It’s been a while since I wrote something on my blog, crypto moves too fast and you just lose track of things in general. Taking a moment here to slow down the accelerator pedal and summarize my thoughts in this post as we move into 2022.
1. Terra Luna, the Darling Coin of 2021
I am probably known for a Luna shill (don’t know why but trying to get rid of this concoction), usually all the comments I received resonate along this line “Thanks for introducing me to crypto, I first got in when I saw your Luna post/video or Anchor.” Well, I guess Luna/Anchor is another portal of getting people into crypto apart from Axie Infinity.
Here is how it started. Initially, I had a bag of staking shitcoins like KNC, ICX and many others carried forward from 2020. I was patiently waiting for their moment to come, for the coins to pump and of course, it didn’t. Hope was never a strategy.
In early 2021 Jan/Feb, I chanced upon Luna and went all-in with a very high conviction. Sold ALL my coins, bought Luna. From Feb to May, my telegram was filled with constant annoyance shills of buying $Luna, get it now before it’s too late, last chance and blah blah. It went from $3 to $20, I felt like a genius.
2. Sold 100% Equities/REITs, All-in Crypto
At that point in time, the risk-reward opportunity in traditional markets does not make sense to me. Average yields of REITs give you about 5%, takes years to potentially even see a 2x return, if you are lucky. Meanwhile, in crypto, you get 10% yields yet very easy to 2x. So I sold away TSLA, BNGO, PLTR all my REITs, went all in crypto. Bought more Luna at $15, $18, $20.
Along the same period of time, I was also buying up lots of Rune at $6, Solana at $15 and Serum, Raydium etc. The thesis for Rune is simple, it is the first cross-chain swap in the market. For Solana is because they were the most scalable platform as compared to other alternative L1s.
Rune went to $20 and Solana went to $50, once again I felt like a genius. I had big bags of Luna, Solana and Rune, all did very well.
3. May-day Crash and the Road to 60k (Double Top)
Euphoria was high, leverage was high, everyone is a genius in a bull market. And out of nowhere, Elon starts trolling Tesla not accepting bitcoin, China comes in with a slab of regulation pressures, again. But this time they were more serious, no more mining business, no more crypto business. Stakeholders in China scaled back and shut down.
Luna went from $20 to $4, UST de-peg and everyone is panic selling. $RUNE went from $20 to $6, then it got hacked, not once but twice and it drops further down to $3. I lost probably 80% of my net worth at one point in time. I remembered feeling very stupid for selling my stocks back then.
I am no different from the noobs either (韭菜之王), my paper hands panic sold Solana at $20 after seeing the insiders hold a large chunk of allocation as I reasoned to myself for logical validation. Clearly 1 of the biggest folly made in 2021. Also sold all the smaller ecosystem coins on Terra/Solana and consolidated the proceeds to go all-in on Luna.
One thing I learnt in crypto and know this well, DO NOT ever sell on nuclear dumps, provided if it is a fundamental solid coin. They will almost certainly rebound back up. Many have lost a great fortune when they sold Luna at $6 or Solana at $20.
At least if you want to sell, sell fast and early without hesitation using a stop loss (e.g. if it falls >20% I am selling all). Don’t do this: dip, think of selling, dip more, think of selling, dip even more, think of selling, final big dip, sold at the bottom. You will get rekt hard.
Paper losses especially when it keeps going down messes up your emotional mindset and influence you to do the wrong things. Resist committing 1 of the biggest sin of investing, “The Itchy Finger Syndrome”. Most of the time, not doing anything outperforms you trying to be smart and rebalance your -80% losses.
You might think doing nothing is easy, but in an ADHD environment like crypto, especially in extreme volatility conditions, it is even harder as everyone feels the need to make some trades, buy/sell some coins, do something.
4. The Rebound & The Reset
After the May-day crash, crypto went to retest 60k again on the 2nd bull run. Along the way, I picked up all Danielle coins $SPELL, $ICE, $TIME and had a good run-up. Then, all the profits were wiped out again as Christmas came early and the coins were down 80%. I was over-invested at that point in time and had other personal obligations, so I reasoned.
Initially had a 3-4x gain, then sold at a loss, mainly because I needed a reset to clear my mind and needed fresh capital to start over again with new coins in 2022.
The thought experiment is if I am starting out new in crypto in 2022, Can I still make $, without luna? Can I repeat the same portfolio performance in 2022 and the subsequent years consistently? Or are we just lucky brats who think we know it all? Basically, anyone who bought 2020/2021 any of the L1s or anything would have won big and brag about it.
