DeFiance Capital partner: How to make more efficient crypto investment decisions?
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DeFiance Capital partner: How to make more efficient crypto investment decisions?
Given the vast amount of information currently available, identifying signals from noise is the most important skill for generating returns.
Navigating Web3 tides with focused insightsAuthor: Wangarian, Partner at DeFiance Capital
Translation: TechFlow
It’s no secret that cryptocurrency currently represents the cutting edge of technological innovation. As human and financial capital flood into the industry, it would be overly optimistic to assume any single individual can keep up with its entire evolution.
Twelve months ago, the game was relatively simple. Find overlooked DeFi tokens on Ethereum before most of the market noticed, then profit when capital eventually rotated in. Returns were high, and opportunities could be effectively identified. Today, we have countless different verticals (DeFi / GameFi / NFTs) flourishing across multiple ecosystems (SOL / AVAX / ETH / LUNA, etc.).
Given the vast amount of information today, the most critical skill for driving returns is identifying signal from noise. While this skill cannot be taught— one must personally endure the trials and tribulations of the market — I’ve often found it helpful to develop a process that eliminates unnecessary decisions. Below are some lessons learned by someone who has been deeply researching the crypto market over the past 18 months.
Simplicity Is Key
For 99% of investors, annual performance boils down to just 2–3 specific decisions. Going long $SOL or $LUNA in January, discovering Axie at $1, rotating out of DeFi 1.0 after the Q1 2020 rally…
If you're a professional fund manager, each of these decisions could make your year; as a retail investor, they could yield 10x net gains. While most people only recognize them in hindsight, the point remains—each investor faces only a few key crossroads that reflect the vast majority of their returns.
The tricky part is how to identify these crossroads in real time. We make countless decisions every day, so it's impossible to know when such pivotal moments will arise. Yet exceptional investors/traders ultimately grasp this intuitively—whether consciously or subconsciously.
I don’t have a crystal ball or any unique edge, but I often find that pruning the decision tree helps build a clearer mindset—one better equipped to seize opportunities when they appear.
Bet Thinking
At its core, an investment position in public markets reflects a contrarian commitment to a specific idea. It expresses the belief that the market is wrong, but over time will reprice the asset according to the investor’s expectations. Every investment has three main stages, each requiring its own set of decision-making frameworks.
Stage One: Entry — Is this a good investment? How large should this position be?
Stage Two: Monitoring — Is the investment thesis playing out? Should we adjust our stance based on new information?
Stage Three: Exit — Should I reduce my position because I was wrong? Should I reduce it because I was right and the investment theme has already played out? Should I sell the entire position or just a portion?
The simplest way to reduce decision fatigue is to minimize the number of active positions in your portfolio. A good rule of thumb is not to hold more than 10 active positions. Doing so forces concentration and conviction through scarcity.
Is Token A a better investment than my current top 10 holdings?
This direct comparison creates a clearer risk/reward framework for evaluating new opportunities. Beyond the number of bets, bet sizing is equally important. One useful framework I rely on is the 2/20 rule.
Exploratory: 2% of Portfolio
Imagine you’ve just discovered a promising new token and believe it represents the future of finance. You’ve done some DD (due diligence), outlined what you know and what you still need to learn, and overall feel good about the bet.
2% is enough to participate (a 10x = 20% return to your portfolio), yet small enough that if you’re wrong, it’s merely a bee sting to your overall performance.
Balls Deep: 20% of Portfolio
After initial excitement about your new position, you dive deep—covering all due diligence bases. You’ve built a clear thesis, identified actionable catalysts, and are ready to earn life-changing wealth.
While you can always go above 20%, a 10x return doubles your portfolio. If you hit a home run (50–100x), this single bet alone could define your year.
If you’re wrong, you’ll lose a leg—but live to fight another day. And that’s what matters most: never let a single losing bet knock you out of the game.
Suppressing Impulses
Crypto markets are a tricky beast. When constantly chasing dopamine highs, we tend to blind ourselves to the bigger picture. In addition to battling the PvP market, you’re also fighting your inner demons—greed and fear.
For me, being exposed to the market 24/7 has had negative side effects on both mental and physical health. I’ve found that mental breaks away from the market are essential to performing at peak capacity.
From personal experience, 2–3 days off produces optimal results—long enough for the mind to settle, yet short enough that you don’t miss entire bull or bear cycles.
As investors, our goal is to maximize returns over the long term. This doesn’t mean we must maximize gains during every waking moment. Mental rest is crucial for resetting dopamine levels and emotional highs/lows, enabling clarity, discipline, and better decision-making.
Discipline
This is one of the most underrated aspects of investing. You can have the most detailed plan or sophisticated framework, but if you can't stick to it, it’s worthless. This is something I’m still working on—and recently paid the price for. Execution is nearly as important as the plan itself. The trade you went long has hit your stop-loss? Cut it. The catalyst has passed but the price hasn’t moved up? Terminate it. Constructing bullish narratives and price targets is easy. It’s much harder to create and execute an exit strategy when things go wrong. Ironically, this is the most critical process—it’s what saves you when the market turns against you.
In crypto, we’re often trained to ask: What’s the TO THE MOON scenario? We focus on potential returns (10x? 50x? 100x?) because that’s the most exciting part. But we must also plan for less-than-ideal outcomes. What if I’m wrong? I notice market participants rarely ask this question. Do you have a framework for handling adverse price moves? Can you reliably cut positions when needed? Nobody truly likes admitting mistakes, but even the best investors are wrong 40% of the time. If you haven’t planned for that 40%, you’re setting yourself up for eventual disaster.
The Journey, Not the Outcome
At the end of the day, remember that investing is a long-term journey. Crypto markets often distort this truth with sensationalized 1000x “TO DA MOON” stories, misleading ordinary people. Lucky market participants come and go, but those who focus on methodology, continuously iterate their frameworks, and refine their processes will stand out over time. The seeds you plant today will yield exponential rewards in the future.
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