5 min read

Creating systems for investing

Creating systems for investing
Photo by Isis França / Unsplash

You might not be aware of it, but everyone has a system on how they invest. How do you decide when to take profits? How do you decide when to buy during a dip?

It's this "system" that separates the winning investors from the losing ones. Now's a great time to think about your machine, and find ways to optimize it.

Today I'll cover:

  • Algorithms. Designing your investing machine.
  • Chart. DeFi Protocol fees are finding a base.
  • Recommendations. Millionaire to $0. Seeing what VCs invest in.

Let’s dive in!

The Algorithms of Investing

creating a profit machine

I see everything in life like an algorithm.

An algorithm is a set of rules or processes to help you reach a goal - you can think of it as recipes, formulas, or systems.

For example, I have a morning routine. Let’s look at these two algorithms.

(A): Wake up, check my phone, scroll through Twitter / social media, answer emails, eat breakfast, work
(B): Wake up, meditate for 10 minutes, workout, shower, make coffee, work

Algorithm B will make me much more productive throughout the day. I can go straight to writing or research without feeling distracted. Whereas going through social media in the morning leaves me scatter brained.

I didn’t just come up with it one day - I experimented and iterated until I found something that works for me.

Remember how I said everything in life is an algorithm?

Want to Lose Weight? Your algorithm is your workout plan, progressive overload schedule, diet, etc.
Want to Build a Twitter Following? Your algorithm is how often you post, your topic selection, what kind of posts, etc.
• Want to Improve Your Chess ELO? I'm not a Chess expert, but I'm spending 15 minutes a day solving puzzles. It's helping me improve over time.

That’s how I think about investing and trading. Whether you realize it or not, you have some kind of algorithm in your head for how you make investments and trade.

(1) The Bitcoin Maxi: Buy $500 worth of Bitcoin on the 1st of every month. Never sell.
(2) The Crypto Newbie: Ignores the crypto market until we’re in a bull cycle. Buys everything that their favorite Shillfluencer tells them to. Goes “all in” on certain coins.​​

Do you even know what your own formula is?

​Take a few minutes and think about it. If you had to explain to someone the process of how you invest, what would it look like?

Here are Some of my Personal Algorithms:

​​(I’m not telling you to follow my system. We have different investment styles and risk tolerances. I’m sharing these as an example to illustrate the concept)

  • If a token initially doubles in value, take profits into ETH or stable coins. Let the rest ride.
  • If it’s a degen play, max 5% allocation.
  • Buy crypto with Fiat on the 1st of every month.
  • Wait 24 hours before buying any coin. This prevents me from “FOMO’ing”
  • 15% Max per token. (Note: If you want to go more than 15% for BTC or ETH, you’re more than welcome to.)
  • I never use leverage.
  • Go to RugDoc and DeFiSafety and check that project before investing.

Other Random rules:

  • I don’t accept crypto gifts. You have no idea how many people have offered me free tokens or free NFTs. It's easier for me to assume everyone's trying to scam me and say no, than to do due diligence on every single offer I get.
  • Everything’s secured on Ledgers (hardware wallet).
  • I do all my transactions on a separate computer than my day to day one.
  • I never download random files.

Part of creating successful algorithms is optimizing and improving them.

I’m not a perfect investor/trader and I don’t pretend to be. Here's one thing I've updated in my algorithm.

Diversifying my stablecoins. I had 15% of my portfolio in Anchor Protocol. Fortunately, I was able to get out before I lost too much money.

I’ve updated my rules so that the max of a single stablecoin is around 10%. (And that’s only for dollar-backed stablecoins such as USDC and BUSD).

I also made the mistake of thinking of Terra Luna as a blue chip a few months ago. Now I have a rule that a coin needs to go through two full cycles before it's in consideration for a blue chip. It's kinda like how a Sports Hall of Fame has rules before someone's eligible.

And remember, your system changes over time because of your goals. If your portfolio is small then you'll probably take more risks and make degen bets. But if your portfolio's reaching its goals, then you want to slow down and become more conservative.​

​Action Steps:

  • Think about your long-term theses and beliefs.
  • How do you make decisions?
  • What are some algorithms and rules you can implement?
  • Where can you write this down and refer to it? (Don’t overcomplicate it. Write it down in Google docs and print it out)

And finally, keep it simple. The simpler your system is then the more successful you’ll be.

If you’re interested in exploring this kind of thinking more, I recommend reading Principles and Algorithms to Live By

Chart of the Week

monthly defi revenue

Source: Theblock / Cryptofees

Protocol revenue fees have been steadily dropping since February. It looks like we might be finding a floor soon.

The Hiring Edge​

If you’re looking to get a job in Web 3, then check out my Job Board on Pallet.

There are 65 jobs currently available. Everything from marketing, community managers, engineering, developers, business development, and more.

If you’re interested in a “sit back and chill” match-making approach, check out the The Edge Collective.

It's a reverse-job board. If you apply and get accepted, Web 3 companies will see your application and ask to chat to you.

It’s 100% free for you, and you can be anonymous too if you want.

  1. Looking for a Job? you are welcome to apply here.
  2. Looking to Hire? Consider joining our talent collective. You’ll get recurring drops every two weeks of amazing talent looking for Web 3 jobs.

There are talents currently working at Meta, Amazon, Google, Goldman Sachs, Microsoft, and more in my candidate pool.

Apply now (Use code: edgefreemonth for your 1st month off free)

😢Multimillionaire to $0. Uncle turned $10k into $1m over a span of 4 years. He lost it all in the past 6 months. If you come across life-changing money, don’t be afraid of “cashing out” a bit of it.

Sometimes we reach our goals and we keep raising the bar. Think about raising your floor. If you have the opportunity to pay off your debts or buy a home, then you’ve raised your floor.

⚠️Is it a Ponzi? People love throwing the phrase Ponzi around in Crypto. Nat shares a framework on evaluating if a project is a Ponzi, and shares other terms which are more accurate.

🕊️What the VCs like. Do you ever feel like you’re hearing about investments too late? By the time an influencer starts shilling it, you’re the last person to eat.

One secret is to look at what the VCs are investing in at the seed rounds. You’ll be ahead of the curve by the time public token sales are available. DoveMetrics is the best database I’ve seen for keeping track of these.

🐋What Do the Whales invest in? Keeping track of Whale wallets is a great way to find under-the-radar gems and strategies. DeBank has listed a few that you can check out.