5 Questions Top Crypto Investors Ask Themselves Before Investing in Their 10X Crypto Project
Investing in Crypto can be nerve-racking given the volatility in the market. If you can get past the volatility you could be in store for mind-bending returns. Below I’ve curated a list of questions that top investors like @FloodCapital, @EllioTrades @Cobie and @HighConviction and @moneywithcarter ask themselves before moving on investment.
1. What is the macro narrative?
The macro narrative in DeFi and the larger Crypto Space is clear:
We currently have ~300M crypto users worldwide — this number will grow to over 1B within the next 5 years given the current growth trajectory. This growth is feasible thanks to the network effects inherent in the technology,. Investing with this level of growth as your tailwind, it’s easier to pick a 10 bagger than in most other markets.
If I look at the total derivatives market, it’s $1 quadrillion. I think there’s a reasonable chance of this being a $250-trillion asset class, which is 100x from here, which would be the largest growth of any asset class in all of history in the shortest period of time. — Raoul Pal, GMI
2. What micro narratives will outperform in the coming 1–3 years?
Blockchain technology will eventually touch every part of our lives, day to day currency to social media to file storage. Despite blockchain technology’s far reaching effects, some narratives will play out before others, and are better suited to the technology. For example,
- Financial Derivatives (especially decentralized)
- Main Stream DeFi — Onboarding the next 300M crypto DeFi users
- Gaming and Metaverse
Now that you have narratives that you want to invest in, it’s time to find the best projects in these themes.
3. What projects fit your narratives?
Search through Twitter, CoinGecko and CoinMarketCap to gather a list of projects that fit your desired themes.
The Analyst at @delphidigital, @FloodCapital, recommends looking in the $100M — $500M fully diluted value range for good options.
4. Is the project best-in-class?
The Crypto industry is flush with cash. Investing effectively requires finding projects that have some if not all the following features:
- Is built on a top L1 (if not an L1 protocol)
- Has a highly active community on discord or telegram
- The project docs make sense and provide a roadmap that fits your theme and exceeds what competitors may be aspiring to
- The developers in the community are active
- The community is able to answer your questions/ concerns regarding the project when reached out to via discord/telegram.
- The project shows positive momentum/leadership
Unlike public companies, you can answer almost all these questions by researching on the projects website or speaking to members of the discord! No need to wait for the quarterly earnings report!
5. Is the project still best in class?
As in any other investment, there is a gap between investing and realizing a return on your investment. In the crypto space specifically, you can face drawdowns of 50%+ during this time period. Being prepared for the volatility requires knowing why you bought in and being able to monitor if your thesis is still intact or not.
Preparing for an eventual 50% drawdown should be an essential part of your investment plan. What KPIs (Key Performance Indicators) will you track on the project to confirm or invalidate your thesis?
Invest with risk in mind
The above small cap investing strategies will help investors find the next 10–100X crypto investment. Preserving capital is just as important, as a result most of the top investors reccomend placing the larger portion of your crypto portfolio in the safer Large-cap projects (such as ETH, LUNA, MATIC)
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