9 May 2021

Different spaces but exact same logics

I realized one can navigate the crypto space with the exact logics that are not too different from investing in the tradfi space. Here's my take.


1) Only invest in what you understand and with good fundamentals


Only invest when you are satisfied with the fundamentals and can explain what you invest in in simple terms, or you can call everything else speculation. 


There comes conviction when you want to invest in the native token of a project (side note: as retail investor, you are not investing in the project itself say like a VC, you are buying the token which may correlate to how well the project does), just like how you invest in a stock which price correlates with the company's business. Although sometimes it may be less straightforward in crypto. So you also need to be clear what's the function of the native token as they may serve different kind of utility functions.


I have shared a thought thread on Twitter on why I do not fancy Luna and the Anchor protocol and why I call it an encapsulated "economy" which I would not want to join. Yeah, you can call me a luna(tic) if it moons one day like btc.


2) Diversify


We all know as part of risk management - don't put all our eggs in one basket. 


If you decide to diversify your portfolio by using 5% of it to buy ONE cryptocurrency / token, that is NOT diversification.


You can diversify by buying a basket of cryptos (you know, macam ETF?). For beginner, I would suggest heavier weightage on the "blue chips", smaller weightage on the up-and-coming like altcoins and NFTs etc. You can further diversify by putting them on different Cefi or Defi platforms, or your own crypto wallet.



3) It runs in cycles



Source: SecretsOfCrypto


It's just like what you see in the stock market of boom-bust cycles. The main difference being that the boom-bust cycle here is being driven by "fad" and not the Fed.


A general perception is that crypto tends to get pumped more furiously and dumped more furiously. This I had previously attributed to the small number of big whales holding, so their dumps made the slides more powerful. 


I hope with bigger pools and more diversified holdings in future, volatility will be much reduced.


And if you study the ecosystem closely, many projects reflect real life economies and market derivatives. The sustainability, security and practicality would be some differentiating factors between good and shit projects.


4) DCA works better than market timing


If the assets are trending upward, then DCA over time will let you fare better rather than staying on the sideline and waiting for the mega crash to happen.


Just remember to save enough ammo too, you will never know when a crash might greet.


5) Watch out for fees


Nothing comes free in this world. Neither does it in the other.


You want to trade? Pay commission. 


You want yield? Pay up the gas fee. The more you itchy-fingers and move, the more gas fee you have to pay.




That's all for now. I try to keep everything short, sweet and simple here.


"I am a baby step closer to being a crypto native. Subconsciously, I think I have picked up enough crypto slangs to curse at someone who rug-pulled me."


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4 May 2021

The Awakening

This is how the story goes...



Current BTC market cap $1,049,693,871,380 

(I know that the limelight is away from bitcoin for now. For crypto natives.)

Ooh... just nice that Seth Godin's new post today is - But How Will You Know?



When this insane crypto market crashes, I will post The Awakening2.

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Related posts:





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3 May 2021

Making sense of Yield farming

I am too lazy to explain so I shall just drop a video here. One video says it all.



Notes:

Liquidity mining - the process of distribution of tokens to users of the protocol. It's additional incentive for yield farmers (these tokens can be staked for additional reward).

Leverage - Farmers can deposit their coins as collateral to one of the lending protocols to borrow other coins, they can repeat this procedures.

Risks - liquidation risk (from leveraging), smart contract risk, defi specific risks.

Crop rotation can help farmers keep up with changes in yields.


People input, people borrow, borrowers input again to chase high yields... And this shall go on until a bubble burst. I guess.


Take care of your hot wallet while having fun and swapping crypto around. Don't become a hack or phish victim.


Some starter advice:


1) Learn to differentiate between Cefi and Defi

2) Read the reviews and find out which (platforms) suit you better

3) Follow Twitter and Discord to find out what's hot and what's not, and the generally sentiments (not asking you monkey see money do hor, DYDD)

4) Read about cases of rekt and how to avoid them

5) Don't buy tokens on FOMO, do homework (read whitepaper, assess project viability, liquidity for entering / exiting etc)


Remember, positive reviews stay positive until they don't. Good yields remain good until they don't. 

We all know that some good things do come to an end some day. Everything seems to shine when the sun's shining. Understanding the crypto cycle and capital flow is important.



This article by The Babylonians is a really insightful read - Beginner's Guide to Crypto.


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