and riding that move until it slows down. Prop traders love this approach because it’s straightforward, data-driven, and often repeatable across timeframes and tokens. Unlike value investing (which assumes rational markets and long-term fundamentals), momentum simply says: if it’s going up, it might keep going… for a while longer.

Some traders…

Some traders use indicators (e.g., RSI, moving average crossovers), while others focus on volume spikes, swings in social sentiment (e.g., news-driven), or even aggressive shifts in interest rates in one direction. This list isn’t exhaustive; there are countless factors that could trigger a momentum-driven surge—the key? Don’t chase every candle. The best setups are often those where the price consolidates firmly before exploding—not the ones that have already run 30% in a single candle. Let’s look at an example with good old Ethereum, which saw a strong surge in February 2024 due to the upcoming Dencun upgrade. As shown on the 4-hour chart, the price consolidated for several weeks before finally breaking resistance—and over the course of February, it launched an impressive 80% rally. Once the breakout is confirmed, capitalizing on momentum becomes a matter of trade management—that is, knowing when the trade still has legs. In this case, the 50SMA, highlighted in yellow, acted as reliable dynamic trend support and provided a clear line for tracking or defending the position. The main enemies of momentum traders are exhaustion and false breakouts. Momentum in crypto fades quickly—especially when driven by hype rather than actual investment inflows. Momentum is one of those strategies that sou

Mean Reversion

ChatGPT řekl: While momentum-focused traders chase strength, mean reversion traders bet on overreaction. Simply put: when the price strays too far from the average, it is expected to snap back sharply. However, this is a risky strategy in an asset class notorious for very high returns, so it requires very strict risk management—tight stop-losses are essential to ensure that a breakout you’re trying to counter doesn’t jump another 50% higher. A safer approach is to focus on trading assets within well-defined ranges, where support and resistance levels are clear and reversions are more predictable than in a full-trend environment.

Mean reversion strategies often involve identifying:

▸Long-term deviations from moving averages (e.g., 20 or 50 EMA).
▸Overbought/oversold RSI values (above 70 or below 30) can signal exhaustion. Zeptat se služby ChatGPT
▸Bollingerova pásma, která pomáhají identifikovat cenové extrémy – zejména když se svíčky uzavřou vně pásem a poté se prudce vrátí zpět dovnitř.
▸Volume indicators – a sharp increase in volume at a parabolic peak
▸ VWAP – mean reversion trades often look for the price to return to the VWAP (more effective on shorter timeframes)

It's funny that Ethereum's rise in February 2024 also serves as a textbook example of overbought conditions (daily chart), as indicated by the RSI. When a large-cap asset like ETH gains 80% in a month, the move is likely overstretched and due for a pullback. This creates a strong risk-reward opportunity for a mean-reversion trade—a bet that the price probably won’t continue rising without at least pausing. As with any trade, this one wasn’t perfect; the setup lacked a clear local top, such as a bearish candle on high volume. Still, when you see an almost vertical price action combined with stretched momentum, it’s often a signal worth paying attention to.

Arbitrage trading

If momentum and mean reversion are about reading price dynamics, then arbitrage is about reading inefficiencies. It’s the least thrilling thing – less adrenaline, more spreadsheets. For prop firms, however, it’s one of the purest forms of edge.

Types of arbitrage strategies:

▸Spot vs. futures arbitrage: Buy the token on the spot market and short it on futures – earn funding.
▸Cross-exchange arbitrage: Price differences between Binance, Coinbase, Bybit, etc.
▸Triangular arbitrage: Exploiting mispricing within trading pairs (e.g., BTC/ETH, ETH/USDT, BTC/USDT).
▸#Exchange vs. off-exchange arbitrage: e.g., price differences between a DEX and a CEX.

These trades can be manual, but they are often executed by bots and automated systems using APIs that trigger orders in milliseconds. Low margin, high frequency. While arbitrage sounds like an easy profit, executing it as an individual trader is notoriously difficult. You’re competing against bots with sub-second latency, direct exchange access, and custom-built infrastructure. Therefore, it’s more feasible for players with a strong tech stack, coding skills, sufficient capital, and human resources. The most famous example of crypto arbitrage is the Kimchi premium – where Bitcoin trades at significantly higher prices on South Korean exchanges due to capital controls and local demand. While the price difference looks like an easy profit, strict regulations and fiat transfer barriers prevent non-Korean traders from exploiting it. It’s a textbook case of how arbitrage exists – but access is everything. For most retail traders, arbitrage is more of a curiosity. For prop firms with the right tech stack, it’s a core strategy. Quiet. Efficient. Ruthless.

