Fundamental Crypto Investments
When I initially got into crypto, everyone around me was in Shiba Inu & Dogecoin. After 15 minutes of due diligence, NOT including Musk & Cuban’s Twitter accounts, I knew those were not legitimate investments I was taught to make by the Buffet/Graham/Lynch style of analysis. I tried to utilize fundamental and qualitative analysis to the best of my ability in the crypto space. While tho gs have been turbulent, there are 10 or so projects I still feel comfortable accumulating and holding long-term. I always traded my crypto, not invested, so I’ve never been holding much for major crashes, have been extremely lucky to see some 20%-30% ROI months (not years), and avoiding the 3 catastrophic losses that have happened since I got involved.

Now that prices have crashed so low, to realistic levels, I feel confident buying for long-term positions. Buying Axie @ $185 early on was nuts, buying it for $15 today is also nuts, in reverse, as is usual behavior for investors. Too high, then too low. So I wanted to share a few clips of some of my favorite “real” projects to look at as legitimate investments (not theoretical, future problem solving projects; but real, revenue generating, active projects).

I’ve mentioned $CRO.X and $AXS.X , two of my favorite crypto investments and the only two I’ve added in the prior few months. Others I’ve started accumulating again at current prices are $AAVE.X , $MKR.X , $UNI.X , and $ETH.X 2.0 (1.0 been staked awaiting conversion). As Some of the crypto DeFi platforms failed, and filed bankruptcy, projects like Aave & Compound were paid before human creditors due to the execution of smart contracts; demonstrates the sustainability of the idea & use (if Ethereum BILLION # isn’t enough). Also have added two more speculative positions; $GALA.X a gaming ecosystem and $CHZ.X , a coin that represents voter/fan rights for sports organizations. Chilliz has already been working with European soccer organization‘s for a couple years and has deals signed and NFT collections created and sold with the NBA and the UFC. Very small market cap coin, still relatively unknown; fan is short for fanatic😉

Here’s a couple articles mentioning the revenue generated by some of the projects mentioned. I understand revenues in crypto space are not like revenues in the stock market. I have no claim to future earnings and cannot analyze these investments the same way. But if I am going to invest in crypto, I want to see real, tangible revenues and a management/developer team who meets their goals as laid out in the white paper and understands how to generate revenue with a Blockchain. I was sort of blown away that the simple lessons taught to me by Warren Buffett and Peter Lynch were so successful when analyzing & investing in crypto projects. The only thing is you really need to have confidence in your convictions. The crypto market is much more volatile and you really have to believe in what you’re investing in to be able to hold on for the ride. I am not a technology expert, so I cannot dive into some of these projects as they are still way too complicated. But ones I can see and use, that are growing and seeing adoption, I can feel much more confident in. Crypto is still less than 2% of my entire portfolio so it’s not like I’m taking any real risk here.

My analysis took me to these companies in the TTM, just wanted to find a couple articles with some numbers for you:

Here’s a link to entire article

Link to Motley Fool article

And links to the two speculative positions mentioned

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Coinbase is literally the only exchange that I trust now, so I am very comfortable having Coinbase as the largest position (will be too 4 when a couple other catch up) in my portfolio. I’ve used a dozen wallets and exchanges, centralized and decentralized in the case of exchanges. Binance is crooked, Voyager filed bankruptcy, is my primary trading account/wallet combo, Kraken & Gemini are the only other exchanges I keep money now (outside Coinbase), both U.S. & more transparent that most exchanges. Just the fact that Coinbase is a public company & the SEC will demand more transparency than we have with any other exchange, makes me more comfortable in my position.

If anyone was going to start dabbling in crypto, I would take that advice. I don’t think it’s a coincidence that the U.S. exchanges are not filing bankruptcy, they are held to a different standard than some. I found exchanges & wallets who were domiciled in Malta, the Cayman Islands, and other tax havens where you’re not even able to invest without blocking your IP address so they can’t tell you’re in the states. People playing there were asking for trouble.

I don’t think crypto is nearly as risky as everyone seems to believe it is. As it is with Buffet disciples, I see risk as a lack of knowledge, not price volatility. So the volatility doesn’t scare me. As soon as I got in, I could see that this industry was dominated by traders and algorithms. The price swings are 30%-120% daily, for reputable projects. So I think the opportunity that exists for value & fundamentals focused investors is even larger in the crypto space than the stock market, if you can find the actual projects that are worth investing in. And if you believe that the market is a voting machine in the short term, and a weighing machine in the long term; it’s even more lopsided in the crypto Industry.

