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Portfolio Allocation 2023
Written around 01/23, added pictures in 03/23
New year, same old me.
During the past eight months, I have been heads down reading papers + grinding on a long-form paper (out soon) and my thesis on scientific funding methods. I have not thought much about the price for a while; now, it might be a good time to think about it again - familia still needs to be fed.
So let me put away my technical optimist hat and put on my degen hat for a bit.
Ideology aligned coins
This bucket of coins is coins that I like from an ideological standpoint and fulfills my intellectual massaging desires.
BTC, ETH, SOL, OP
“But Kydo,” you might ask, “Bitcoin’s security model will not hold when there are not enough transactions happening on the network.”
I agree with this concern. I have debated with myself before on the future of Bitcoin and whether I should include it in my portfolio. “How can I include something so obsolete and problematic?” I asked myself. And then I realize that Bitcoin’s role in cryptoland is just to exist and not fuck it up.
Bitcoin is a symbol of freedom. And to be honest, that’s a good enough symbol to make it go up in price.
“Because Bitcoin is just there, Ethereum can just go and take on risks.” - from some talk on youtube I heard.
How can I not have ETH?
But let’s also be real, in 1-2 years, Ethereum probably will face some major bugs in its software. The merge sorta made people/devs feel invincible and that’s generally not a great thing. Also, what ETH upgrades are trying to do are always insane to be quite frank.
I admit I was a SOL-shitter before (Sqlana is still funny as hell). But I think the design choices they are taking are interesting. With Jump daddy backing a large portion of the R&D, the future for Solana might be less unfortunate than people expect.
Anatoly is also a much better person than most alt L1-founders. I like Anatoly.
Moreover, even if Solana fails like EOS at the end, I think Solana’s research into the networking layer of crypto is going to be useful for the whole industry.
Optimism is here because Arbitrum doesn’t have a token yet.
OP is cool from a governance and technical standpoint. Their governance structure is probably the most innovative structure post-governor-alpha. Their tech stack is also fascinating given the way you can swap different parts out of the stack (not yet live as I understand it).
Their focus on retro public goods funding also makes me want them to succeed.
Mid-curve bets are important because most people (with a decent amount of money) are mid-curve. And I want to buy what we want to buy.
LSD, Alt-L1, ZK
“Lido controls 30% of Ethereum and is only valued at 0.2% of the network.”
“Rocket pool is the more decentralized version of Lido and ensures the long-term survival of Ethereum.”
“From a fundamental perspective, LDO’s PE is currently 10x and if you account for future ETH appreciation, this is a no-brain buy.”
So many narratives because LSDs are easy to understand, simple as that. DCF narratives, governance narratives, and attack/security narratives.
LDO, RPL, FXS.
MATIC to the moon. I mean they are so good with BD - it is so hard for my consulting and finance frens not to be interested in it. Reddit + Starbucks partnership. Man, that’s really juicy. Also, MATIC is just 1 dollar now, the unit effect is still in play.
ATOM is the place dreams start and die. Most people just fall in love with the ecosystem and then realize that the ATOM token is useless. But most mid-curves, like me, did not realize it until very late (aka lost money).
Do you understand ZK? I know I don’t. I know what it supposes to mean and what it looks like in the 1980s when the first papers came out. But I do not understand its current form.
But I will still invest in it because it sounds promising and HUGE.
Did we see a ZK bubble this year? In the private market yes, but in the secondary market, no. Youtube videos about ZK are still very academic and educational. The boom-bang-bong picture-style ZK coin videos are gonna be lit.
Not a lot of ZK coins are out there.
“Institutions are coming.”
My DeFi thesis is straightforward. Bet on winners. Why? Even though most legacy DeFi protocols are problematic, we know those problems; and I would even consider those problems just a symptom of growing pain.
Lastly, network effects in these protocol-level apps are immense. To overthrow them would be a feast in itself.
UNI, AAVE, CVX.
A short on humanity
Okay, enough legit bets for the degen me. How can I invest in crypto and not play with the casino a little bit? (I would argue crypto is more like ponzis than casinos because if you get in early, you will 100% make money, unlike in casinos where time-to-entrace is relevant.)
If the coins above represent a hopeful future for humanity, the following coins represent the worst of humanity - greed, ignorance, and stupidity. By longing these coins, I am expressing a short on humanity.
Memecoin is generally a reflection of human greed. The urge to get rich quickly. DOGE and SHIBA are the most prominent ones.
Cardano is a reflection of human stupidity. The darling of Youtube shillers and TA adventurers, Cardano has been in production for so long with little to no production value. While it does produce some interesting academic research papers, it dwarfs in front of its multi-billion-dollar valuation.
Best of luck my fellow frens. Let the DCA game begin.
PS: my allocation is around 80% ideology-aligned coins, 15% mid-curve, and 5% short on humanity.