A thread on thought process for special investing in digital assets .... courtesy of $LEO
Step 1: Identify a new catalyst (news, a merger, something unnatural...)

Step 2: Analysis

The stolen funds probably not getting dumped that easily, how else could they monetize?

Step 3: Recall some ominous and seemingly unrelated tweet that may in fact be related

Step 4: Mosaic theory

(from the original $LEO whitepaper) Image
Step 5: Risk / Reward & Probability analysis

Upside: If stolen $BTC is returned to Bitfinex, they will have to use 80% of ~$7 bn to repurchase the $LEO token which only has a $2 bn market cap... um, that would be tough -- anticipate a tender offer or a fast move to $6.
Step 5 (cont'd) Risk / Reward

Downside: If I'm wrong, $LEO is still cheap based on P/S, P/burn, and relative value. It's a slow moving amortizing token from a cash-flow positive company, and the upside scenario is not priced in.

Thus, good downside protection ImageImage
Conclusion: Special situation investing is all about risk/reward and probability analysis.

We look for opportunistic upside where downside is limited, where we pick up "cheap optionality". Even when probability is low, these investments generally have solid payouts.

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More from @jdorman81

30 Mar
Nexus Mutual ($WNXM) is the most undervalued token in digital assets & it's not even close. Trades at just a $23mm net market cap despite being one of the most utilized #DeFi projects.

A thread on valuation and upcoming catalysts 👇

(h/t @arca head of research @KatieTalati )
First, why does Nexus Mutual exist?

Digital asset builders are trying to build the car while simultaneously driving it. Fine in theory, but in reality, not laying key pieces of infrastructure early on can stymie growth & innovation.

For #DeFi, insurance is infrastructure
Insurance is a sleepy, boring business, but insurance in the case of #DeFi is also crucial to an ecosystem that is still being built yet already holds a massive amount of assets and is still growing (current DeFi TVL: $43 Billion).
Read 23 tweets
14 Jan
Anyone want to buy $BTC at a 47% discount to current prices? Here's how you can do it.

I can't believe I'm saying this, but $EOS might actually be the best risk/reward in digital assets right now due to their massive #Bitcoin holdings.

Thread time 👇
First, let's talk risk/reward. Over the past 2 years, $EOS is the only well-known token other than $XRP that is not higher. In fact, it has underperformed by a LOT.

Even other zombie projects are up 300-1000%

That's a nice start for an investment -- low downside, relatively
Next, the math:

Block One owns 140,000 $BTC. At $2.77, the market cap of $EOS is $2.6 bn, which is only 47% of the value of their BTC holdings.

That means by buying $EOS, you are actually buying $BTC at $18,771. Huge discount.

The question is "can you unlock this value"?
Read 14 tweets
7 Jan
Here's the problem. #DeFi can be valued based on cash flows. $BTC $ETH & layer 1s can not be. When something can be valued, it also creates a theoretical ceiling. That's why VCs often tell startups not to generate revenue - b/c once you have revenue, the valuation model changes.
That's why 80% of the Top 25 digital assets by market cap are such a joke, dominated by Layer 1s and cryptocurrencies with almost no chance of success - because this industry was founded by a VC mentality of "huge upside, low probability of success, but no way to prove me wrong"
$ETH and $BTC have already proven to be successful -- whether they are cheap or expensive is hard to know, but they have undoubtedly succeeded. Many DeFi tokens are definitely cheap, but price gains are somewhat limited by current revenues or multiples on future revenues.
Read 4 tweets
29 Dec 20
Anyone like great risk/reward setups w/ high upside, low downside & tangible floor value? @NexusMutual $NXM $WNXM

WNXM now trades at a NEGATIVE net market cap. So how did NXM go negative?

A lesson in book value & optionality 👇
2) First, h/t to @DegenSpartan who nailed the "sell call". Investors who focused on $NXM price & the MCR completely misunderstood how Nexus & the NXM token works (myself included).

But the short thesis is completely over and it's now an "all-in buy"

Nexus Mutual, like all insurance companies, has to keep a certain amount of capital in their pool to pay out future claims. What they do with this capital is how insurance companies make money.

Profits = Yield on float + premiums paid > claims paid & inv losses

Simple business
Read 6 tweets
30 Nov 20
"That's Our Two Satoshis" is out! This week, we take a look at the institutional adoption of digital assets

Was it Paul Revere or Satoshi Nakamoto himself who said "The Institutions are Coming! The Institutions are Coming!"

Regardless, they are currently playing stickball in the parking lot while the pros are playing under the lights of Yankee Stadium.

The growth in #Bitcoin products like the CME futures and Grayscale's trusts shows that institutions are here already, but these products have limitations, including not being open during volatile trading hours. This manifested itself during Thanksgiving.

Read 4 tweets
20 Nov 20
Five random Digital Asset and #Bitcoin thoughts heading into the weekend

1) Actively managed hedge funds and passive indexes built around high allocations to $BTC have a very short shelf-life. Investors now have the knowledge & means to buy $BTC themselves. Very soon, investors will specifically seek out digital asset HF strategies that own $0 in BTC.
2) Decentralized governance is less about ideology or risk transfer, & more about capitalism. Historically, there has been nothing in digital assets worth governing, but now, as #DeFi protocols are generating real revenues, there is something worth fighting over.
Read 6 tweets

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