Is the “copycat season” coming? How to formulate an investment theme strategy

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深潮TechFlow
1 months ago
This article is approximately 855 words,and reading the entire article takes about 2 minutes
Successful investors typically prioritize investment themes based on in-depth research and analysis rather than engaging in short-term speculation.

Original author: Crypto, Distilled

Original translation: TechFlow

A hypothetical: It is now Q4 2024, the price of Bitcoin has reached $80,000, and altcoin season has finally arrived. You might rely on your intuition and try to time the markets peak. But is there a better way?

“Failure to prepare is preparation for failure.”

Is the “copycat season” coming? How to formulate an investment theme strategy

The pitfalls of price prediction

It is a common mistake to manage investments solely based on price targets. These targets are often subjective, driven by emotions or influenced by social media. It is extremely difficult to accurately predict prices and time their changes.

Is the “copycat season” coming? How to formulate an investment theme strategy

Tactical Advantages of Mentality

Every time the market goes down and up, it becomes more difficult to think rationally. Your investment goals will keep changing, and you will be more likely to focus only on information that supports your views and ignore other important signals, leading to increased confirmation bias. At the same time, your ability to maintain discipline in the investment process will gradually weaken. This is a battle with yourself, and this inner struggle will become more and more difficult as the amount of money invested and the risk increases.

Is the “copycat season” coming? How to formulate an investment theme strategy

The power of thematic investing

When investing, what strategies are there besides simply relying on price and sentiment? There are many to choose from: market sentiment, technical indicators, or on-chain analysis. However, strategies centered around a clear investment theme or investment logic tend to be the most reliable.

Is the “copycat season” coming? How to formulate an investment theme strategy

Create an investment theme

An investment thesis is a well-reasoned analysis and argument for a projects potential over a specific time period. This theme can be made up of a variety of factors and does not necessarily rely solely on price. A good investment theme should be testable so that investors can manage their investments with precision and flexibility through testing and adjustment.

Is the “copycat season” coming? How to formulate an investment theme strategy

The rationale for thematic investment

Thematic investing has several significant advantages:

  • Scalable with your growing portfolio

  • Eliminate the influence of emotions and market sentiment

  • Provide clear validation and rejection criteria

  • Eliminate the distraction of short-term price fluctuations

Is the “copycat season” coming? How to formulate an investment theme strategy

Example 1

Let’s say you are optimistic about a particular layer 1 blockchain (L1). Instead of using its past ATH as a target, you can focus on the following metrics:

  • Total locked value (TVL)

  • Trading volume

  • Number of active wallets

Going a step further, you can focus on relative metrics, such as market share or awareness.

Is the “copycat season” coming? How to formulate an investment theme strategy

Verification and denial

Next, set validation criteria based on your chosen key performance indicators (KPIs). This helps check if the L1 is developing along the path you predicted, or if it is deviating. For example, you can use the growth of KPIs within 30 days as the basis for managing your investment thesis.

Is the “copycat season” coming? How to formulate an investment theme strategy

Example 2

Consider a new project with an AI agent. Instead of focusing on price, you can focus on the following key performance indicators (KPIs):

  • Number of proxy transactions

Set a benchmark based on your beliefs, such as reaching 1 million on-chain transactions.

Is the “copycat season” coming? How to formulate an investment theme strategy

Whitepaper vs. Minimum Viable Product (MVP)

When exploring lesser-known and more volatile cryptocurrencies, many projects only have a minimum viable product (MVP) or even no actual product. In these cases, focus on the project’s roadmap nodes or milestones.

Is the “copycat season” coming? How to formulate an investment theme strategy

Navigation Events

Your investment thesis may be more focused on the execution of events rather than the growth of metrics. As they say, buy the rumor, sell the news.

Sometimes it is wiser to exit immediately after the date is confirmed rather than waiting for the event to happen. After that, set new indicators and form a new investment thesis.

Is the “copycat season” coming? How to formulate an investment theme strategy

Other strategies:

Complex thematic investing strategies not for you? Consider these alternatives:

  • Time-based strategies

  • Fear and Greed Strategy

  • Relative excess return strategy

Let’s take a deeper look at each strategy.

Is the “copycat season” coming? How to formulate an investment theme strategy

Time-based strategies:

Time-based strategies offer a simpler, more reliable approach. Consider selling a small portion of your portfolio on a weekly or monthly basis.

Adjust the timing and amount of your sales based on macro factors, liquidity, and your goals.

Is the “copycat season” coming? How to formulate an investment theme strategy

Fear and Greed Strategy:

Market sentiment swings like ocean tides, pushing prices higher when greed is high. The key to a fear and greed strategy is to profit when the tide is high. In this strategy, a weighted fixed-investment exit strategy based on the fear and greed index can be considered.

Is the “copycat season” coming? How to formulate an investment theme strategy

Relative excess return strategy:

Think of the market as a race, with each coin like a racing car. The key is to identify which car will accelerate faster relative to the others. One way to profit is to sell at a specific MC ranking. For example, sell 10% at 50th by market capitalization (MC), 20% at 40th, and so on.

Is the “copycat season” coming? How to formulate an investment theme strategy

Summarize

The cryptocurrency market is highly speculative, and investor emotions (such as fear and greed) often influence decision-making. In this case, establishing a risk management system that is independent of price fluctuations can give investors greater peace of mind and not have to worry too much about the impact of short-term market fluctuations.

Successful investors often prioritize investment themes based on in-depth research and analysis rather than short-term speculation. This approach helps them make more rational and sustainable investment decisions.

Original article, author:深潮TechFlow。Reprint/Content Collaboration/For Reporting, Please Contact report@odaily.email;Illegal reprinting must be punished by law.

ODAILY reminds readers to establish correct monetary and investment concepts, rationally view blockchain, and effectively improve risk awareness; We can actively report and report any illegal or criminal clues discovered to relevant departments.

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