Lots of people asking for my opinion right now... here's a quick and dirty thread πŸ‘‡
First, think about what caused the rally since October 2020:

1) Low rates / low dollar

-- still very much in tact even though there are taper talks and inflationary data, rates and the dollar still have not reacted, which is still very bullish for risk assets
2) Inst money coming into the market

-- Inst money doesn't come faster or slower based on price moves. Those trying to deploy will still deploy, and they are. Though $GBTC & $COIN may have been leading indicators, as downward px moves show inst money was already slowing
3) Elon Musk / Corporations -- The ESG narrative (which is just that, a narrative) is unlikely to ever go away at this point. Like a religion, no amount of science will change people's minds here, and this becomes more political theatre than substance.
So you have 1.5 / 3 factors that are still very bullish for risk assets, which probability-weighted, means there still should be buying power on the sidelines. The question is just when and how it gets deployed.

Let's look at 2008...
During 2008, the smarted buyers who had cash just kept buying even though every purchase was terrible. I personally sold Carl Icahn MGM bonds at 80, 70, 60, 50, 40, 30 and 20 cents on the dollar -- in the same week.

It takes conviction to buy that way, but it's usually right
Same thing will happen here

If you have cash, you don’t worry about levels, you just keep deploying into assets you believe in. Every buy will be wrong the second you make it, but if your valuation is right, it won't matter. Buy a little at each level & don't try to time it.
Unfortunately, a few factors prevent this behavior in digital assets:

1) very few in this space have distressed experience
2) very few manage cash/leverage well so even if they did want to do this, they can’t
3) very few have enough conviction in their holdings to do this
Three behaviors always get investors in trouble (particularly hedge funds):

1) Leverage (obviously)
2) Illiquid positions -- lots of traders suddenly became early-stage VCs this year b/c these are "hot deals"... less hot now
3) Shorting (working right now, but unwinds are hard)
For those that avoided 1, 2 and 3 above, you are still likely down a lot of money, but you are solvent. Most investors will sell their marginal positions and double/triple down on their best ideas -- when the dust settles, you'll know what they bought as these will go up fastest
Those assets that can't be valued (i.e $BTC & most layer 1 protocols), will be the hardest to have conviction on price.

Those that are asset-backed or have real CFs (i.e. #DeFi, #CeFi, some NFT-platforms & sports/gaming platforms) in theory are immune from a LT value standpoint
In March 2020, $PTON & $ZM got crushed in the first 3 weeks of the crisis too, but the market soon realized that these were the types of companies that disproportionately benefit from stay-at-home.

For the next 9 months, these stocks thrived.
So what disproportionately benefits from a coordinated government/regulatory attack on miners/exchanges?

- #DeFi, especially DEX's
- Miners in other jurisdictions
- Censorship resistance storage / archiving (i.e. Arweave)
- Self storage/wallets
- and of course $BTC
Like 2008, you'll see a few heros emerge who crushed it during the past two weeks on the short-side... most will be one-trick ponies like Michael Burry, John Paulsen, Kyle Bass, etc -- guys who made fortunes on one trade and have done little exceptionally well since.
For everyone else: stay solvent, pick your spots, trust your analysis, & keep your emotions in check.

Digital assets aren't going away today any more than they were curing cancer 2 weeks ago.

The answer is usually in the middle. Fortunes are made when emotions are too high

β€’ β€’ β€’

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Jeff Dorman, CFA

Jeff Dorman, CFA Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @jdorman81

14 May
We believe $SUSHI is now the most undervalued token in digital assets.

A thread on valuation, upcoming catalysts, and why the recent downward price action will be short-lived Down pointing backhand index πŸ‘‡
2/ $SUSHI has underperformed both $UNI and the broader DEX market since the beginning of the year.

This is most apparent with the 50% peak-to-trough decline in March and April (still down ~30% from ATH’s)
3/ Why? 3 Overhangs:

1) rolling 6-mo vesting unlock from initial Sushi yield farming
2) PancakeSwap growth
3) Uniswap V3 hype

Let's break each of these down -- none of which have any actual impact on $SUSHI valuation and its core business.
Read 23 tweets
15 Apr
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?

Read 8 tweets
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 πŸ‘‡

(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 πŸ‘‡
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 πŸ‘‡
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

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!