How to understand Value in crypto
My Investment Framework used in Cryptocurrency
It’s been a while that i had been crypto investor. Despite being invesment analyst in my professional career, I have been strugling to get the grasp of investing in crypto.
Yet, Lot of people claiming that if you do “these things”, you would 10x your portfolio or something similiar. If it was that easy, i wouldn’t tell a single person and use it to for my own benefit.
The most important investing principle that i used in day to day :
Price is what you pay; value is what you get — Benjamin Graham
People tend to mesmerize or amazed by increased of certain project whether 10–20% a day or >100% within a week.
But, I tend to question that Why the hell other people value this things that high ?
Below are my current investment framework :
What was problem these project going to solve. Not every problem need to be solved using DLT or in decentralized manner. Most of the time during your exploration, these project wasn’t the pioneer in solving the problem. It is very important to get comparison to its peers. Few themes that i tend to focus in 2022 :
- Interoperability : Cross-chain communication, Cross-chain value token
- GameFi : Focusing on relatively low barrier to entry game with proper anti-bot mechanism
- Defi : Projects with proven protocol revenue like CDP, lending-borrowing, DEX-AMM with high dominance in the chain.
If there’s real problem to be tackle, How these kind project incentivize and convince user to participate.
- Credibility of project team : Good team usually will have some sort of KYC with some business background or technical background on its project leader. Team will mentioned clearly the audit timeline for the projects.
- Tokenomics : Good one will inline developer and user to have the same interest such as vesting period, locking-up liquidity. Good tokenomics tend to distribute its supply gradually inline with its initial roadmap. Good tokenomics doesn’t need to be inflationary, Being scarce wasn’t good reason to be valued. I would rather have predictable deflationary token with good product use case rather than inflationary token only.
- Avoid Ponzinomics : Tokenomics sometimes could be complex to be understood. However, There’s one very simple things to differentiate ponzinomics vs sound tokenomics. Sound tokenomics will have multiple source of income. Ponzinomics tend to have closed system source of income. it means user and investor are one and the same.
- Roadmap vs Achievement : Good roadmap will have milestone each few months (normally around 1–3months).
After that i decide to invest on certain names, it was important to understand on the timing and situation outside of the projects. Because, things doesn’t work in vaccum :
- Macroeconomic analysis : Performing correlation, implied volatility, macro view.
- On-Chain Analysis : Understand position of other using on-chain data Exchange flow analysis, Leverage derivative position, etc.
- Technical Analysis : Price action analysis through chart-pattern and technical indicator.
Why sometimes we need to de-risk our portfolio. Even the greatest business idea sometimes come-up too early and your portfolio could be rekt for while. However, sound project will sustain your portfolio in the long-term.
Your journey in cryptocurrency will be tough and long, below are several article that help me understand better cryptocurrency :
- How to analyze crypto whitepaper : https://blog.goodaudience.com/how-to-analyze-a-crypto-white-paper-for-investment-871746958c4b
- Compliation of web 3.0 knowledge : https://medium.com/lightspeed-venture-partners/the-web3-crypto-metaverse-ecosystem-guide-from-the-minds-of-lightspeed-e5c35eebb27d
- Tracking whale through on-chain data : https://medium.com/@DeFi_educator/on-chain-analysis-whale-edition-a8ce173b423f
Few tools that i had been used to help making decision :
- Realtime chart and transaction : Dexscreener, Tradingview
- On-chain provider : Cryptoquant, Into The Blocks
- News Feed : Cryptopanic
- Portfolio Tracker : Debank
. . .
Thanks for reading, I hope you found this article useful. Always DYOR (do your own research) because conviction always come through understanding not just following.
Disclaimer
This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by me or any third-party service provider to buy or sell any securities or other financial instruments.
