Everyone dreams of getting rich through altcoins, but only a few actually achieve it.
Why? Most people do not understand the asymmetry of risk and fail to manage it effectively.
After researching hundreds of top investors, I found an investing strategy that works.
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Origin of the strategy:
Inspired by @0x_Kun who found freedom before turning 30 through crypto investing.
His strategies are simple and work for any skill or capital level. It has 6 steps, bookmark this thread and check back anytime!
Step One: Manage Risk
The first step is about managing risk.
No matter how smart you are, failing to manage risk means ultimate failure.
What is the most effective way to manage risk? Through smart portfolio structure.
"You can evaluate opportunity by the same criteria you use to evaluate risk. They are related." - Earl Nightingale
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Portfolio structure?
Risk isn’t just about individual investments – it’s the interaction between them.
Adjusting asset type/amount/weighting will change your overall odds of success.
Target? Make sure your gains outweigh your losses in the long run.
Cornerstone: More than 50% invested in Bitcoin:
Kun’s strategy recommends putting more than 50% of your capital in Bitcoin.
Why? Even if all altcoins fail, Bitcoin's long-term growth usually ensures profits.
It acts as a safety net against investment mistakes.
PS: Most altcoins fail (tribute to CoinGecko)
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Multi-cycle blue chips: 25%
Kun recommends allocating 25% to blue-chip stocks that can survive multiple cycles.
For most people, this is usually Ethereum or $SOL.
This increases your odds of outperforming Bitcoin while reducing downside risk.
The remaining 25% is invested in small altcoins:
The final 25% should be diversified across 4-6 equally weighted altcoins.
Think like a venture capitalist: A few big winners can offset losses in other investments.
This approach allows you to pursue returns of 10x to 20x while still sleeping soundly.
Why equal weighting is important:
Equal weighting gives each investment a fair chance to balance the others.
Weighting by belief is not wise - why include a low-belief asset?
Equal weighting more effectively balances potential gains and losses.
Diversify beyond cryptocurrencies:
Finally, engage in structural diversification.
Your net exposure to cryptocurrencies should take into account your age and other factors.
Kun hedges his crypto holdings with gold. High-quality stocks also help with diversification.
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Step 2: Assume you might be wrong:
Most people skip this step, but it's crucial.
Always assume you could be wrong. Focus on the odds, not the outcome.
Be prepared for different scenarios and adjust your strategy accordingly.
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Visualize the worst-case scenario:
Imagine the maximum loss you can sustain and still make ends meet.
If losses are too high, consider increasing your investment in Bitcoin and decreasing your investment in altcoins.
Be honest with yourself and reflect on past losses and their emotional impact.
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Are you wrong about cryptocurrencies:
What happens if you’re wrong about cryptocurrency?
How do you hedge? Gold often serves as a theoretical hedge against Bitcoin.
Or diversify your income sources to further reduce risks.
Step Three: Seek Asymmetry
Patience is the key to finding asymmetric investment opportunities.
This means the potential gains far outweigh the potential losses.
Kun aims to achieve 10x to 20x earnings while managing 30% to 50% downside risk.
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Don’t invest your entire position:
After identifying an asymmetric opportunity, resist the urge to commit your entire position.
Remember, the goal is to grow wealth compounded over time.
Step 4: Develop a theory:
Once you identify an asymmetric opportunity, develop a clear investment thesis.
The theory should clearly explain why you made this investment.
Then, create clear ways to test whether your theory holds or fails over time.
Theoretical example:
One theory could be that Bitcoin reaches a market cap comparable to gold.
One failure point could be if Satoshi Nakamoto suddenly dumped all his Bitcoins.
While this is an extreme example, it illustrates the point.
Multi-factor selling strategy:
Selling is often more difficult than buying.
To solve this problem, Kun recommends setting up multiple sell conditions.
This helps protect against market uncertainty and personal biases.
Kun’s three-factor selling method:
Kun recommends splitting your sell points based on three factors: time, theory, and price.
For example:
Sell 25% by end of 2025
Sell 25% When Bitcoin Hits $100k
Sell 50% when Bitcoin’s market cap exceeds gold’s market cap
Step 6: Develop a post-profit strategy:
After making huge gains, many investors make the mistake of giving back the gains.
To avoid this, go back to step one:
Reevaluate your portfolio and look for new asymmetric opportunities.
Avoid putting profits back into the market too early.
Managing psychological stress:
In addition to financial strategies, manage your mental and emotional health.
Has the crypto market taken a toll on you? After making great gains, consider taking a break.
Invest time and money in things you love. Balance is the key to long-term success.
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Thread review:
Manage risk through your investment portfolio.
Assume you are wrong and plan.
Look for asymmetry and be patient.
Use theoretical verification and invalidation.
Use a multi-factor selling strategy.
Go back to step one and create a post-profit plan.
It is purely educational and does not constitute investment advice.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
