#1.0 Investment strategy (common)
I would like to start my set of articles with just a little bit of theory about investment strategy. I am not really good in writing, every time i want to make it perfect and it takes me a lot of time to make it look properly and structural. So i just decided to write it as is, i hope that it will be a little bit useful and will not look extremely messy. English is not my native language, so mistakes are expected.
You will not see certain recommendations in the article, i do believe that investing approach should be completely different for different types of personalities and if something is suitable for one person it may not suit another one. I would just describe my case and my point of view. It does not mean that it is true, moreover, if you have another approach i will be happy to see your comment below or with a private message.
First of all, I think we have to start from the description of our financial situation. It is just the fact, that more money at the market than more it is efficient and it leads to the conclusion that it is harder to make money in it.(Just take it as is). So if we have not such a huge initial investment and we want to get the highest return(with acceptable risk), we have to consider the markets with low liquidity and with high potential. People may say that risk is higher in the markets, but our goal is to reduce the risk without systematic approach and competencies. I just want to say, that it is really possible to do.
I choose to focus on kinda initial stage projects, so by default, I will not invest in top-10(top-20) highest valuation at the crypto market, but I may keep the position if coin from my portfolio will be on the list. I am more focused on the capitalization range $100k-$20m.
I chooses to focus on kinda initial stage projects, so by default i will not invest in top-10(top-20) highest valuation at the crypto-market, but i may keep the position if coin from my portfolio will be in the list. I am more focused on the capitalization range $100k-$20m.
Yes, it is the kinda huge range, but so far there are no so many projects and basically, the choice is limited. If potential market is extremely big I may consider investing in the project with close to $20m capitalization, but I have to have strong reasons to do it. At this range, my money can work the most efficient way for me.
Typically, early stage venture companies propose the system like:
- Y dollars for X% of capitalization (like $100 000 for 5% of equity)
- Ability to achieve target market of Z in several years(like >$30m)
- Equal capitalization of projects at the initial level
But in crypto space we don’t have the ability to set the initial cap, the market sets it and we have just the option to accept it or not. So before we make our decision to invest or not we have to consider the possible future valuation of the current project with adjustment to capitalization.
Investments in the perspective projects with high capitalization can be not less stupid than investments in not super bright projects, but with low cap.( under assumption that we can find the necessary liquidity in both cases)
(!) It is very important to consider all amount of coins which can be at the market. If a company hold huge % of their coins, it is completely crap since they have the strong influence on the price.
To understand the possible valuation(or possible market) for the current project, we have to consider the drivers which may influence the price. It is the really huge topic and, maybe we will talk about it later.
I have 2 strategies :
- Value investing
- Speculative strategy
Each strategy has the different set of rules about initial reasons to make a trade, exit strategy and position size. I am much more loyal to my value investing positions than to speculative one and basically act in the way of my managing position plan for each type of the deal. For speculative positions I am more focused on technical analysis(like graph+order book+time&&sales), in the case, my goal is to find a huge buyer in the coin who collect coins before the pump.
With the statement, i just want to notice that:
- It is very nice point to separate the logic and act different way
- You need to have a plan what you are gonna do with each position during the time
- It is fine to trade shitcoins and make money with it (for me it was difficult to buy crap, but it works so now i am fine with it)
One more thing that I want to notice: personally, I have really seen the huge potential of crypto-economy and I am not going to get money from the system and transfer it into USD or another shit-currencies. My benchmark is BTC and my goal is to just outperform BTC growth over time regardless of the current market situation(altcoins pump or dump). I may consider hedge possible drawdowns with some uncorrelated to BTC assets, but not with Tether or another need-to-trust crap.
That’s pretty much it. It is the just common description, I would like to tell about the most important points a bit later. Maybe It seems a bit abstract, but it it not possible to describe all the details(even something which is fine to share) within one post. I will write more my theory in details, describe examples, so subscribe :) Actually, i need your opinion, i would appreciate comments :)