Messari Daily Brief – Feb 22, 2021: Bull Market Regret Minimization

_SUBSCRIBE Here’s something I’ve learned the hard way: it pays to be honest about how much you can afford to invest in crypto. Not just initially, but over time as you rack up transaction costs, tax liabilities, and (if you’re using any sort of leverage) interest payments. If this sounds overly simplistic, it’s tougher to put into practice than it seems at first glance, especially since most of us try to black out our future tax liabilities when we’re in the middle of capitalizing on the full bull stampede, and interest / gas fees are merely the cost of doing business.  But it can be disastrous to lose sight of your true balance sheet and P&L on the way up, given how rapidly things can unwind. We were reminded of how fast things can correct this morning. Since I suck at trading, but also like reaping the rewards of sticking out multi-year bear markets, I have a bull market regret minimization system that I use that’s easy enough for the back of a napkin. A lot of people are making gobs more money than me I’m sure, so this is not investment advice, so much as it is a set of “if you’re going to drink, I’d rather you do it at home” safety measures.  Three steps I take to not ruin my life, but also capture upside if we go to the moon: 1. I like crypto, and believe in its 10 year outlook. I net out personal liabilities, INCLUDING GAINS TAXES, and take what I’m willing to lose today from that stack – let’s say $50,000, which I know is high, but may be a median stack for our Pro subscriber base and is easier round numbers – and put it in a big pile. Even though I want to trade aggressively, I’m taking 60% of that pile and sticking it in 80/20 BTC-ETH and forgetting about it for a year. If it doubles and I sell in a year and a day, I’m happy, and only pay a few grand in long-term gains. 2. I’ve got $20k left. Right off the bat, I’ve got a choice: pick assets? pick sectors? both? In my case, I’d probably want to pick sectors. Layer 1’s just rallied 3-5x. Is that a great relative value play vs. ETH anymore? What about Layer 2’s? Some of the best speculators I know are following the “hot ball of money” relative value trade theme to theme, with ruthless effectiveness. I try not to invest in last week’s meme if I “miss it.” If something looks long-term interesting, I’ll buy some even if it’s rallied and move it into bucket #1 to forget about. 3. I tend to take more risky, short-term bets early in the year because I have a ton of time to plan for the tax consequences and do later tax loss selling. If I get rekt on something, I can write it off against my winners. I’m not bashful about copy-trading crypto funds short-term because it’s a <70 IQ trading strategy and memetics are powerful. I don’t recommend any copy-trading strategy, but it’s a helpful diligence item. The flipside is that in a bear market, you’re getting dumped on by a whale. Do you think that’s very fun? This is about as close as I’ll ever get to a paid chat room with CAN’T MISS GEMS, and as you’ll see there’s no active strategy here, only downside protection recommendations. Crypto is risky. Don’t invest more than you can afford. Ride the blue chips if you decide you want sector exposure. Plan for taxes and fees, by minimizing the number of positions you have, and think about tax selling and memetics in a hypergrowth market.  And for the love of god, don’t go short.  P.S. if you take non-investment advice from a twobitidiot, and play it off as investment advice, sue yourself. Headlines that matter:
$1 billion of derivatives were just liquidated (The Block)
ETH mining revenue hits $1 billion so far in February (The Block)
Tencent & Ant backed banks are testing digital Yuan (The Block)
North American bitcoin ETF raises $400mm in two days (Decrypt)
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