Own your attention back
Developing sustainable investment strategies and overcoming CT.
In this fast-paced world of information and data overload, everyone is fighting for your attention. You are constantly exposed to outrageous amounts of external inputs.
On top of that, you are addicted to Twitter and believe that CT has the key to your success.
This deadly mix forces you to constantly refresh the feed. You are a hopeless soul waiting for some alpha to drop. Far from happening, the reality is that yet another project is shilled to you. Then, your brain, which is flooded with so many inputs, ends up confusing alpha and garbage. You get dumped on once again.
Before I start, please remember that I’m just a random anon on the internet. I’m not a financial advisor, I don’t have any real-life experience in financial markets, and I’m still trying to figure shit out myself. These are just my thoughts. I share them because I’m trying to refine my investment strategy, and this seemed to be the best way to be accountable and follow my own ideas.
More often than you should, you find yourself blindly following the latest CT narrative. In a matter of weeks (or even just days), your favorite influenza managed to convince you to buy a new token. Your weakest side gets triggered, and you find yourself aping into any decently marketed project. You expected a x100, but you ended up underperforming the market or, even worse, getting dumped on.
I don't have a secret formula to find new gems, front-run others, or do not feel FOMO. Nevertheless, I will share a few ideas that I believe to be useful.
First of all, you should acknowledge that real alpha is scarce. Most of the time, when CT publically shares any type of alpha with you, they are already positioned.
Don't get me wrong, CT is one of the best tools to learn about new stuff. But it can also be overwhelming and counterproductive. Especially if you make rushed decisions because you ape into a project right after reading a couple of threads.
Because of that, it is extremely important to build an investment framework that works for YOU.
The need for a plan
Since I created this account, I've learned a lot of interesting stuff that helped me shape the way I see crypto today. Some of the stuff (the technical part) is related to projects and the space itself. This is what I define as the knowledge that you can “easily” access. Because people may shill projects after they are positioned, but they eventually share them with the rest of the market.
Nevertheless, what is not shared is the other side of the story. The information behind the market participants. Their financial habits, their way of investing, and the strategies they use.
As it is of public knowledge, the vast majority of the big market players have been in crypto for multiple cycles and/or had previous knowledge of the financial markets. If that’s not your case, instead of trying to directly copy other people’s investments, you should copy some of the stuff that these people that you look up to have in common.
Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.
The reality is that the investors that you admire behave completely differently than you do. Just ask yourself a couple of simple questions:
Would X blindly throw money into a project right after just reading a couple of Twitter threads? Or would they do proper due diligence?
Which % of their portfolio would Y be willing to invest in moonshots? Do they properly manage risk?
Is Z monitoring the value of their positions 24/7? Or are they making sure that their thesis is still correct over time?
If I had to bet, I would say that most people who manage to consistently outperform the market, and make astronomical sums of money, do so because they invest in a professional manner.
On the other hand, most people don’t take it seriously enough despite spending endless hours on Twitter.
The fact is that, despite having a good understanding of the industry and feeling embarrassed by your normie friends (who think of crypto as a shiba-doge-safemoon casino), you are not that different from them. Unless you consolidate a professional investment strategy, you will heavily rely on luck to achieve your goals. Until you do that, you will only be a sophisticated moonboy.
So the conclusion is clear. If you want to maximize the EV of your investments, you need to work on a framework that mimics the behavior of professional players.
Laying out the plan
So how can you control your own narrative, be more mindful of your decisions, and (hopefully) become a successful investor?
Step 1: Reduce noise
You need to own your attention. You need to win it back.
The first step is to declutter your Twitter feed. Curate the list of people you follow. Go through all the accounts you follow. Unfollow those which don't provide real value. Unless you are a scalper/short-term trader, I would also encourage you to not follow any trading accounts.
Bonus: Mute those projects that you are not interested in and people will endlessly shill. If something is not aligned with your interests, don’t allow it to consume part of your mind-share.
Step 2: Gather insights
Build a network of insights and create your own library of resources.
