Writing Hypotheses in Crypto Investments

Stop being blind, understand the fundamentals of why things move and position yourself according to wheel thought out hypotheses based investments.
by Yoaquim (@yqboom)
December 2, 2023

The Hyopthesis Theory

Crypto is such an intense space that most people tend to not make money despite most coins just going up perpetually. So how is this possible?

The simple answer is people are creatures defined by emotion, defined by fear, greed, and disbelief. That’s what moves the markets, any market. But it is especially true for an open-to-participate market such as crypto, ruled by retail investors.

You’re probably one of these retail investors, and you want to actually make money in this space, to which there is one simple key, namely, creating a thesis.

When I state create a thesis, I'm referring to the idea of having a concrete view of what the markets will do, but more specifically what any one project’s price action will do.

For example, I would implore you to ask yourself, what is your long-term view for Bitcoin? And don’t answer with simple things such as up or down. You want to begin to articulate the reasons for which any one project goes either up or down. What are the drivers you are expecting to drive the market?

Retail FOMO? Institutions? And if institutions, why exactly would they want it? Etc.

It’s not a matter of whether your thesis is right or wrong; in fact, that may be completely irrelevant.

The reason I so stringently implore you to understand the importance of creating such hypotheses is a matter of research and critical thinking. Writing out such a broad market or focused project thesis requires you to build a foundation of basic understanding of economics, psychology, demand, technical analysis, fundamental analysis, and so on.

The likelihood your thesis will be correct will only go up as you grow your knowledge base, although you shouldn't focus at first on the correctness of your thesis; rather, focus on the reasons why you believe what you believe.

I would also implore any trader, speculator, or investor to critically analyze themselves for biases.

For example, if you're basing your project/market thesis on singular insubstantial matters, for example, one single bearish tweet by Michael Burry, and you fall into agreement with him by stating the whole market should go down, you have to analyze why you would shift theses like this.

You’ll often find it to be due to you wanting the markets to go down with your short position or to accumulate further.

On all my minor and major investments, I have clear hypotheses that state the exact reasons for which I believe this investment to be sound.

Admittedly, I have made numerous investments in which I had no clear thesis but merely FOMO'd into some bag due to someone shilling me something. I'm down on all those investments.

You can learn to understand this concept the hard way, the way I did. Or simply begin writing out ideas and doing exponentially more research today.

If there’s one thing I've learned, it’s that there’s literally nothing to lose in gaining more knowledge and assessing decisions more carefully and systematically.

This counts for investment hypotheses all the same as trading plans and trading journals.

Let's give an example of an investment hypotheses.

Example thesis:

$OX - Open exchange token

Founder Proposition

Founders: Su Zhu and Kyle.

This entails they are extremely well-connected throughout the crypto ecosystem and still considered by many to be some of the crypto godfathers. Despite the downfall of 3AC, they received relatively little backlash from the community in relation to other blunders such as Celsius, FTX, Luna, etc. Strengthening my idea of their relative remained belovedness in the community, or at the very least many people’s ignorance/forgiveness of their past ‘failures’.

Additionally, objectively speaking, they are extremely smart individuals, with no interest in making something that doesn’t succeed. In regards to any form of rugging, it’s ever more unlikely with a pair of individuals under relative scrutiny and watchful eyes of both the FEDs and the community.

Decentralized Exchange Proposition

With Centralized exchanges being less used on a daily basis and more hype being built around the DEX narrative, people will be looking for the next best DEX investment in the future, and OX is easily a contender. Especially in light of...

Market Cap Proposition

The market cap is currently sitting at a cool sub 30M, a relatively low sum in relation to many other DEXs in the current bear market (see DYDX at 600M>). That’s an easy 20x to reach DYDX’s MC.

In a bull market, many things will reach a 10B market cap with ease. If DEXs can reach 600+M in the current market conditions, they can certainly reach 6-10B in a bull market. Suppose OX reaches a measly 1B at its peak, we have a 33x from its current market cap. Investing today will position yourself early. (NOTE: I began accumulating at 30M market cap on the way down and have been doing so since, having held a good sum since sub 20MC).

The Hated Rally Proposition

Many hated rallies usually go much higher than people like to see. OX will be one of those intensely hated rallies due to the names behind the project. Some people will simply bear post based on their disbelief and hatred towards Kyle and Su Zhu, which may or may not be well-founded.

Yet, others will simply see the value in the project as an investment. I’d rather be in the objective money-making part than the bear posting haters that will miss this move.

Final Thoughts

In conclusion, there’s more to this thesis and most of my other ones, but now you may be able to better understand aspects that you may want to look at when writing out a thesis for any of your investments in this space.

You’ll feel less blind and be less blind if you begin to understand the fundamentals of WHY an investment may be sound or unsound in your own eyes and the market’s eyes.

I wonder how long I'll leave this REAL hypothesis I have on OX online. So save it if you please, invest if you please. None of this is financial advice by any means, merely my own thoughts. The reason I may remove this thesis is it may jus the too much alpha to be sharing for free... But hey, I'm a transparent investor and trader, or at least try to be, so maybe I'll leave it up for ya'll.