Chat with Shen Yu: How to hold quality assets long-term? How to re-establish a heavy position after selling too early?
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Chat with Shen Yu: How to hold quality assets long-term? How to re-establish a heavy position after selling too early?
Holding good assets for the long term has two aspects: one is earning money within your understanding; the other is that returns are often highly non-linear, potentially exceeding everyone's initial expectations.
Navigating Web3 tides with focused insightsCompiled by: E2M Research
This content is compiled from E2M Research's weekly Friday Space session, "Conjectures and Refutations."
The book Conjectures and Refutations has profoundly influenced the speakers at E2M Research. We believe reading should go beyond passive consumption—its valuable ideas should be applied in practice and tested through our own investment cases.
As we firmly believe: many things in the world aren't simply black and white. There exists a wide spectrum of "third-way thinking" that encourages us to continuously seek better explanations, boldly conjecture, actively refute, carefully verify, and apply insights to real life.
Given the recent market rally, how can one hold quality assets over the long term? And after selling too early, how does one re-enter with significant exposure? These questions warrant deeper discussion, and our guests shared insights drawn from their industry experience.
Full audio:
https://www.xiaoyuzhoufm.com/episodes/673b43ef43dc3a43879d5cb8
Key Highlights
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Shen Yu (Twitter @bitfish1)
The dimension of a good asset involves making forward-looking judgments based on current understanding. If an asset’s development trajectory, future growth trend, and key inflection points are already evident today, it qualifies as a candidate for inclusion in the “good assets” basket for comparative evaluation.
The core question then becomes: after identifying a good asset, how do you hold it long-term?
Holding on isn’t primarily a rational challenge—it's psychological. Therefore, while still in a rational state, we must establish systems and rules to help maintain relative rationality even when gripped by FOMO.
How do we build such a framework?
This brings us to the so-called “portfolio management framework,” which divides your assets into four distinct pools:
The first is the cold wallet, used mainly for coin accumulation. It introduces various barriers to make access difficult, safeguarding core holdings. Typically, over 60% of assets reside here.
The second is the warm wallet—a system designed for asset management that safely and steadily generates cash flow, helping stabilize mindset during extreme pessimism. This usually holds 20%–30% of total assets.
The third is the hot wallet, reserved for spending and speculation. Use this small portion—just a few percent or even less—to experiment, test products, gain experiential insight, and refine your judgment of what constitutes a good asset. If speculative activity grows this wallet significantly, immediately transfer the gains into the warm or cold wallet.
The fourth is the fiat wallet, governed by a simple principle—the 4% rule: 4% of the fiat wallet’s value equals annual living expenses. Should other wallets suffer unexpected losses, interest from fixed deposits or government bonds held in this wallet should cover basic living costs. This serves as both a living reserve and isolated buffer asset.
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Zhen Dong (Twitter @zhendong2020)
If you currently hold crypto assets or Tesla stock, it’s essential to understand models like complex systems evolution, nonlinear growth, and innovation diffusion. In today’s internet era, the speed, efficiency, and cost of information and knowledge dissemination have grown exponentially compared to decades ago.
Understanding good assets requires foundational knowledge. A major obstacle preventing people from holding good assets is a widespread misunderstanding of long-term holding. The greatest enemy of long-term ownership is often the allure of short-term trading—many conflate long-term holding with frequent short-term trades.
As Popper emphasized, what matters most is intellectual humility.
How do we analyze good assets? By consistently making positive expected-value investment decisions—those with long-term compounding potential—rather than engaging in repetitive, mechanical tasks akin to tightening the same bolt over and over. Humility means acknowledging fallibility; once you realize a mistake, you must continuously adjust and correct course.
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Odyssey (Twitter @OdysseysEth)
Long-term holding of good assets hinges on two elements: understanding and longevity. Understanding itself consists of two layers—rational and emotional. How is this understanding formed? The frameworks built at the time of purchase will simultaneously operate at both cognitive and emotional levels when it comes time to sell. So how should one construct these frameworks at entry? That’s precisely the question of how we understand good assets.
