1/ How to 50x your portfolio - identify high conviction investments, size bets right, and compound gains.
I've posted in-depth threads about $LUNA, $LDO, $GMX, $RLB, $BANANA which all 3-10x'd at some point since posting - lets dive into my favorite crypto investment style. x.com/i/web/status/18509946762...
2/ The general idea is to bet bigger on a smaller number of high conviction investments you believe could go 3-10x.
Once you hit a 3-10x, you start rebalancing your portfolio into investments you believe still have a 3-10x potential.
Lets talk about how to do this in practice:
3/ High Conviction Investments
I want to look for something I can size into with a reasonable level of comfort that the potential drawdown (assuming the market doesn’t completely nuke) is 50% and the potential pay off is 5-10x.
So how do you find that? x.com/i/web/status/18509946805...
4/ Identifying High Conviction Investments
The easiest way to find these is looking for a project with solid and growing fundamentals that you understand well and provide a level of value that the market will back you up on.
These fundamentals help create a "floor" on price. x.com/i/web/status/18509946828...
6/ Projects like $LDO, $GMX, $RLB, $BANANA, even $LUNA had these "floor" creating fundamentals.
The easiest one to spot is revenue/yield - if a project is generating a +20% yield that is growing and sustainable for the foreseeable future then there will likely be buyers for it.
7/ I will link to all my threads on these at the end if you want to review what I considered "floor" creating fundamentals.
To truly size in you just really need confidence that their is some sort of "floor" because drawdowns kill returns!
8/ Bet Sizing
With confidence there are buyers near these levels it gives you the ability to SIZE into plays with let’s say 25% of your portfolio.
You are okay risking a 50% loss (12.25% total portfolio loss) for the potential to hit a 5-10x (125% to 250% portfolio gain)! x.com/i/web/status/18509946898...
9/ This is not a one size fits all approach, but it is a good framework to start thinking in.
I would suggest searching up the Kelly Criterion calculator and playing around with it to help figure out optimal bet sizing depending on your confidence and projected return.
10/ AVOID THIS MISTAKE:
If you find something you have high conviction in and you think could go 5-10x you shouldn’t have just 1% of your portfolio in it, but at the same time it’s risky to be 100% invested too.
Find an appropriate middle ground. x.com/i/web/status/18509946948...
11/ Exiting & Compounding Gains
Lets revisit the chart from the beginning.
It will never be this clean, sometimes you’ll have multiple projects go down 50% or more, sometimes you’ll have multiple projects up 5-10x or more. This is meant to directionally show how powerful… x.com/i/web/status/18509946978...
12/ My problem with "holding onto winners" mentality is that this space is so new and volatile even the best projects can have BRUTAL drawdowns (-97% on $SOL) so you just need to be mindful of that.
You can always sell a % of the position and keep the rest if you have long term… x.com/i/web/status/18509947010...
13/ Don’t be afraid to take profits as things are going up and valuations/hype make no sense, holding onto cash while you wait to find better opportunities is also very important.
14/Done
This is not financial advice, I am just sharing what I have observed to be one of the most interesting crypto investment styles given how volatile and quickly the space moves!
Previous threads on on investments below
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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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