"What is my Crypto Investing Strategy?"
I asked myself this question a few years ago when I started my journey in the cryptocurrency world.
Financial markets were simple to me — just define your expected return level, risk appetite and stick to a strategy like S&P 500 long or All-Weather Portfolio (easy to say, hard to do). If you have some edge and time, you can pick the individual stocks and try to beat the market. It is hard, but some people like Peter Lynch, Ray Dalio, or Howard Marks do it with good results. It’s your choice, but I know it’s very tempting to try…
For cryptocurrency, I didn’t have any end-to-end investment framework. For me, digital assets were also disconnected from traditional financial markets. I wanted to merge these two worlds. This union would allow me to use my well-established knowledge and experience from investing in traditional financial markets in cryptocurrency.
I was looking for holistic strategies in many different sources — thousands of Twitter accounts, hundreds of blogs and articles, dozens of books. Many of the sources were useful and informational, but I couldn’t find one end-to-end strategy for investing in cryptocurrency. So, I’ve asked myself — “how should I invest in digital assets without having a framework”?
“What if I create this strategy by myself?”
I make notes when I am learning something new. They are organized in one structure, which gives me a holistic view of what I know and what I am missing.
I used the same approach to learn cryptocurrency — I started building my crypto knowledge base and combining it with notes from different relevant areas, including finance, cryptocurrency, cybernetics, psychology.
After dozens of iterations, I created my cryptocurrency investment framework, which I had been looking for since I started my journey!
I haven’t invented this in the sense that I have come up with all the ideas. Although I’ve also added my concepts and methodologies, it’s far from true. I’m just standing on the shoulders of giants from different areas. You can think about this framework as a glue that combines all the relevant knowledge I acquired during research.
“Can other people use my strategy?”
Do you know what is worse than losing your money? Losing your friends’ or family’s money or giving them wrong investment advice… because of that, I hesitated to share my framework with others. First, I wanted to test it and add more context and details to make things obvious to me, clear for other readers. I also believe that this framework can be also helpful for other people.
Many crypto investors don’t have a strategy, and they buy shitcoins, enter degen farms, buy on FOMO, sell on FUD, or just HODL some altcoins from the old cycle (sorry for crypto jargon). Most of them also lose their money. In contrast, many people with a background in traditional finance don’t understand cryptocurrency, so they stay away from it.
In the below section, you can find mentioned the Cryptocurrency Investment Framework, which I’m using now. I hope that it can also be helpful for you, regardless of which group you belong to.
This is an end-to-end framework, so it’s a lot to share. I’m starting with a high-level view, and we will go deeper into each of those points later (follow me if you want to be up to date with it).
There is no such thing as a completed framework, especially in a fast-changing world and even a faster-changing industry. I’m also still learning and applying feedback to it. You can expect minor changes on the strategic level and major on the tactic level.
You can use it as it is, choose what works for you or just see a different perspective. Whatever best serve you. Good luck with your journey!
My Cryptocurrency Investment Framework
The Framework consists of five areas, which create an iterative investment process. Below, you can find a description of all pillars with their main points.
I Portfolio Management
First, we need to start with Portfolio Management. What is my financial situation, and what are my financial goals? How can investment contribute to this?
1. Portfolio assessment -> where am I now?
2. Portfolio goals -> where do I want to be?
3. Portfolio strategy -> how do I get there?
II Research and Development (Strategy)
Next, we are creating our investment strategy. What is my risk appetite? How should I split my portfolio into different assets classes? How to find new financial instruments and evaluate my strategy?
1. Risk management-> what can go wrong?
1.1. Investment risk
1.2. Risk types
2. Asset allocation -> what and how much?
2.1. Methods
2.1.1. Tactic (dynamic) assets allocation
2.1.2. Strategic (static) assets allocation
2.2. Asset classes
2.2.1. Cryptocurrencies
2.2.2. Stable assets
2.2.3. Financial assets
2.2.4. Real assets
3. Security selection -> what to choose?
3.1. Investment process
3.2. Screening (pre-selection)
3.2.1. Screeners
3.2.2. Screening process
3.3. Selection
3.3.1. Selection framework
3.3.2. Research
3.3.3. Scoring & adjustment
3.4. Exit criteria
4. Back-tests -> how to check it?
III Systematic Implementation (Investment Process)
Now we are ready to execute our strategy and gather data for further evaluation.
1. Investment journal
1.1. Gathering data
2. Portfolio management
2.1. Portfolio monitoring
2.2. Investing & rebalancing
2.3. Knowledge management
IV Evidence-Based Assessment (Investment Review)
It’s time to check our performance and review our goals. Are we progressing in our chosen direction? What can we improve?
1. Strategy review -> what I achieved?
2. Journal review -> what did I learn?
3. Benchmarks -> how I perform?
V Investor Competencies (Investment Skills)
We will need a bunch of different skills to be a successful investor.
Emotion and Focus Management, System Thinking and Forecasting. Investment Life Balance and much more…
Details will be shared in the future.
What Next?
In the next posts, we will dig deeper into each of those points… Stay tuned and follow me on and Twitter to get a sneak peek of what is coming!
Previously published behind a paywall here.
Disclaimer: The contents here are for educational purposes only and should not be considered professional investment advice.