This step takes time, but it can also become your edge once your insights start compounding. Build a method to gather and organize knowledge, and you will end up having something truly valuable and powerful.
The main source of insights for most of us is CT. Personally, I like to bookmark the threads and articles that seem interesting. I have recently discovered a tool that helps me organize them based on topics. You can also add labels and comments, which comes in handy.
Another source of insights consists of sharing alpha with other people. Although developing a network of people that will share their edge with you is really hard, it will also save you time afterward (since the information that you will receive from these sources will have been previously filtered by your partners).
My advice is to engage with people via comments or DMs. Be the one who shares alpha yourself. Don’t expect anything in return. Altruism eventually pays off.
Step 3: Learn
This step is where the magic happens. This is where you become wiser.
Once you have gathered information and organized it, it is time to process it. It is time for you to learn stuff.
All the content that you consume should focus on one of these two different goals:
Master the basics. To be successful, you need to understand how the industry works. You don’t need to become a developer, but you should know the basics about the technology behind your investments (Bitcoin, PoW, Ethereum, PoS, AMMs, Curve, oracles, decentralized lending protocols, liquidations, etc).
Do proper due diligence. Once you understand the basics, every time that you get presented with a new project, you will be able to have a critical mindset. You will have the ability to judge if it is interesting or not (more on this later).
Understand the mechanics of that protocol. Assess if the tokenomics are good. Account for human value. Never fade a strong community and a team that relentlessly builds.
Step 4: Build your own theses
Here is where you create your investing principles. You need to determine which narratives will succeed in the long run. I like to think of it as a general roadmap that gives you a sense of direction. Since you believe that some narratives will be successful in the future for X reasons, you should ensure that your investments match these core narratives.
For some people, it will be decentralization. For others, it will be privacy. Maybe you are all about DeFi and the financial revolution, or a believer in the cross-chain future. You may even be one of those people who can envision where culture and social trends are headed to. It is up to you to figure it out.
You shouldn’t expect to have clear mental models since the very beginning, but it is net positive for you to think about it from the start. Your mental models will evolve as time goes by. You will gather more insights, will be more experienced, and will have a better understanding of the industry and the markets. Therefore, it is to expect that, as you mature, you will build more accurate theses.
So despite your models won’t be perfect and will always be evolving. If you make sure that 90% of the investments you make are aligned with your long-term vision, your chances of FOMOing into dumb projects will be drastically reduced.
Despite probably being the most difficult step, I believe it to be one of the most important ones. Nevertheless, interestingly enough, most people don’t spend any time at all thinking about it.
Sit down, realize how do you perceive the markets. Figure out what has (in your opinion) a bigger chance of success and why. Build your theses around those ideas.
Step 5: Execute
When investing, you need to establish a professional methodology.
This is an extremely volatile and fast-growing market. Because of that, it is to expect that, over the long run, you will increase your investments in dollar terms. Nevertheless, by blindly throwing money into projects, you won’t be able to outperform the market regularly. If you want to outpace the growth ratio of the market, you need to be mindful.
Determine soft portfolio targets.
This step is crucial to properly managing risk.
I feel like CT barely discusses this topic. Your feed is probably flooded with projects, but almost no one shares their risk management strategies. People will shill you a position that only represents 2% of their portfolio (because who cares about old boring ETH), and you will allocate 15% of your net worth to that project after reading a couple of threads.
I highly encourage you to at least have two different target portfolio compositions. An aggressive portfolio that is growth-focused for the bull market, and a conservative one for capital preservation during the bear market. I find that planning this portfolio duality will help you rationalize the market and reduce your chances of being overexposed for a long time.
Instead of tracking your net worth, it is more likely that you start focusing on the composition of your net worth. And when the market starts turning, instead of hopelessly waiting for a recovery, you will be more likely to follow a conservative strategy to protect your capital.
Risk tolerance is different for everyone. Nevertheless, when determining your target portfolio compositions for the different scenarios, you should have separate targets for:
Stables: Common denominator that most of the market participants use. Their potential downsides are “only” due to de-peg and smart contract risks. When exposed to stables you should always be farming with them. If your portfolio is big enough, you should spread your stablecoins among different farms and stables types to diversify risk.
