Founder of LK Venture: Eleven Simplest Rules for Investing in the Crypto Market
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Founder of LK Venture: Eleven Simplest Rules for Investing in the Crypto Market
Summarize how to analyze trends, people, and assets in the crypto market from eleven aspects.
Navigating Web3 tides with focused insightsAuthor: Xiao Yin Xin Shi Nian (Feng Wang)
Investing in the crypto market has always had its unique characteristics. Entering the dark forest of the crypto world—extreme volatility, manipulative players, hackers ready to strike at any moment—the risks are extremely difficult to quantify, yet new opportunities may emerge at any time. To succeed in crypto investing, mastering the right methods is essential.
This is a set of reflections I wrote for my internal team on cryptocurrency market investment. In fact, I’m trying to run a three-year experiment: how to use the simplest possible approach—watching trends, people, and assets—to manage a $10 million crypto fund today, aim for $100 million by year-end, and perhaps even dream of managing a $1 billion fund within the next three years.
Originally meant to be ten points, but once I started writing, I couldn’t stop. I drafted this during meetings on Thursday, handwriting it as I went. This is the first version; there may be more to come. If you don’t like it, feel free to skip it.
1/ Focus on Pre-IPO Market Investing
Crypto market investing is fundamentally different from traditional internet angel, VC, or PE investing. This most dynamic emerging market is an economy built on secondary market trading, with primary market investments serving mainly as brand enablers.
There’s a crucial logic here: we can participate in primary markets, conduct deep research, gain firsthand project insights, and then act earlier and more effectively in the secondary market.
Rather than waiting two to four years for lock-up periods to end, we should leverage the native, decentralized, and multi-channel liquidity that defines the crypto market. Therefore, what we really want is to operate in the pre-IPO space.
2/ Stand With the Most Active Founders
Strive to align yourself with the best projects. You must have direct access to top founders. You need to understand their thinking—they provide frontline market signals and serve as reference points for understanding the market landscape. Only through this can we develop reliable criteria for identifying where the next great project will emerge. Learning from founders—this is the most valuable part. Emotionally, being aligned with founders puts you in sync with their growth journey, which is never a bad thing.
3/ Recover Your Principal Quickly
Early-stage investments are usually very cheap, often yielding 3x, 5x, or even higher returns. For example, rewards earned via staking—even if your cost basis is low, pull out your principal early. Avoid greed and build this into a habit. Especially for newly launched projects that haven’t listed on major exchanges yet, liquidity is severely limited. If overall market sentiment turns negative, you might not be able to exit at all and could remain trapped for a long time.
As long as you recover your initial capital, you’ll always have funds ready for the next bottom-fishing opportunity or new target.
4/ Long-Term Holdings in Top-Tier Projects
The core of your portfolio—75–80%—must consist of current market leaders, especially absolute leaders in emerging sectors such as base-layer protocols and trading platforms. Major investments aren’t driven by news headlines, but by real trends. When adjusting positions, it should only be to replace old leaders with new ones.
5/ Investing Requires Lateral Thinking
Building a startup requires vertical thinking—digging deeper and deeper. Investors, however, thrive on lateral thinking: designing diversified portfolios across different targets. Once you’ve identified a leader in one niche, immediately start searching for the next market and its emerging leader. Proactively seek new targets and uncover new themes—don’t become obsessed with a single sector. Some investors dive into a protocol within a specific sector, think they’ve mastered it, and keep buying related assets layer after layer. There’s no need. Just capture the leader and move on.
We often hear advice like “invest only in what you understand,” but who truly understands anything innately? More often than not, the understanding comes only after you’ve made the investment. Many investors enter a project only to realize later—with cold sweats—that it’s nothing like what they originally thought. In the fast-moving crypto industry, change happens even faster. What separates successful investors is momentum in continuous learning, courage to seize opportunities, and the capacity to swiftly correct mistakes.
6/ Focus Energy on Decision-Making, Not Management
The essence of investing is that your energy should center on “research and decision-making.” Investing means pulling the trigger—the final critical step is acting decisively based on information gathered. Investing isn’t about management. I’ve seen small firms believe that having many talented people under them and managing well is enough. But when meetings turn into gossip sessions, things go downhill. More people mean more noise—information may occasionally contain value, but mostly it becomes chaotic interference. When rhythms diverge, coordination breaks down. No need to write PPTs. If you’re truly excited about an investment—if your heart races and you feel like hugging it—why would you need polished slides? Keep investment decisions simple.
