Being too overconfident in an investment can ruin your portfolio.
Here are the 9 most common traps to watch out for:
Here are the 9 most common traps to watch out for:
Trap: Overestimating Your Alpha
A paid discord isn't really alpha.
Neither is watching YouTube or reading Twitter threads.
Alpha is having an EDGE over everyone else.
2 simple ones:
1) Information asymmetry / inside knowledge
2) Watching onchain movements.
A paid discord isn't really alpha.
Neither is watching YouTube or reading Twitter threads.
Alpha is having an EDGE over everyone else.
2 simple ones:
1) Information asymmetry / inside knowledge
2) Watching onchain movements.
This is the wild west where "insider trading" runs rampant.
Information Flow:
Builders / Team Members -> VCs & Seed Investors-> Whales / Connections to Insiders -> Retail (most people)
The lower you are on the chain, the more vulnerable you are.
Information Flow:
Builders / Team Members -> VCs & Seed Investors-> Whales / Connections to Insiders -> Retail (most people)
The lower you are on the chain, the more vulnerable you are.
Trap: Doxxed Founder
"I won't invest in anything with an anon founder"
There are plenty of projects that went to 0 with a Doxxed Founder.
1. Being doxxed doesn't mean they're immune to evil or being dumbasses.
2. I suspect that some doxxed founders are fake.
"I won't invest in anything with an anon founder"
There are plenty of projects that went to 0 with a Doxxed Founder.
1. Being doxxed doesn't mean they're immune to evil or being dumbasses.
2. I suspect that some doxxed founders are fake.
This is Jacob Wilson.
He went to Stanford with an undergrad in Computer Science.
After graduating, he worked at Google. Now he's working on launching a new Layer 1.
Want to invest?
I made this shit up, and I generated this fake, nerdy white guy with A.I.
He went to Stanford with an undergrad in Computer Science.
After graduating, he worked at Google. Now he's working on launching a new Layer 1.
Want to invest?
I made this shit up, and I generated this fake, nerdy white guy with A.I.
Trap: Thinking You're Early
Buzz is starting to pick up.
You're seeing it everywhere on social media.
You FEEL the FOMO and ape in.
The coin immediately dumps and you're left holding the bag.
Find projects, invest with conviction, and let the gains COME to you.
Buzz is starting to pick up.
You're seeing it everywhere on social media.
You FEEL the FOMO and ape in.
The coin immediately dumps and you're left holding the bag.
Find projects, invest with conviction, and let the gains COME to you.
How can you ACTUALLY be early?
That's a separate thread on its own.
Some high-level ideas for you:
1) Follow on chain movements
2) Research projects before tokens are available
3) There are a few smaller accounts that are good at spotting gems.
That's a separate thread on its own.
Some high-level ideas for you:
1) Follow on chain movements
2) Research projects before tokens are available
3) There are a few smaller accounts that are good at spotting gems.
Trap: A Venture Capital Invested!
You see a reputable VC logo on the homepage.
It must be safe to ape in because the gigabrains invested!
Problem:
1) Some spray and pray and don't do solid diligence.
2) They're human and make mistakes.
3) Three Arrows Capital - enough said.
You see a reputable VC logo on the homepage.
It must be safe to ape in because the gigabrains invested!
Problem:
1) Some spray and pray and don't do solid diligence.
2) They're human and make mistakes.
3) Three Arrows Capital - enough said.
Solana's wormhole bridge was exploited for $320m.
Jump Crypto came in and bailed them out - Disaster averted.
"Terra Luna will be fine. If something happens, Jump / 3AC will bail them out 🤷♂️"
They tried, but it wasn't enough to save the protocol 😔
Jump Crypto came in and bailed them out - Disaster averted.
"Terra Luna will be fine. If something happens, Jump / 3AC will bail them out 🤷♂️"
They tried, but it wasn't enough to save the protocol 😔
Trap: It's Audited
3rd party firms review the code and give it a thumbs up.
Take a look at Rekt's leaderboards.
Bad actors exploited several protocols even though they're audited.
1) Hacks are evolving
2) Some can be inside jobs
3) Not all audits are thorough
3rd party firms review the code and give it a thumbs up.
Take a look at Rekt's leaderboards.
Bad actors exploited several protocols even though they're audited.
1) Hacks are evolving
2) Some can be inside jobs
3) Not all audits are thorough
Trap: Models and Charts
The Stock2Flow model was often quoted in the previous cycle.
Because of its popularity, many people were expecting $100k bitcoin in the last cycle.
Well, it missed its mark - it's not even close.
"The Map is not the territory"
The Stock2Flow model was often quoted in the previous cycle.
Because of its popularity, many people were expecting $100k bitcoin in the last cycle.
Well, it missed its mark - it's not even close.
"The Map is not the territory"
Trap: An Influencer's Opinion
This is a common and dangerous one because of the authority bias.
1) People make mistakes.
2) Some are bad actors using their audience as exit liquidity.
3) You don't know when they're buying and exiting. Or their intent behind the trade.
This is a common and dangerous one because of the authority bias.
1) People make mistakes.
2) Some are bad actors using their audience as exit liquidity.
3) You don't know when they're buying and exiting. Or their intent behind the trade.
Trap: The Echo Chamber
When you love a project, it's easy to fall into confirmation bias.
You join the discord and follow the top shillfuencers.
So you hear 100x a day how AWESOME the project is.
SEEK THE FUD.
A good place to find them is in the comment section of threads.
When you love a project, it's easy to fall into confirmation bias.
You join the discord and follow the top shillfuencers.
So you hear 100x a day how AWESOME the project is.
SEEK THE FUD.
A good place to find them is in the comment section of threads.
Trap: Dunning-Kruger effect
It's a bias where it's easy to overestimate our own abilities.
It's kinda like when people think they are geniuses in the bull markets.
And start leveraging more.
When you're flexing your Crypto gains to normies, it's time to take profits.
It's a bias where it's easy to overestimate our own abilities.
It's kinda like when people think they are geniuses in the bull markets.
And start leveraging more.
When you're flexing your Crypto gains to normies, it's time to take profits.
This isn't black and white.
I PREFER a protocol be backed by VC, is audited, and has doxxed founders.
And of course, not all influencers are bad.
I wanted to highlight potential blind spots you might have.
Be careful out there.
I PREFER a protocol be backed by VC, is audited, and has doxxed founders.
And of course, not all influencers are bad.
I wanted to highlight potential blind spots you might have.
Be careful out there.
Use More Probabilistic Thinking
Most people think of investing as a checklist
✅ Passed an Audit
❌ Not passed an Audit
Instead, you should think:
1) Who conducted the audit and their reputation
2) This increases the PERCENTAGE that it's safe to invest with.
Most people think of investing as a checklist
✅ Passed an Audit
❌ Not passed an Audit
Instead, you should think:
1) Who conducted the audit and their reputation
2) This increases the PERCENTAGE that it's safe to invest with.
Did you enjoy this?
1. Follow me @thedefiedge for more thoughts on Crypto and DeFi.
2. I'd appreciate a like or a retweet to the 1st tweet linked below if you think your audience would find value.
1. Follow me @thedefiedge for more thoughts on Crypto and DeFi.
2. I'd appreciate a like or a retweet to the 1st tweet linked below if you think your audience would find value.
https://twitter.com/thedefiedge/status/1559596016461967360
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