Investing in crypto assets: the cycle and risk control of judging right and wrong

In Friday's article, a reader left a message:

“...... Long-term holding of the target that you are optimistic about...... It is true that you can maximize the benefits of time friends, but there is one premise: you are choosing the right one. However, what if you are wrong, how many years and eight years are there in life? Almost all value investors only emphasize long-term holdings, but they don't seem to have a remedy or stop loss due to their own bad decisions...... Is ten or eight years wrong, and the cost is too long? ”

I think the key to solving this problem is to find a measurable, measurable and objective standard that can be used to quickly determine whether an investment is right or wrong.

In the traditional world of stock investment, I think it is relatively easy to judge by the discounted future cash flow. But in the crypto ecosystem, it is not easy to deal with, and I will classify and judge according to the attributes of assets. The series of articles I wrote earlier are an attempt to classify the assets of the crypto ecosystem.

According to the classification method I summarized earlier, I roughly divide the current crypto assets into the following types:

- Collectibles led by Bitcoin

- Assets with hybrid attributes, led by Ethereum, which have both commodity attributes and similar to traditional cash flow companies.

- Governance tokens with only governance functions

- Tokens that have certain utility or equity attributes, but are actually vaguely defined

For collectibles led by Bitcoin, I think it is the most difficult to judge at the moment, because it is difficult to find a standard that can be measured, measured, and objective.

By reading the history of Bitcoin, understanding the operating mechanism of Bitcoin, and the prospect of -----the future of the crypto ecosystem, I firmly believe that Bitcoin has a bright future in my lifetime.

But this is only my subjective opinion, and it is completely possible to be subverted. In other words, I can't rule out the possibility that a new crypto asset will emerge in 2 years, or that a crypto asset that already exists in a corner will suddenly show a stronger and more powerful collection attribute than Bitcoin in 2 years.

If such an asset really appears, it will continue for a long time in the future after 2 years, and it is likely that the increase of this asset will greatly exceed that of Bitcoin, and it is even possible that the current price of Bitcoin is the highest price of its life.

In this case, I will probably still insist in my mind that Bitcoin is unique and die, and in 10 years, I will probably be slapped in the face by the market and spend these 10 years of my life in vain.

This probability does exist, but I think it's very small, so I still choose to bet on Bitcoin.

But in order to prevent this probability from causing me too much harm, my most fundamental approach is the point that I have repeatedly shared before: the money used to invest in bitcoin is spare money, money that will not affect my life, and money that will not make me destitute even if I lose everything--- I think this is the most fundamental and safest way to stop losses and prevent the cost of trial and error from being too large.

I'm relatively conservative, so I can't do anything like Changpeng Zhao to sell my house and buy bitcoin, so I'm not destined to become the richest man like him. However, I am also very satisfied with my own operation, and I will not envy that kind of practice.

For an asset with mixed properties like Ethereum, I would use the attributes of various assets to evaluate its value comprehensively: both from the perspective of commodities and from the perspective of platform cash flow.

But because the crypto ecosystem itself has not been around for a long time, and there is still too little historical data to refer to, in fact, the subjective factors of my judgment on Ethereum still account for most of it: I believe in the future of the crypto ecology, believe in the future of Ethereum, and compare Ethereum horizontally with other platform tokens, I am more confident and sure of it, so I think that as long as it does not make some principled mistakes, I choose to bet on it.

But such a bet can also be wrong, and it is possible that it will be slapped in the face by the market in 10 years.

In order to prevent this kind of mistake from causing me too much harm, my most fundamental approach is the same as the above method of dealing with Bitcoin: the money used to invest in Ethereum is idle money, money that will not affect my life, and money that will not impoverish me even if I lose everything.

For tokens that only have governance functions, my current approach is very simple, and there will be no trial and error cost at all: I will never actively spend money to buy them, no matter how hot the market is, even if I miss them, I don't care.

Of course, I'll keep the tokens that were airdropped to me to see what happens.

For tokens that have certain functional or equity attributes, but are actually vaguely defined, I will evaluate its potential value more and more strictly according to its attributes.

For example, if some tokens are the "currency" used in their platform, then I will pay close attention to whether the platform has a financial report showing its revenue and cash flow every six months or a year.

If not, then I will be wary of this project, and even if I do, I will only participate with a small amount of money. If so, I will evaluate whether its cash flow revenue value is worth its currency price, and I will also compare this coin with other similar platform coins horizontally to see if there is any special excellence and brilliance.

If, after such a comparison, I feel that the price is not too outrageous, I will be inclined to continue to hold it; If I think it's too high, I'll sell some of it.

However, there is still a part of this subjective opinion, but I think that if a project has a serious problem, it will not take long, about 1 to 2 years, to find out its problem, and sell the stop loss. In the future, when I encounter this kind of token again, I will be more cautious to participate, if the price is too high, even if the market is hot, I will choose to wait and see, and would rather miss it than rush brainlessly.

In the same way, the most fundamental way to prevent the cost of trial and error from hurting oneself is to use spare money and pay more attention to position control.