Advertisement
OPINIONS
TLDR: Concentrated allocations for outsized performance, OpSec and conviction-betting in a sideways market
Lin Yun Heng
Edited 04 May 2022
Senior Analyst at Delphi
In retrospect, April was a tumultuous month. The entire macro landscape was perplexing, and market participants were constantly perplexed.
Also, I am currently in Europe at the point of writing and will be roaming around till August. (already missing bubble tea/sg food..)
Is the bull market still going strong? Is the bear market in full swing? What does the Fed’s action mean for future yields and potential returns? It’s constantly buzzing through my head, and I’m sure it did the same for you. Sideways crab markets are difficult to understand because one minute we pump and think the bull run is back, and the next minute we dump back to the same price level, leaving us baffled over and over again.
The majority of market participants are investing in similar assets and, as a result, have similar portfolio compositions. The allocation is the most important factor in determining the return. Is your portfolio dispersed across a variety of assets or concentrated in just a few key positions? Is it more common for these positions to outperform or underperform the benchmark market returns? These are important considerations to make when re-evaluating your current portfolio and deciding on a new strategy.
Of course, neither I nor anyone else has a crystal ball to predict where markets will go. The April market situation has left hedge funds, venture funds, billionaires, and retail investors all perplexed. In comparison to 2021, the market in 2022 is far more difficult to navigate. Anyone expecting returns similar to those seen in 2021 will be disappointed or disheartened by the end of the year. The amount of intellectual capital and smart money flowing into the not-so-nascent crypto markets is immense, and this will only serve to make the crypto markets more efficient over time. The difficulty of making money (whether trading or investing) will increase over time, and natural selection will occur among market participants (winner takes all).
On the TradFi front, the S&P 500 index and NASDAQ index were down 8.7% and 13.2% respectively in April. On the crypto front, the large caps (BTC/ETH/AVAX/BNB/SOL) are down 13% to 33%. Altcoins which relied on hype and speculation quickly died off when fear kicked in and are easily down 70% or more and most probably not recover anymore. Things definitely look bad for the overall market.
Liquidity is seeping out of risk-on assets after the hawkish stance from the Fed and Quantitative Tightening kicking back which means less free money flowing in the global economy. With inflation at historic high (14%) while central banks are capping easy money back into the markets, we might be facing an unprecedented stagflation event with recession + high inflation. People with little to no assets will get consumed by inflation while others get fired due to the recession. Macro simply is sh*tty.
As of 4th May 2022
The right side of my portfolio looks messy as heck. How did it even end up like this?
I basically stopped allocating to my losers while adding on to my winners, and focus on concentrating my bets. In this case, I was betting heavily on 1 thing: Crypto Unicorn’s Rainbow Token (RBW). I have been accumulating ETH over time as part of my barbell strategy to accumulate as much ETH as possible since it forms the basis of my “Low Risk” portfolio. I have no trouble adding more ETH since that will be part of my long-term accumulation bag and ETH is always king.
I’m currently unstaking all of my Cosmos Ecosystem coins, with the intention of accepting the loss and concentrating my bets on where my conviction lies (for now). Crypto Unicorn is a new game that has well-thought-out faucets and sinks, as well as amazing RBW tokenomics (nearly half of all RBW circulating supply are staked for 9-12 months). With breeding loops sucking even more RBW out of circulation, as well as additional sinks like Shadowcorn hatching, item crafting, Land crafting, and Rainbow Marketplace fees, it’s easy to see RBW experiencing a supply shock. To me, this is a very asymmetric Risk-Reward ratio, with a very high probability of a positive EV (Expected Value). I am putting my money where my mouth is. Do take note that my RBW net cost basis is low (approx $0.8), so the supply shock scenario plays are framed from my own price entry and this is definitely not financial advice. Please do your own due diligence!
As you can see, if you dig deep enough into the markets, there are always pockets of opportunity. If you want outsized gains and extreme asymmetric R/R plays, it’s far better to be surgical than to have a birds eye view. The majority of market participants have only a basic grasp of many coins, and thus have similar portfolio allocations (typically a few L1/L2s spread evenly, with some Bitcoin and Altcoins thrown in for good measure).
I’m not pointing fingers, but tokens like OHM (Olympus), TIME (Wonderland), SPELL (Abracadabra), JEWEL (DeFiKingdoms), and others that have been shilled the most on Twitter and elsewhere have attracted the most market participants due to promises of high returns and over-hyped narratives claiming to be the next big thing. (Look how those things ended up. I am lucky enough not to fall for these Ponzi-esque projects but had I been early in finding them, money can still be made.
Instead of being the herd that apes into those things at the late stages, find your own edge and sharpen it as much as you can. You’ll be able to find gems before the rest of the herd, and once the narrative has been sufficiently hyped, you’ll be able to quietly exit into the next play.
Crypto, it turns out, is all about narratives and attention. The Cosmos story took off in March and then fizzled out after the failure of EVMOS. While EVMOS is now operational, the market’s focus has shifted elsewhere, and most market participants have become bored and have moved to the sidelines as a result of the market’s sideways movements. It’s unfortunate to admit, but crypto remains speculative, but that is the nature of the market. It’s a never-ending game of who has more information than others and who takes advantage of it, with dozens upon dozens of sectors and hundreds of narratives for speculators to bet on.