Several critical points come into play during the cognitive construction phase, all of which will inevitably influence the decision to sell.
The first point is avoiding early-stage assets that haven’t crossed the tipping point. If something was incomprehensible from the start, it’s best not to touch it—and therefore won’t need to be sold later. Conversely, if entry occurs after the tipping point, focus intensifies and understanding deepens considerably.
The second point is multidimensional assessment and validation of monopoly characteristics. If you buy because of a monopoly, then you should only sell when that monopoly dissolves or a superior monopolist emerges. This symmetry can be clearly established. Studying the nature of monopoly enriches our understanding of user needs, total addressable markets, and more—strengthening both rational and emotional conviction.
Long-term holding of good assets involves two aspects:
One is earning returns within your circle of competence. Suppose you clearly envisioned the long-term product roadmap and it has since been successfully executed—should you sell? Not necessarily. Some investors successfully capture these anticipated gains, but others fail to earn returns beyond their original expectations.
The other aspect is that returns are often nonlinear—far exceeding initial expectations. As investors, we must be able to withstand and embrace such surprises. Don’t use the limited rationality of your mind from ten years ago to predict the future. Instead, build asymmetric upside potential to capture unforeseen benefits. How do you prepare for such outcomes? After acquiring an asset, recognize its unique properties, acknowledge it as a high-quality asset, and believe it can outperform even your boldest imagination.
After selling prematurely, how do you re-accumulate a large position? This is mostly a psychological challenge, though it also involves cognition. From a cognitive standpoint, if you scale in gradually alongside growing monopoly power, price becomes irrelevant—you’re no longer focused on whether the current price is high or low. Rebuilding a large position is difficult primarily because you’ve previously exited. For nearly everyone, admitting error is painful. Many think investing is purely analytical, but beneath it lies a desire to prove oneself or resolve immediate life struggles. To make sound investment decisions, one must first confront and resolve these underlying desires and psychological barriers. If driven by intense emotion from the outset, rational decision-making becomes nearly impossible.
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Q: Why establish such a portfolio management system?
I reviewed some of my major past trading decisions and found my win rate was barely above 40%, never exceeding 45%. Since then, I began keeping a decision journal before making significant moves—documenting the context, my emotions, worldview, outlook on the event, rationale for the decision, and whether I anticipate regret. Six months or a year later, I review it again.
Inevitably, I realized the world is fundamentally unknown, and our mental models and rationality are inherently limited. When modeling reality, we must maintain openness and intellectual flexibility.
Painful mistakes are essentially signals from reality itself. What determines personal growth is not just receiving accurate feedback from the real world, but avoiding being trapped in emotional reactions, and instead reviewing, reflecting, and iterating afterward. (Shen Yu, Twitter @bitfish1)
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Q: Which is harder—discovering a good asset or reaccumulating a large position after selling too early?
Building a large position is inherently harder than finding a good asset. Many Bitcoin holders take partial profits and exit, and very few manage to buy back in afterward—let alone rebuild a substantial position. Allocating a large percentage of one’s portfolio to any single asset class is inherently challenging.
When I initially bought Tesla, despite extensive research, I still struggled to execute the purchase fully—I could only buy up to a certain absolute amount. This reveals a human discomfort with large nominal figures. Even in poker, I noticed that increases in chip stack size create psychological pressure—even when the proportion of net worth is small, the absolute number instinctively gets compared to everyday spending.
The greater difficulty in reaccumulating after selling stems from confronting error. Acknowledging a mistake isn’t enough—it requires reconstructing fundamental beliefs. Moreover, attitudes toward error matter. People often tie mistakes to self-image, feeling embarrassed or ashamed. While ordinary people may see error as shameful, smarter ones view the inability to correct errors as far more disgraceful.
Popper’s framework of philosophy of science acts as an antidote. At a philosophical level, it teaches us that humanity advances precisely through error. The sole method for creating new knowledge is conjecture and refutation—eliminating incorrect hypotheses until only relatively correct ones remain. Thus, making mistakes is not only inevitable, but also the only path to discovering new knowledge. (Peicai Li, Twitter @pcfli)
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