After studying 100 top investors, I found a viable token risk management strategy

author:Crypto, Distilled

Compiled by: Xiaobai Navigation coderworld

Everyone dreams of getting rich through altcoins, but only a few can actually do it.

Why? Most people don’t understand the asymmetry of risk and fail to manage it effectively.

After studying hundreds of top investors, I found an investing strategy that works.

Origin of the strategy:

Received @0x_Kun Inspired by the crypto world, he gained freedom before the age of 30 through crypto investing.

His strategySimple and works for any skill or capital level. It has 6 steps, bookmark this thread and check back anytime!

Step 1: Manage Risk

The first step is about managing risk.

No matter how smart you are, failing to manage risk means ultimate failure.

What is the most effective way to manage risk? Through smart portfolio construction.

“You can evaluate opportunity by the same standards you use to measure risk. They are interrelated.” — Earl Nightingale

Portfolio structure?

Risk isn’t just about individual investments – it’s the interaction between them.

Adjusting asset types/amounts/weights will change your overall odds of success.

The goal? Make sure your gains outweigh your losses over the long term.

Cornerstone: 50% above invested in $BTC:

Kun’s strategy suggests investing more than 50% into $BTC.

Why? Even if all altcoins fail,$BTC's long-term growth usually ensures profitability.

It acts asSafetyNet to protect against investment mistakes.

PS: Most altcoins will fail (tribute to @coingecko)

Multi-cycle blue chip stocks: 25%

Kun recommends allocating 25%'s funds to blue-chip stocks that can survive multiple cycles.

For most people this is usually $ETH or $SOL.

This increases your chances of exceeding $BTC while reducing downside risk.

The remaining 25% is invested in small-cap altcoins:

The final 25% should be diversified into 4-6 equally weighted altcoins.

Think like a venture capitalist: a few big winners can offset losses in other investments.

This approach allows you to pursue 10x to 20x returns and still sleep soundly.

Why equal weighting is important:

Equal weighting gives each investment a fair chance to balance out the others.

Weighting by conviction is not wise – why include a low conviction asset?

Equal weighting balances potential gains and losses more effectively.

BeyondcryptocurrencyDiversified investments:

Finally, engage in structural diversification.

You are rightcryptocurrencyYour net exposure should take into account your age and other factors.

Kun hedges his crypto holdings with gold. Quality stocks also help with diversification.

Step 2: Assume you might be wrong:

Most people skip this step, but it is crucial.

Always assume that you could be wrong. Focus on probabilities, not outcomes.

Be prepared for different scenarios and adjust your strategy accordingly.

Visualize the worst case scenario:

Imagine the maximum loss you could sustain and still stay afloat.

If the loss is too high, consider increasing your investment in $BTC and reducing your investment in altcoins.

Be honest with yourself and reflect on past losses and the emotional impact they have had.

You are rightcryptocurrencyIs the view wrong?

What happens if you’re wrong about crypto?

How do you hedge? Gold can often be used as a hedge for the $BTC theory.

Or diversify your income sources to further reduce risk.

Step 3: Look for asymmetry

Patience is key in finding asymmetric investment opportunities.

This means that the potential gains far outweigh the potential losses.

Kun's goal is to achieve a 10x to 20x return while managing downside risk of 30% to 50%.

Don’t go all in:

After identifying an asymmetric opportunity, resist the urge to go all in.

Remember, the goal is to grow wealth through compounding over time.

Step 4: Develop a theory:

Once you identify an asymmetric opportunity, develop a clear investment thesis.

This theory should clearly explain why you are making this investment.

Then, create clear methods to test whether your theory holds up or fails over time.

Theoretical example:

One theory could be that $BTC reaches a market value comparable to that of gold.

A failure point could be if Satoshi suddenly sold all of his $BTC.

While this is an extreme example, it illustrates the point.

Multi-factor selling strategy:

Selling is often more difficult than buying.

To solve this problem, Kun suggests setting multiple sell conditions.

This helps protect against market uncertainty and personal biases.

Kun's Three-Factor Selling Method:

Kun suggests breaking down your sell points based on three factors: time, theory, and price.

For example:

• Sell 25% by the end of 2025

• When $BTC reaches $100k, sell 25%

• When the market value of $BTC exceeds the market value of gold, sell 50%

Step 6: Develop a post-profit strategy:

After making huge gains, many investors make the mistake of giving back their gains.

To avoid this, go back to step one:

1. Re-evaluationXiaobai NavigationEvaluate your portfolio and look for new asymmetric opportunities.

2. Avoid reinvesting profits in the market too early.

Managing psychological stress:

In addition to financial strategies, manage your mental and emotional health.

Is the crypto market taking its toll on you? Consider taking a break after making some great gains.

Invest your time and money in the things you are passionate about. Balance is the key to long-term success.

Thread review:

1. Manage risk through your portfolio.

2. Assume you are wrong and plan accordingly.

3. Look for asymmetry and be patient.

4. Use theory verification and failure.

5. Employ a multi-factor selling strategy.

6. Go back to step one and make a plan for when you make a profit.

This is purely educational and does not constitute investment advice.

The article comes from the Internet:After studying 100 top investors, I found a viable token risk management strategy

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