But the reset helps. When you start from ground zero, it forces you to reevaluate what you know and whether you truly have all the ingredients it takes to succeed. One of the very successful traders used this tactic, whenever he entered a trade, it 2x, 3x he takes out capital and reset again stripping away all complacency and using the same level of cautiousness to look for the next 2x 3x. By this means, you are always in a constant state of lookout which makes you strong.
5. Play Defense
Anyways, the 2nd wipeout of profits has forced me to really tell myself, time to get serious. I am not new to making these amateur mistakes, but yet I did. The wake-up call I guess is really the difference in capital size. In the past, while such losses are painful it is a few thousand but now it is 5-figures, guess the pain hits harder and hence the lessons.
In Paul Tudor Jones words, “The most important rule of trading is to play great defense, not great offense.” When you are young and your capital is small, it is easy to play degen offense. Find the next 10x, ape all in, anyways I have nothing much to lose. That is how the younger generations are playing it now, but as you grow older with bigger AUM and more obligations, responsibilities, it is time to start thinking about wealth preservation.
That means risk mitigation strategies, consistency, sustainability, defensive hedging moves and being paranoia that the market is going to take it back from you. And I realised I have not given much thought to playing defense, it has been offense all along. It is time now as age catches up.
6. Market Observations
After all these years, I have come to realize that making $ in crypto investing is a combination of pulling the right levers. One is allocation & sizing, for those coins that you were right on, how big were your bets? It is only meaningful money if you made the right bet + the right allocation sizing.
Second, the emotional psychological trigger probably matters more than picking the right coins. Picking the right coins isn’t that hard, everyone shills everywhere nowadays with all the new telegram groups, discord groups, Twitter, research and the information asymmetry gap is getting narrower. The point is finding new ideas isn’t that hard nowadays. But knowing when to buy, how much to buy, when to sell, when to HODL determines the magnitude of your portfolio size more than knowing what to buy.
Third, crypto is largely driven by narratives/communities/influencers & VCs. When you want attention (money follows after) to be on something or the next thematic play, it can be tactically/psychologically crafted with coordinated big money. You can either buy something early and hope that the attention rotates over to yours in due time, or follow the wind.
But also know that not all narratives are as lasting as they may seem. DeFi 1.0 used to be one where any random pick is a winner, same for NFTs, or dog coins, or food coins or ohm forks but the winners are short-lived. Crypto in a nutshell is just everyone wants to be early. Token x is successful, token y forks with tweaks, token x holders take profit and new money prefers token y, the cycle repeats and you have this domino effect of shit copy-paste farms/forks/coins/NFTs. The market becomes oversaturated with a supply of the same stuff, hence profits dilution.
Then there are those that are still winning so far, like L1 alternatives.
7. Lady Luck
I would like to think that I am just pure lucky, rather than having foresight. I am lucky that I bought Luna, I am lucky that I did not sell Luna because they are locked up, lucky I anyhow buy in 2020/2021, If you remove Luna from my portfolio, my portfolio returns are probably no better than the SPX index. In one of Berkshire Hathaway’s shareholder meetings, Charlie Munger mentioned that Warren Buffet owns 400/500 stocks during his life, but the big money only come from 10 of them. The 20/80 Pareto principle applies too.
There are many people who got into crypto without any knowledge, bought Luna and bought in big allocation size and they won. It doesn’t mean the more paid resources you have, the more hours you spent researching on Twitter/Discord groups, the higher the profits. While it helps to develop general sensing of markets & awareness, it does not always necessarily translate to performance. Don’t feel the FOMO need to be in everything. Other variables both external (market environment) and internal (psychological) plays a big part also. The only exception is knowledge of insider big money flow.
Contrary to what many think, you really don’t have to be right at a lot of things, just one or a few is more than enough. If tails, you win. Or as George Soros put it, it is about how much money you made when you are right and how much you lose when you are wrong.
8. How to Play the Crypto Game?
There are different ways you can play crypto in life. In Investing, you can either DCA & HODL, play thematic capital rotation (metagame in Cobie’s substack article), play alts-BTC rotation, play short-term/medium-term leverage trading, play stable coin yield farming, IDOs/NFTs and many more. There are many rich successful players in each category, and many losers as well. Find one that fits your investment personality, style, risk appetite, time horizon and most important the one that you can win.
Or you can be a developer, builder, build stuff, write some codes, launch some stuff, do some NFTs, there are pretty much free available resources everywhere right now. Or even grants & bounties to help you get started. This may be even more satisfying than investing. Just play around with web3, dune analytics, flipside crypto and many others more out there.
Get a job in crypto. Many have asked, how to get into crypto? What do they look out for? In my opinion, rigour, curiosity and burning passion, best if they can be demonstrated through a portfolio (website, youtube, medium articles, Twitter, degen score).
