On High Conviction Investments

about 3 years ago

On High Conviction Investments.png

Trading has always been an elusive game to me. I've never enjoyed sitting in front of charts for hours upon hours each day and trying to guess whether a stock or cryptocurrency would go up or down. Over the past several years, I've moved toward high conviction investments.

Instead of trying to guess the short-term price action of a stock or crypto, I would find a handful of companies or projects that I thought had a lot of fundamental value. Value investing is a term frequently used to describe this approach.

Value investing is certainly a part of it, but I look for high conviction investments with asymmetric upside.

My highlight reel for the past 5 or so years:

AMZN
TSLA
SQ
BTC
ETH
LeoFinance (a startup I founded, but deserving of this list imo)
Most recently: RUNE

RUNE and Having Conviction

@nealmcspadden has talked about this idea of investing heavily enough to matter but not so heavily that you lose sleep at night. "The Whale Rule" if you'd like.

I discovered Thorchain from @shanghaipreneur who also showed it to @jk6276 and @nealmcspadden. The 3 of them investing in the project and talking about it was enough of a combination to get me to start looking into it.

Since I've had a lot on my plate for the past year, I struggled to find the time to deeply research it. Instead, I would read Prof K, JK and Neal's posts and comments about the project and occasionally do some google work. Lurking on their Twitter account provided a great deal of insight as well.

A few weeks/months passed and I had slowly picked up some knowledge on Thorchain. I started to buy some RUNE - albeit at a much higher price than Neal, JK and Prof K.

RUNE fluctuated wildly. Going from $0.30 to $1 in the timespan that I started buying. It subsequently crashed with the rest of DeFi and came back to $0.30.

It was at this moment that I started buying heavily.

I had become much more familiar with the project and their community. I was enjoying their weekly dev reports and I bought-in to the vision of cross-chain liquidity pools and how bridging the gap between the major crypto assets via a liquidity-oriented project could be a massive hit.

DeFi and Liquidity Pools

Around a similar timeframe, we launched Wrapped LEO and I started to understand the DeFi industry from a much more nuanced perspective. Pooling became an obsession of mine as I researched and stalked various protocols and gathered ideas about what DeFi was at the time and what it could be in the future.

In all of my research, I continued to find that Thorchain was positioning itself to be the liquidity pool protocol for the entire crypto industry. It's not about pooling 1 or 2 or 10 assets. It's about bridging together blockchains and liquidity.

It's about creating an ecosystem of traders, LPs and validators in a very practical and economically viable way.

Reading through their whitepaper and starting to understand ideas like Determinstic Value, Incentive Pendulums and more, I realized that Thorchain had the most exciting tokenomic structure that I've ever seen.

Needless to say, I continued to buy heavily around that $0.30-$0.50 range. As RUNE fluctuated, I continually bought more and more.

At the end of my buying spree, I held a sizable position in RUNE (50,000+ coins) and I realized that the project was going to the prophecized $6 and even beyond that.

Today, RUNE hit $4 for the first time ever. It's incredible to see the rise of this project as it moved from hidden gem to one of the most talked about projects in all of DeFi.

.. and it's just getting started. Native Bitcoin pooling isn't even here yet!

My point in this post is something that I talk about often when it comes to how I invest. I made most of my money in Bitcoin and ETH by being early to the industry and RUNE has been one of my most profitable investments in the past 2 years.

I didn't do this by having a light touch. I didn't do this by sitting in front of charts for 12 hours a day. I did this by finding projects, assets and people that I could cultivate a high conviction for. I deployed my capital in a way that directly reflected my conviction for what existed in the moment and what I believed would exist in the future.