This thread will necessarily talk in vague terms and avoid giving concrete examples, as the goal is to teach financial principles - not to give you an excuse to YOLO your life savings away.
Only ever invest money you can afford to lose. Every trade carries risk.
1/ Intro
A phrase that is often repeated in the crypto world is to "buy the dip". The idea is that if you buy when prices are low, you'll be able to sell high. This is not always the case, you need a strategy to approach buying assets - don't just blindly throw money around.
2/ Portfolio Management
In the coming weeks, we will be talking about how to find and assess good investments, but to start with, assuming you have some already, we'll discuss how to structure yourself in choppy waters and accumulate more of whatever it is you want to get.
3/ On Timing the Market
Buying when the market is lowest, and selling when the market is highest, is a bit of a pipe dream. It's close to impossible to guess this - perhaps the exception being Jim Simons, a fund manager who made billions developing mathematical models.
4/ Dealing With One's Ignorance
For us mere mortals, we're left having to buy and sell assets at what we consider fair prices. It's not about optimizing every percentage point but executing trades that you can live with.
You don't know when we're hitting a bottom or top!
5/ Don't Wait For Dips
Since we don't know the future, assuming that the current prices are what you consider fair and sustainable, there's no shame in buying now rather than later, assuming you're investing for the longer term and you believe in your investment thesis.
6/ Opportunistic Trading
On the other hand, if you believe prices are too high or you're just looking to add more if the price goes lower, then there are two main means by which you can structure your investment strategy without incurring additional costs - Ladder Orders & DCA.
7/ Dip Within a Dip
An issue that a lot of people encounter when they "buy the dip", as in they buy when the price of an asset falls in value, is that the dip keeps dipping, but by then they've shot all their ammo, and have nothing left in the chamber.
8/ Pick Your Shots
Don't shoot all your bullets at once. You can do this with "Ladder Orders." This is just a fancy way of saying that you will buy at price points below the current price.
For instance, if the price is $10, you can place orders to buy at $9,$7.5, $6, etc.
9/ A Note on Ladder Orders
Some platforms, especially old-style DEXs (almost all of them) don't have this functionality built in. But you can make your own version of it by placing orders at different intervals; you can also adjust the cost weighting of each one.
10/ Stairway to Heaven
You can change how much money (the weight) you put in per step on the Ladder Order. For instance, if you have $100 to invest in a token, you can divide that capital across each level. They don't need to be the same, you can value each step differently.
11/ Different Types of Steps
There are two ways in which to place a buy order for a token: Limit and Market orders.
- Limit Orders only buy at the price they were set at.
- Market-if touched orders buy at whatever the price is when activated, until an order is filled.
12/ Uses for Limit Orders
As these orders only purchase assets at the price they were set for or better, they are great for the very start of a ladder. That way, if there's a market trend reversal while purchasing your tokens, you won't buy at worse prices than you wanted.
13/ Uses for Market-if Touched Orders
These orders start purchasing at any available price once they're triggered, so they should be placed deeper in your ladder. If the dip is large enough, you'll get lucky and purchase more tokens at even better prices than you planned.
14/ The Average Bear
The main problem with a ladder order is that it assumes you already have cash sitting on the sidelines, waiting to be deployed. Most people aren't in that position, so we have to be a bit creative in how we approach things - enter Dollar-Cost-Averaging (DCA)
15/ DCA
Take your savings, and invest a fixed amount of it on a regular basis, that's DCA. How often "on a regular basis" means, is entirely up to you - it can be once a week, a month, etc. This ensures you'll buy high and low, so on average, it'll be a decent price.
16/ Salary & DCA
Because of its cyclical and fixed nature, many people tie their DCA strategy directly with their paycheck and invest a fixed percentage thereof. Some platforms even allow you to keep an active order open, which you top up when you have money available.
17/ Structuring Around One's Ignorance
Buying the dip without going broke and overinvesting, relies on emotional control and having a plan. DCA, Ladder Trades, etc. are expressly designed to work around one's biases -
You are your own worst enemy while investing.
18/ Conclusion
This is just the beginning of a long journey. Over the coming weeks, we'll be discussing the nuances of investing, the red flags to avoid, as well as how DeFi has so far failed you as investors.
For now, we wish you farewell and happy bear markets!
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Make sure to check out our ongoing #TradFiTales series too:
Memecoin fever has gripped Cardano, and it has a lot of people confused. How is it possible that in the midst of the iciest of bear markets, there is still enough dry powder to create a speculative mania?
Today we will be discussing the economics of memecoins.
2/ On the Origin of Memecoins
Memes are units of culture, they’re small packets of information that contain a basic idea that is interesting enough to get passed on and evolve through each generation it exists in.
Memecoins, on the other hand, are tokenized viral ideas.
- Active: Where you make regular decisions to address your investing needs
- Passive: Where you fund a specific strategy & keep doing so indefinitely
Both have their benefits and weaknesses, which we will explore in this thread.
2/ Active Investing
When the average person thinks about investing, they think of active investing - of an investor finding some secret pattern in the data and striking it rich because of it. Unfortunately, the reality is more complicated than that.
DeFi will defy expectations - why on-chain identities are essential for mass adoption of #Cardano.
- Thread Time 🧵-
1/ Intro
Now that the angry dust is clearing from the contingent staking debate, perhaps it's worth discussing why on-chain identity verification can be very important to mass adoption.
It's not without its tradeoffs, but it is needed if we want to fully bloom to our potential
2/ Adoption
If you want to attract the enormous liquidity of financial institutions, you need to allow for TradFi to work in DeFi by allowing legacy operational procedures to work on-chain.
In other words, users need to have freedom to decide how and when transactions execute.
Bears are vicious creatures, you blink for a second, and they can rip away any gains you had with a single swipe.
In this thread, we'll discuss the three genres of assets and how to build a portfolio that can not only survive the bear market but thrive.
2/ Asset Genres
Whether you're talking about stocks, real estate, commodities, etc., they all broadly fall into three broad archetypes that denote their behavior within a complex system:
Cardano is entering the age of Voltaire, the age of community governance.
This is going to be a critical development period, which will, in no small part, determine the future of the blockchain.
In this thread, we'll discuss the pitfalls and solutions to governance.
2/ 1st Principles
The problem that governance seeks to solve is what is termed in finance as the "principal-agent problem" (PAP), as in when stakeholders nominate someone to represent them, but they're unsure if the agent will act in the stakeholder's best interests or their own