Again, this is most definitely the speculative part of my portfolio. I’m not a Blockchain professional or technology analyst. I’m just a guy with a brain that downloads all this and tries it. If it’s useful, adoptable, easy to use, has real world use case,& provides safety of capital/transparency (in the case of wallets & exchanges), then I think it’s a relatively safe bet to see adoption in the future.

I expected all the new traders to flake out of Robin Hood at the first crash, and that is exactly what happened. The same thing happened with E*TRADE & retail investors back in the day. I’m not sure why this was such a surprise. When a bunch of people jump in and start trading cryptocurrency‘s, options, and with margin; that is not going to end well🤣

Use your brain, both sides. This is an art, not a science. If it was a science, everybody with an algorithm would be winning.
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Crypto is NOT another asset class
If you are looking at crypto as another asset class, you might just miss the boat. Crypto “currency” may be another asset class, but don’t be misled, currency is one very minor slice of the pie. Currently Bitcoin (technically a currency) is damn near all of crypto market cap, but blockchain, crypto coins, tokens, and NFT’s are not going anywhere and they are not another asset class, they are revolution and will forever be an alternate investing universe. Some may be monetized and be more traditional investments, but most will likely never be valued like traditional investments.

There are coins like $INDEX.X M, that gives investors exposure to baskets of crypto investments in DeFi, the metaverse, Web 3.0, and the data economy.

$ENJ.X is a gaming and NFT marketplace with their own interactive trading.

$LINK.X is a coin that is used for Chainlinks ecosystem, an oracle network that links blockchain smart contracts to real world data sources and is used by many relative crypto platforms.

$LUNA.X created a fiat pegged currency for almost a dozen important global currencies and will become more valuable as their coins are minted and burned to maintain the value of their algorithmic stable coins.

$AXS.X is a blockchain game with millions of dollars in daily transactions where users own in game items and are much more involved in creative and/or ownership opportunities.

$MANA.X is a blockchain hame focusing on the metaverse where individuals buy virtual land and build marketplaces and monetize other assets.

$FIL.X is a peer to peer file storage network, other similar platforms include $SC.X & $STORJ.X

$SNX.X is a coin that represents fractional shares of real world commodities like gold, stocks, or other tradable assets.

$FET.X is AI for exchange of data on chain who’s potential os still being harnessed

$LPT.X is like YouTube for Web 3.0 basically

Platforms like $COMP.X, $AAVE.X , $MKR.X allow person to person lending & borrowing

Decentralized exchanged like $UNI.X, $CAKE.X, and $SUSHI.X

Centralized exchanges like $COIN (public stock) or $CRO.X

$NMR.X is a hedge fund that allows data scientists and developers to develop machine learning models and compete at creating effective AI prediction models.

$CHZ.X is a sports coin that allows users to connect and enjoy special offers from their favorite sports clubs and organizations. Started with European soccer but recently signed UFC and NBA.

And platforms like $VET.X and $IOTX.X I expect to significantly impact the internet of things and supply chain logistics. If UPS or FedEx gets hold of either of these products, watch out.

Just a few examples off the top of my head to show how wide the world of crypto coins and toke s can really get. Looking at it as another asset class is foolish in my opinion. There is another investing world open to us, it’s open 24/7/365, how can it possibly be just another asset class, it’s clearly an entirely new market; please don’t miss the boat, at least start learning.

PS, I’m still 80%-90% stocks and not one of those crypto to the moon folks, it the possibilities are literally endless and I only get more excited the more I learn. Just expand your horizon beyond Bitcoin.
Definitely think most is faddish. I only invest in things I believe in, it’s a crap shoot and why I limit my exposure. I definitely read for months before I started to feel like I was starting to understand anything and am still barely scratching the surface, even with dozens of holdings across multiple wallets and exchanges (experience), it’s still complicated and too difficult for mainstream adoption. But as people continue to realize they can cut their bank out (of some of their savings at least) and make their own money on their own money, the tide will continue to shift. The millions of dollars in transactions and billions locked up on these platforms speaks for itself.

Once one starts reading, real info about the industry, not influencer BS, you’ll be surprised how well being an intelligent investor, who does some due diligence, pays off in crypto. We’ll see long term, but so far, following basic Buffet & Lynch principles has worked better than I could’ve ever imagined. You can spend 5 minutes on a website and know not to buy most of the BS people are pushing in crypto. Just be an investor, not a speculator😉

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Interesting quote from the Greyscale report they linked to

"The market opportunity for bringing the Metaverse to life may be worth over $1 trillion in annual revenue and may compete with Web 2.0 companies worth ~$15 trillion in market value today"
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Axie Infinity Part 1: Thesis
I am going to be spending more time doing deep dives on Web3 companies, starting with Axie Infinity.

