A Traditional Trader's Take on Web3 Investing

Featuring creator, cryptokai.eth
With @tomscaria & Tom Lombardozzi3 min read

How does being a Fundamental & Technical Trader translate into web3 markets?

The crypto markets are a very different ball game compared to equity markets. There are many factors like, tone of social media influencers, news, and catalytic announcements. Classic technical analysis via charting can be a factor for more mature markets like DeFi blue chips. Fundamental analysis is like liquid venture capital: identifying product market fit, tokenomics, development activity, etc.

In this emotionally driven market, where sentiment shifts in minutes, I work off a simple, flexible framework to try and create consistency in how I evaluate projects. Here are the details:

Fundamentals 

  • Does the protocol/project have PMF (will people care)?

  • What are the tokenomics in terms of supply, token properties, use-case

  • What are the vesting schedules of founders and investors?

  • Github repository, what's the activity like?

Technical Analysis 

  • How does the chart look, how is it performing vs BTC & ETH? 

  • Can I identify anything here which presents an opportunity (accumulation/momentum patterns, trend analysis and standard technical patterns)

Social

  • Hop into the socials such as Discord, sometimes the information asymmetry in the crypto space is huge and a good trade can be as simple as acting off public information that hasn’t circulated or been announced officially on the likes of Twitter.

Conviction

  • There are projects that may be very volatile but the best returns come from having enough conviction to hold an asset to what your investment thesis has deemed to be valued at. The real returns are granted to those who have the conviction to see their thesis through instead of selling for a 2X breakout before it goes into a macro expansion. If you buy a $50M market cap asset that you analyze to be a $1B protocol in the making, you need to have diamond hands.

Using this framework has given me a clear way of identifying investment opportunities but someone else might come to similar conclusions using a whole different set of data points, perhaps just fundamentals or maybe just based on social sentiment. Finding a strategy that lets you build conviction is unique to the person!

Tell us about what you’re building at cryptokaidojo and where you want to take it

Crypto Kai is a project of mine that creates actively managed, thematic investment portfolios. Additionallly, we offer free trading education, tools and a Discord community. It is a very rewarding project for me personally, I love the fact I can have friends and family join my investment journey, leveraging my experience in the crypto space but also in a trustless, decentralized way. 

Currently, the Crypto Kai indices have over $100K combined assets under management across Ethereum and some yet to be announced Polygon Portfolios with the plan to very much continue to outperform the market benchmarks and create new themed portfolios and content for the community!

How are you utilizing protocols like Set to achieve your vision?

Set allows me to create isolated, themed portfolios around key narratives I want to invest in whilst also allowing me to compare performance between them and allowing the community to follow along and invest in a trustless, decentralized manner. 

For example, I have created two portfolios under the banner of Crypto Kai since July - the Crypto Kai Innovation & Crypto Kai Blue Chip Indices. Much like Prysm, the performance and track record of the Set is completely transparent as well as the holdings over time. So whilst both portfolios are currently tracking around a 300+% ROI since inception, it makes it significantly more valuable that people can see that it wasn’t done by flipping a low market cap token with a few dollars for significant returns in one day and underperforming ever since, but rather the performance was attained by an actively managed, high conviction portfolio with much more AUM at play. 

Is there anyone in the space you look to for insights?

I do the vast majority of my investment research, but I leverage tools heavily such as Token Terminal, Nansen, Glassnode, TradingView, Twitter and of course - Prysm! You can find a list of links to these tools and a curated Twitter follow list on my wiki site https://cryptokai.wiki, which I often share with new traders. The important thing to note when using Twitter or other social platforms is to use other people's insights as a single contributing indicator to your own trade ideas as opposed to the whole idea itself.

What’s the best way for new community members to get in touch with you?

Twitter or Discord, I reply to everything and help where I can!