Thread by @j_mokwh

The lessons of legendary investor Seth Klarman from the Global Financial Crisis in 2009 remain relevant today.

Here are 15 bite-sized musings to away from 2022 in #Crypto.

Enjoy 👇 🧵

#Web3 #DeFi #NFT #Investing #Markets

1. Things that have never happened before are bound to occur with some regularity. Always prepare for the unexpected.

That includes stress-testing your portfolio for the worst possible outcome. 🦢

2. Correlations between asset classes may be surprisingly high especially when leverage rapidly unwinds.

This applies to asset classes that have historically exhibited a negative correlation to risk assets.

3. Consideration of risk must never take a backseat to return.

Conservative positioning during a crisis is crucial for maintaining long-term thinking and focusing on new opportunities. It also helps avoid being distracted or forced to sell.

4. Risk is not inherent in an investment; it is always relative to the price paid.

Assets being driven to lower levels often become less risky investments.

5. Reality is always too complex to accurately model. Markets are governed by behaviors, not science.

Attention to risk must be a 24/7 obsession, with people - not models.

6. Do not accept principal risk while investing short-term cash; as it will lead to greater risk, increasing the likelihood of losses and near-term illiquidity.

Keep your powder dry.

7. The last traded price of an asset creates a dangerous illusion that its market price reflects its true value - it is a dangerous mirage, especially during market exuberance.

Valuations should always be considered with a healthy degree of skepticism.

8. A broad and flexible investment approach is essential during a crisis. Opportunities can be vast, transient, and dispersed through various sectors and narratives.

Get married to your process, not the token.

10. Financial innovation can be highly dangerous - it is created during sunny times and is never stress-tested for stormy weather.

Algorithmic stablecoins fit right into this description; de-pegged #Algostables have yet to recover since their collapse.

11. VCs, PEs, and institutions are highly conflicted. Adverse selection and moral hazard will always be present in the market.

"There are billionaires lining to bid up #SOL".

12. Be sure that you are well compensated for illiquidity, especially illiquidity without control.

Think before you start locking up your tokens just for that few extra bps of yield.

13. Beware of leverage.

There's no point in being able to unsheathe the sword if you can't properly wield it.

14. When authorities or central figures say a problem has been or is being "contained", pay no attention.

"Steady lads". 😉

15. No one will accept responsibility for his or her role in precipitating a crisis.

"We did not anticipate/expect".

Here are Seth Klarman's actual 20 lessons from the Global Financial Crisis in his annual letter to investors.

olavdirkmaat.com/20-lessons-fro…

2022 will be a painful but rewarding lesson for most, including myself.

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To a better 2023!