In crypto investing, hesitation is deadly. When your market sense kicks in, act immediately. Otherwise, by the time prices rise and you try to jump on board, the courage you once had for decision-making evaporates halfway, possibly leading to frustration, poor emotional control, and compounding mistakes.
7/ The Ideal Setup Is a Two-Person Partnership
This mirrors how we build startup teams. A two-person partnership is nearly ideal—consider complementary expertise and skill sets. One partner excels in product and technology, the other in economics or finance—even sociology or psychology. From a capability or personality standpoint, one might be strong at resource mobilization, the other at building influence. These combinations form golden partnerships in investing.
If an investment team—whether two or more people—lacks technical understanding, doesn’t tweet, and is invisible in communities, they’ll struggle in this mixed bag of an industry. Every industry has its chaos—but this one is particularly tough.
So, what’s your two-person advantage?
8/ Never Be Overly Confident in Your Expertise
In investing, beware of falling into endless K-line analysis. Once addicted, you fall into short-term bullish/bearish thinking—just like a product team obsessed solely with coding, buried in lines of code, appearing professional and hardworking, yet never talking to users, ultimately wasting effort.
Some people become deeply attached to a particular tool or method, mastering it so thoroughly that they rely too heavily on technical pathways. Once they begin ignoring external changes and dismiss anything outside their framework as “nonsense” or “mysticism,” they’re living in a beautifully decorated well—an unfit mindset for investing.
Whether investing or building products, one common trait is needed: situational awareness. Never be overly confident in your specialty. Step outside and look at the picture from afar.
9/ Why Placing Bets Is Hard
A promising asset is usually known by few and held by fewer. Once it gains widespread ownership and fame, the optimal investment window has likely passed. Therefore, investing is about going against the grain—about courage to bet early, when no one else cares. Last year, I asked a colleague to check a new Bitcoin-based asset protocol token. He saw fewer than 1,000 wallet addresses and dismissed it as “too early, no potential,” then turned back to watching Bitcoin price charts. But we entered crypto precisely because we were drawn to stories of 100x returns.
Here’s a line you can take as a joke: After years of observation, I’ve found those who enjoy spending money tend to make better investors.
10/ Founder DNA Matters
Having strong founder background in an investment team is a big plus. A good founder—regardless of past success or failure—must retain one key quality: hunger. This proves unrelated to age. Saying “Stay hungry, stay foolish” shows Steve Jobs truly understood human nature. Conversely, someone with a prestigious big-tech background may actually be a liability.
Over the past decade, I’ve seen many underachieving or failed founders transition into investing—and succeed. Meanwhile, some highly successful corporate executives enter investing but care only about appearances, doing zero real work. Why? Their sense of career achievement is already fulfilled. These ex-corporate executives carry over their old habits, treating LP capital as retirement decoration.
11/ Manage Your Psychological Expectations
Ultimately, investing is about returns—know when to exit. When selling, don’t worry about who buys next or how loud the crowd gets afterward. “Sell at the peak of excitement” is sound advice. But how do you recognize that peak? Focus on just one thing: manage your expectations. How many times has your paper return multiplied? Has it met your original target?
Improving abilities—professional skills, cognition, energy, charisma—is achievable through practice. Birth is fate, regardless of status. Getting rich requires luck. But consistently earning money step by step? That’s skill. The question is: how much do you intend to earn?
Be pragmatic. Survive long enough. As long as you’re alive, you still have room to dream.
As I kept writing, it got a bit cliché. Five years ago, when I first entered the crypto space, I said I’d one day write *My View on Crypto Assets* as a summary. I kept thinking about it but never knew where to start. Now, five years later, despite still feeling lost, I’ve picked up a few basics. These past five years have merely been catching up on general knowledge of markets, economics, and finance. My only stroke of luck? An unrelenting hunger.
Update / The following four "correct" opinions can be taken as wrong.
Some of these conclusions are being broken year after year. What innovators need is firm conviction in their own judgment—and willingness to accept the consequences.
1/ NFTs are pointless!——Tokens are more direct. Non-fungible assets via tiny images? Impossible.
2/ Bitcoin is enough!——Programmable expansion? Ethereum exists—no need to reinvent the wheel.
3/ Blockchain gaming has zero chance!——If I want to play games, why not just use consoles or online games?
4/ Earlier still, a seasoned crypto veteran told me personally: DeFi is just a passing Ponzi scheme. Don’t touch it.
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