On the NFT side, I recently got scammed by someone on Discord and had my Genesis Kaiju, Baby Kaiju, and ASM Brain stolen.
On the Kaiju discord, I attempted to do a P2P NFT trade. We started talking after user NGMI#4921 expressed interest. I recommended nfttrader/sudoswap because it appeared legitimate on Twitter. The scammer claimed that he had been scammed on nfttrader and sudoswap and recommended that people use swift trade instead. I did some research and discovered that Swift Trade was rife with scams, so I avoided using it. The con artist then suggested trading a worthless NFT on swift trade to test the site’s legitimacy. It seemed harmless at the time because the maximum loss would be the useless NFT. However, connecting to Swift Trade grants the scammer access to your wallet, allowing him to withdraw my NFTs. I’m usually on CT to keep up with the latest scam tactics and avoid falling for them. This scammer (or a group of scammers) has been employing this strategy of delaying the transaction for a few days in order to reduce suspicions and not appear desperate. To make me believe that they were also wary of me being a scammer, the scammer said things like ‘can you lmk what to search on google as idw to click on any links you’ve sent‘. I looked up his address and username on Twitter, but there were no tweets about scams. Only after I was scammed did I discover NGMI#4921 was a malicious scammer on Doodles discord but it’s already too late.
Tragedy aside, I still have the rest of my NFTs, with a heavy allocation to Crypto Unicorns (obviously). It is definitely important to keep precious NFTs in a separate wallet and avoid being lazy. I paid an expensive lesson here but hopefully others can learn from it and prevent a similar outcome.
To be honest, I don’t know. I am going to focus on my edge here on out (which seems to be GameFi/NFTs) and spend more time concentrating my portfolio than to diversify it based on my edge. My portfolio is at an inflection point and concentrating it can hopefully allow me to capitalise on huge asymmetric risk-reward ratio according to my circle of competence.
The market dynamics within crypto are definitely much different from the one in 2018-2019. The market has matured versus the lack of activity and utility of crypto back in 2018. You pretty much can only buy Bitcoin and Etheruem back then and everything was vapourware. Useful DApps only went live and matured from 2020’s DeFi summer onwards. In 2022, we have a thriving and dynamic L1 competitive environment, Layer-2s innovation taking shape, NFTs, GameFi, and many more developing narratives as blockchain technology continues to be experimented worldwide by different start-ups. Use cases are constantly evolving, but the market is definitely maturing beyond just Bitcoin and Ethereum.
As late-stage adopters begin to approve of blockchain’s viability and the transition to digitisation, we are most likely approaching the steepest part of the adoption S-curve. The analog world as we know it will be obsolete, and the concept of an internet-native currency and economy will become the norm sooner or later. Banks will follow the Power Law curve as they no longer serve a purpose, and we may see a gradual consolidation of big banks through M&A deals as weaker players are pushed out of the market. In 2022, banks are no longer rejecting Bitcoin, and nation states are embracing digital currencies. You get the picture.
If you think crypto is interesting but you find it hard to learn about them, you can consider joining my telegram group where I share articles, investment opportunities and more research based content on an almost daily basis. You can also ask questions, and take part in polls to see how others think as well!
Want to learn how you can earn high yielding interest rates on your idle crypto assets in a secure, safe and easy manner?
You can read up more on my post here to learn more about Celsius and Nexo which give you interest on your crypto assets
Or read up more on Hodlnaut here which is a Singapore-based crypto lending platform with market beating interest rates
Or do your due diligence on Bitcoin in my post here where I debunk some of the myths regarding Bitcoin.
I did a bite-sized article on Ethereum for you to get a crash-course on what the buzz word is all about here.
Also my crypto exchange of choice Gemini here if you are looking to buy your first crypto!
If you think there are too many crypto platforms out there, here is a simple solution for you. An all-in-one app for you to earn yield, trade, invest or borrow crypto with high security and assurance. Check out my Matrixport review
Or do you want to learn more about DeFi in a simple to understand manner? Click here to learn more
Learn more about how you can put a “fair value” on crypto such as Bitcoin, Ethereum and more here
Gemini Exchange: Deposits and buy US$100 or more crypto on Gemini and you will earn US$10 in BTC.
FTX Exchange: Create a FTX account here and trade the lowest fee and best UI/UX crypto exchange!
Coinhako Exchange: You can create an account by clicking the link and then enter promo code: COINGECKO when doing a buy/sell and enjoy 20% trading fees discount!
Binance Exchange: Create a Binance.com account here and trade the widest range of crypto pairings!
Hodlnaut: Earn US$20 in BTC/ETH/USDT/USDC/DAI for free with your first transfer of US$1000 or more in the corresponding crypto asset of your choice!
Celsius Network: Earn US$40 in BTC for free with your first transfer of US$400 or more in any crypto asset and wait for 1 month!
Matrixport: Get a $1288 free coupon trial to try their product and earn $20 in USDC when you sign up successfully and become a qualified client!
Nexo: Earn US$10 in BTC for free when you transfer US$100 or more in any crypto asset of your choice!
Disclaimer:
The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.
Comments
215
0
ABOUT ME
Lin Yun Heng
Edited 04 May 2022
Senior Analyst at Delphi
Crypto Educator
215
0
Advertisement
No comments yet.
Be the first to share your thoughts!