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I’m not a hodler by nature. I started out sticking to the Ben Graham idea that a 30% profit is the time to leave. This might be a maladaptation of his value investing work, but the idea is useful because there is always another potential 30% riser out there to jump on and it doesn’t matter which horse or how many you ride to get to your destination.
It shouldn’t matter if you hold three stocks for 30% each or if you hold one stock for 90% and it takes the same time to get to that target.
However, over time I’ve adapted to be greedier and run some winners longer. Some rare assets can go way further than even 100%.
Happily over the years I’ve changed to be able to hold on for the big wins, sometimes, if I have maximum conviction, and that worked out well for me in crypto—although I still can’t hang out for those x10 ponies that happen in the crypto space, but I’m getting there.
The crypto faithful are extreme buy and holders and have invented the neologism “hodl,” an ironic morph of the word hold, something my spelling checker really hates. You are meant to buy bitcoin and hold it forever. This is highly unadvisable even if only it is pointless to be rich but live your whole life like you are not. Yet we all get the idea of holding an asset for the very long term and have it become a fortune.
It’s the dream.
For me it is also a decent part of a diversified strategy. Pick a very few assets you really love and hold them until either bad luck creates a need for a liquidation or you decide to do some estate planning or have transcended the need for investment.
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In the crypto space I have a short list of these assets and they must be able to stand the test of time while remaining reasonably valued and able to grow in value because they have a use case.
The first is Sushiswap, a DEX (decentralized exchange) that has set the pace for many DeFi projects. Its genesis was as a competitor to Uniswap but with a twist in that it gave out its token as an addition reward for supplying the liquidity to its markets. This token would be valuable as revenue would pass through it and give holders revenue in a way not unfamiliar to equity holders. This added incentive drew huge sums of money into its system and all sorts of fun and games followed.
The upshot is that after all this time it is one of the most significant players in DeFi with an extremely broad offering and clearly an excellent development team behind it. It is the number two behind Uniswap in the DeFi centralized exchange space. Uniswap has $8 billion in its system and Sushiswap $5 billion. Uniswap has a market cap of $13 billion and Sushiswap of $2 billion. If you believe that DEXes will survive a regulatory clampdown then their future is extremely bright, making old fashioned exchanges look so clumsy by comparison they seem patently obsolete. Of course the regulators will spring to the defense of their sclerotic wards but the tide is unlikely to be stemmed.
You could just as easily hold Uniswap as Sushiswap but I really like the obvious discount of Sushiswap and on current form Sushiswap should at the very least hold a value close to the TVL ratio to market cap of Uniswap.
Make no mistake, crypto is far from an efficient market with plenty of rubbish assets to get in the way of good decisions. However, there are some really great projects that will be revolutionary and in the long term as significant as the current goliaths of the Nasdaq. The decentralized savings and loan operations will be huge and the two leaders are Aave (AAVE) and Compound (COMP).
Aave has $30 billion in liquidity and Compound has $24 billion with Aave’s market cap at 4 billion and Compound’s at $1.9 billion. Compound recently threw egg on its face by handing out tens of millions to users by accident, so its current price is depressed, but nonetheless, it is a great system, one like Aave I have trusted significant funds to. I like to buy my assets cheap so it’s natural for me to plump for Compound but for the dyed in the wool, ultra long term holder Aave look pretty good too.
Finally I love a token that has a great brand, has a great track record, has managed to hold huge sums and not get into technical problems and is cheap. That is Curve (CRV). The site looks like it has escaped from a Commodore 64 but under the hood is $17 billion of liquidity earning yield for its holders, which once you have stake yields a 5% yield. Curve is absolutely not flashy which is rather reassuring in the flashy, hype-marred crypto environment.
Meanwhile bitcoin has made its new all time high and toppled back under $60,000 and the wild volatility continues. Under the headlines there are some tremendous projects that will be mammoth if the industry can avoid being stunted by authoritarian governments like China, frightened by a power capable of magicking $2 trillion out of thin air.
The bottom line, however, is blockchain and crypto has already changed the game. Countries that adopt it will flourish, those that don’t, like kingdoms slow to adopt earlier technology, are doomed to decline.
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