Breakout Trading

Breakout trading involves catching the price at the moment it moves beyond a key level, usually following a period of consolidation. Prop traders love breakouts (my personal favorite too), not only for their explosive potential but also because they often serve as the first signal that the market is waking up. These setups often mark the transition from sideways movement to a directional trend.

Jak to funguje:

▸Identify clear zones of resistance or support – levels that have been tested multiple times.
▸Wait for confirmation that the price has broken through – ideally accompanied by a sharp increase in volume or open interest.
▸Look for tight consolidation before the breakout – the more compressed the range, the sharper the potential move.

Breakouts can occur on chart patterns (e.g., triangles, flags, ranges) or simply at psychological price levels (like $1,000, $10,000, etc.). The main risk is that not every breakout is real. False breakouts are especially common in crypto. The price briefly breaches a level and then reverses, often right when everyone has piled in. That’s why proper risk management is always crucial, and using a stop loss is an absolute must. My personal strategy (and the one generally used in these cases) is to place the stop loss at the level where the breakout occurred. The advantage is that if you also entered at the breakout point, you can exit at the reversal and re-enter if the price moves back toward the breakout—which, unfortunately, is another common occurrence.

For this strategy, Bitcoin’s breakout in mid-June 2024 serves as a perfect example of a flag-style breakout (weekly chart). After months of tight consolidation—where the market drifted sideways, built up buying pressure, and squeezed short sellers—the price finally surged through resistance. The volume spike was significant, though on this chart it’s overshadowed by frenzied trading around SBF amid yet another discussion claiming Bitcoin is dead. Breakout trading is one of the more consistent strategies when executed correctly—offering high reward potential and a strong win rate. The key is identifying a well-defined setup: a clean consolidation signaling that the market is accumulating and building pressure before a decisive move. Timing is equally critical. Enter too early, and you risk a false retracement; enter too late, and you may simply become liquidity for someone else.

Event-Driven (Narrative) Trading

While other strategies focus on structure, this one focuses on the story. Event-driven or narrative trading means paying attention to things that move the markets—whether it’s a token unlock, an ETF approval, a protocol upgrade, or just the latest headline from macro panic. Cryptocurrencies might be the only market where a well-timed tweet or a leak on Discord can shift market capitalization by billions. Equity traders know this—and they build strategies around it.

How it works:

▸Pre-positioning ahead of planned events (e.g., Ethereum upgrades, token unlocks, airdrops).
▸Reactive trading on volatility following an event drop (especially if the market misinterprets it).
▸Capitalizing on emerging narratives—AI coins, Layer 2 solutions, real-world assets, NFTs, etc.—while they gain momentum but before they overheat.

However, narrative and event-driven trading is highly uncertain—and often better suited for technologically sophisticated, well-capitalized firms than individual traders. The main challenge? Markets look forward. If you trade on a “sell the news” reaction, you might correctly anticipate the event outcome but still lose money. Even worse, much of the move happens instantly, often requiring algorithmic firepower to capitalize on it before the market fully digests the news. Narrative trades, on the other hand, tend to be a bit more forgiving—they can unfold over days or weeks, giving you time to take a position before [insert mainstream media] finally decides to shape the story.

Is there a better example than XRP’s legal victory in March – a headline that delivered a comfortable 400% profit to anyone who got in early (of course, under ideal circumstances)?

Conclusion: Find your edge and sharpen it.

In crypto, there’s no shortage of strategies—only the discipline to stick to one. The five approaches outlined here aren’t magic formulas and won’t make every trade a winner. However, they form the backbone of how professional prop traders think about markets: system over sentiment, process over prediction. You don’t need to master all five. In fact, most prop traders specialize—they refine one or two setups until they become second nature. The edge doesn’t come from knowing everything, but from deep knowledge of something, consistently applying it, and protecting capital when it’s not your setup. The difference between a retail trader and a prop trader isn’t in access to a secret plan—it’s in mindset. Prop traders treat trading like a business: structured, rule-based, risk-focused, and longevity-oriented. If you want to level up, start by thinking less like a gambler. Because in crypto, survival is truly a strategy.