Majors: I would only consider ETH and BTC here. Battle-tested assets that have survived multiple cycles. You can confidently trust them to survive the following ones as well. Both assets move the market and generally retrace the least during downturns. You should denominate in one of them and try to outpace its growth.
Blue chips: Assets that have proven market traction, that currently are undervalued, and you believe that will likely outperform the majors during bull runs. This is where your long-term thesis plays a big role. There usually are a lot of contenders that fight for market attention, but you must choose the ones which manage to capture everyone's attention.
Risky plays: Small projects that can perform a 100x but which can also go to zero. You should carefully decide where to invest by doing meticulous due diligence. Since these are risky plays and it is harder to assess how the market will react to something that small, you should highly focus on minimizing risks by learning as much as possible about the project. Whereas I believe that your thesis is always important, in this case, due diligence is key.
Why do I recommend soft portfolio targets? Because you should be flexible and adapt to market conditions.
You should let winners run. Imagine cutting a 20x on a project that is fully aligned with your thesis, just because your pre-set portfolio allocation forced you to limit your exposure to it.
You shouldn’t force yourself to take risks. Imagine that you decide to cut an underperforming project that has lost fundamental value. Instead of redeploying that capital to another project to compensate for the loss, or to reach your portfolio allocation, you may want to move that capital back to ETH (or stables) until you have time to properly assess another investment opportunity.
Portfolio targets should just be a mental framework that helps you manage risk.
Create an investment list.
To prevent yourself from FOMOing into new stuff, I would encourage you to follow a set of steps that you previously defined as best practices.
These steps should abstract market irrationality, force you to be more thoughtful about your investments ideas, and take things slowlier. If you are about to enter a position mid-long term position, it is probably best to spend a couple of days researching instead of directly committing to that investment for a potential extra 10%.
Make sure that you have a fundamental understanding of the project.
Read the docs on their website (do it multiple times if necessary).
Look for the project ticker on Twitter and read the more relevant threads.
Deep dive into their tokenomics. Be aware of the initial token distribution, the vestings periods, and the token issuance schedule.
Research the founder(s) and core team.
Join the discord and evaluate the community vibes.
Ask questions about the protocol. You will see if there is a strong community and if they understand the mechanics.
Join (or listen to past) community calls.
Try to engage with the founders. You will likely manage to get insights directly from team members.
Look for competitors (if there are any).
Learn what differentiates them. Find out why this project is better suited for success than its competitors.
Compare the lifespan of the projects and their marketcaps. It can be useful as a growth benchmark.
After you have done all this research you should be able to answer the following questions:
Why does the industry need that idea? Which problem does it solve or what service does the protocol provide?
Why will people buy the token? How will the protocol generate revenue?
What are the tokenomics like? Is the project evenly distributed? or is it heavily reliant on whales?
Is the team legit? Do founders engage with the community? Do they seem to be constantly working on improving the project?
Do they have an active community? Do community members engage in discussions, or is it a discord full of people just to farm potential airdrops?
Again, answering all these questions won’t guarantee that a project succeeds, but it will strongly reduce its chances of failing.
Step 6: Iterate
I like to think that none of us know what we are doing in life. The same principle applies here. As time goes by we learn new stuff, and our perception of things evolves.
Because of that, you should periodically reassess where you are and where do you want to go. It is an iterative process. You should constantly iterate and question your previous assumptions.
If you manage to consistently do things correctly, you likely end up learning a couple of valuable things. You will probably build your powerful theses.
If I had to summarize this article in a couple of sentences, I would encourage you to change the way that you are currently approaching crypto. Instead, do things professionally, as if it was your work. CT is fun. It can feel childish, but it ultimately is a PvP arena. Remember that you are here to make money, so don’t get fooled by anons and wassies, and do not gamble your money.
Be certain that if you are invested in a project is cause it fits your narrative and not because you are FOMOing. If it goes to zero, you will at least be able to look at yourself in the mirror.