Within the crypto sphere, there is also a couple of roles: for the low-hanging fruit just go to any of the discord/telegrams and volunteer to be a community manager or something. For a more full-time role, there is research, BD, VCs, exchanges and etc. VCs/BD give you exposure to meeting with project founders/team/people, others are more of back-end research analytical roles.
I can speak for exchange as I am in Huobi (we are hiring), the good is it gives you broad exposure to a wide variety of coins, sort of like the audit industry, you learn to evaluate what matters most. But the main reason for joining is to learn Chinese and see things from a new perspective. Different languages have their unique ways of thinking, thought processes & expressions to evaluate crypto. That is interesting to me.
Point is, there is never a lack of opportunity, start somewhere and find the path that you are destined for.
If you are new, crypto is unstructured, fast and rampant. There are lots of different moving parts and lego blocks, you just gotta go everywhere and be like a sponge absorbing the key essence of each part. The more you study into projects, the more you will find repeatable patterns, the better you become. YouTube/Google is more than enough to go from 0 > 1.
And just like how you won’t take advice on root canal from a barber, don’t blindly listen to everyone in telegram channels/Twitter/YouTube/random charts/me on investment tips. Typically the more successful they are in what they do, the more quiet and low-profile they are because of less need for validation. It is the wannabes that are the loud ones around. So pay attention to their track record, if they got nothing to show, their words carry little/no weight. And also differentiate luck/skills through consistency. A speculator in 2000 who made money on internet stocks does not mean that guy is smart. Same thing in crypto. Avoid group thinking and wear an independent cap with a filter on.
9. Never Enough
Crypto is fast, exciting and exhilarating but yet we are also seeing increasing instances of stress, anxiety & burnout. Especially those who are in the markets since 2020. We have had a continuous, never-ending stream of information 24/7 feeding into our life for 2 years now unlikely quarterly earnings reports. That means no break time unless you give yourself one. It may seem paradoxical that wealth and satisfaction are not correlated but this human behaviour is seen across history.
In The Psychology of Money from Morgan Housel, there was a story of Gupta, born from the slums of Kolkata, orphaned as a teenager but became the CEO of McKinsey by mid-40s. He retired in 2007, took on roles in UN, WEF, Goldman Sachs, Bill Gates Foundation and was worth about $100m by 2008. Yet he was involved in insider trading before Warren Buffet bought $5b of Goldman Shares in the bailout. Or how about Bernie Madoff, a highly successful market maker doing about 9% of NYSE volume but yet creating the biggest Ponzi scheme in the world. Why do these successful multi-millionaires feel like they don’t have enough money?
The problem comes from getting the goalpost to stop moving. If expectations rise with results, there is no logic in striving for more because you will feel the same after putting in the extra effort. And it gets even more dangerous when the taste of having more (money, power, prestige) increases ambition faster than satisfaction. In that case, one step forward pushes the goalpost 2 steps ahead. You feel you are always lacking behind and the only way to catch up is to take a greater risk.
Modern capitalism is good at generating wealth & envy. Social comparison is even more flagrant in egotistical crypto Twitter. Crypto is the only place where people are not happy making a 300% gain for the year because everyone around them is making a 1000%. Meanwhile, TradFi people are considered outperformers with a 100% gain for the year.
Know what you want, what matters and where to draw the line especially when $ pumps & information is unlimited in crypto. Don’t sacrifice all that time chasing for something that is not what you want.
Probably much of the investing lessons I shared would not register to you, even I myself don’t follow my own lessons I wrote in the past, what more anons? The reason is that you will only learn something well unless you have been through the whole experience yourself. The emotional pain & losses embedded in your brain is what will make you learn, not the words you read or hear. And each individual’s experience is different but the core lessons same.
On markets, there is without a shadow of doubt that the world is moving towards this direction, traditional financial systems are inefficient and broken, we just got to wait for regulators to catch up with the knowledge gap before we can move forward to the next phase of maturity. Institutions are already here and more is coming over the next 5 years, same for retail. Speed is not so important as direction is. As long as you are in this, you are on the right track. Go at your own pace and don’t compare with others.
While markets have their ups and downs fluctuations, the technology is constantly evolving and getting better at each iteration. Everyone is learning what works and what doesn’t making tweaks to improvements. Be it scaling, yield farming or DAO consensus. Everything is becoming better, faster, cheaper, more efficient fundamentally. That is the natural order of things and technological evolution process. Eventually, the long-term price will catch up with fundamentals, we will slowly hit 5T, 10T, 50T.
Not a matter of if but when.