Unlike traditional investment research, there are no resources that centralize relevant information (no SEC website search, Bloomberg, YCharts, or Capital IQ). A lot depends on doing primary research, and own data collection. Therefore, this analysis is a blend of traditional research and data science. I'll share a dashboard with the underlying data in a future post.

Axie Infinity Investment Thesis

Axie Infinity ($AXS.X) is the leading blockchain game in Web3. It has a high probability of being part of a future Metaverse because of 1) a growing network community (+2M current daily active users (DAUs) and 2) vibrant token economics underpinned by NFTs generating income for players and fees for Axie Infinity.

Sky Mavis is executing well on the Axie Infinity roadmap. The recent release of Ronin's Katana decentralized exchange (DEX with over $1B TVL) suggests that the team wants to position Ronin as the leading blockchain layer for crypto gaming, not just for Axie Infinity.

AXS's market capitalization increased from $500M to $10B in the last ten months, driven by exponential user growth. New players fueled demand for Axies that led to an Axie breeding egg boom. As a result, Axie Infinity's revenues surpassed $1B over this timeframe (mostly from breeding fees.) AXS' treasury, from which tokenholders will benefit in distributions, recently reached $3B.

The game offers three kinds of NFTs: Axies, Lands, and Items. The land is more desirable because supply is limited and is a central piece of future gameplay.

Axie Infinity's bear case is that value creation depends on adding new players constrained by high entry costs (~$900 for 3 Axies.) However, Axie's P2E model mainly attracts players from Emerging Markets, where Axie's income is higher than domestic salaries. In addition, sponsoring programs overcome the requirement for an initial capital outlay to onboard new players.
Axie Infinity ($AXS.X): The "Crypto-Meets-Pokemon" Game
With Axie Infinity up 35% this morning, I thought I'd repost this great synopsis of what it is from the "Coinbase Bytes" newsletter

(Disclaimer: I probably wouldn't chase here, this FOMO rally feels unsustainable)

from Coinbase Bytes:

In the last week, Axie Infinity — a crypto-meets-Pokémon game in which players raise, battle, and trade cute NFT pets called Axies — generated roughly $40 million in revenue, more than all of Ethereum's gas fees in the same period. As the broader crypto market struggles, Axie and its two native cryptocurrencies have been booming. So what's driving the popularity?

  • Vietnamese developer Sky Mavis launched the game in 2018, and it got a boost from investors including Dallas Mavericks owner Mark Cuban and Reddit cofounder Alexis Ohanian in May. It runs on the Ethereum blockchain, with most in-game transactions supported on a speedy, bespoke sidechain called Ronin, which Sky Mavis designed to have lower fees.
  • To start playing, you need to buy at least three Axies from the game’s marketplace. Sky Mavis takes a 4.25% cut of all the Axies, virtual real-estate, and other items users sell each other.
  • Players can also “breed” new Axies, which costs some of the game’s two native cryptocurrencies: Axie Infinity Shards (AXS, which is also a governance token that gives holders a say in the future of the game) and Small Love Potion (SLP, awarded to players for spending time in the game).
  • Axie Infinity has a "play-to-earn" model — and it can be legitimately profitable for some users. Rare Axies can sell for as much as 30 ETH, and desirable real estate in the fictional world of Lunacia can go for nearly 270 ETH. The game also rewards hardcore players with as many as 200 SLP a day — often worth over $50 at recent weeks’ prices.
  • Axie Infinity has more than half a million daily players, according to Coindesk, with around 60% hailing from the Philippines. Why? In part, because chronic underemployment has long sent millions of the nation's citizens to work overseas. Now some younger Filipinos are wondering if it might be better to stay home and grind in a virtual universe.
  • Both AXS and SLP can be traded on many exchanges — and as the game’s popularity has spiked, prices have taken a wild ride. On Monday, AXS lost nearly half of the 971% surge it had been gaining for the previous three weeks. Still, prices remain up for the year. And game revenue tops virtually all other crypto protocols, dwarfing popular DeFi apps like Aave, Sushiswap, and Compound combined.

Why it matters… Some critics have noted that Axie Infinity's marketplace fees are many times higher than those charged by most crypto apps — a compelling business model that’s already giving rise to competitors. But because the bulk of revenue does go to players, “play to earn” might be more than just a slogan. It might even be the start of a new crypto-powered relationship between work and play.
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it's pretty wild - at current prices (and requiring 3 axies to even play) it's about a $900 buy-in to get going
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