From Legendary DeFi Investors to Successful Secondary Market Traders

A well-known cryptocurrency investor achieved a 100-fold return in less than 3 years. Now he has turned to Secondary Market trading and continues to perform excellently.

This investor entered the crypto space at the age of 20 in 2017. He majored in Economics and minored in Entrepreneurship at Nanyang Technological University, actively participated in extracurricular activities, and served as the Vice President of the Investment Club. After graduation, he joined a large oil commodity trading company as a trader.

As interest in blockchain has grown, he resigned from his job in oil trading. This experience in commodity trading helped him establish strict standards in cryptocurrency investments, allowing his fund to minimize losses during the FTX collapse.

He gradually became a fundamental investor, focusing on the potential uses of cryptocurrencies beyond speculation. This led him to delve deeply into Decentralized Finance in early 2019, fully taking advantage of the opportunities brought by DeFi Summer.

He is currently the founder of an investment fund that mainly focuses on the Secondary Market. At the same time, he is also an opinion leader with over a hundred thousand followers.

He stated: "In the process of growing into an investor, I gradually formed my own investment philosophy. Every investor has a unique investment philosophy, just as Buffett represents the idea of long-term value investing. Once an investment philosophy is established, one will begin to look for suitable investment strategies. These strategies will adjust with market changes, but the core philosophy typically does not change easily."

Through these experiences, he realized that successful investing requires not only keen insight but also the ability to continuously learn and adapt to the market.

Investment Strategy Revealed

The investor stated: "Our fund size is between eight and nine digits. We adopt a typical fundamental-driven coin selection strategy, mainly focusing on small to medium-sized cryptocurrencies. Large cryptocurrencies like Bitcoin and Ethereum are not our main investment direction because our goal is to outperform the performance of these large cryptocurrencies."

"We started primarily investing in DeFi projects in 2020, and afterwards we would invest in any sector that we believe has potential for growth. Last year, we also invested in many AI projects, and we have been continuously investing in the gaming field."

Someone asked him how to ensure sufficient understanding of all investment areas. He admitted: "This can only be achieved by spending time. As long as you are willing to invest time, anyone can reach an investable level in a relatively short period, of course, it is not possible to understand as deeply as a technician. But as an excellent investor, you do not need such deep knowledge to invest; you only need a basic understanding to start investing."

Advice for Newcomers

When it comes to quickly understanding a new track, he provided three steps:

1. Assess the degree of integration between the track and cryptocurrency. Sometimes people may forcefully apply an application to blockchain, but the actual integration may be very low.

2. Determine whether there is a possibility of rapid growth. Due to the generally restless nature of the industry, if a track takes a long time to grow, it may lack sufficient patience.

3. Look for supportive data. Prepare some data to support your optimistic viewpoint on this sector, and give yourself 3-6 months to validate it. If after 6 months the data still does not reflect the expected growth, you need to reassess your judgment.

Learning from the mistakes of others is wisdom; learning from your own mistakes is intelligence.

Investment Lessons

In the operation of the previous fund, due to some force majeure factors, the fund launched a new phase between 2020 and 2023. Many previous investors expressed strong support for the new fund and continued to invest, resulting in a relatively good performance for the latest fund.

Reflecting on this experience, he believes there are many useful lessons for entrepreneurs. He points out that there are many opportunities in the investment industry, with relatively low barriers to entry. However, this industry also has its challenges, as many aspects are still immature, leading to easy speculation.

He mentioned that the key to success in the industry's history over the past 5-7 years is to "survive." As long as one does not fail, they can be considered a relatively successful investor.

In the investment process, in addition to market risk, there are two main risks to be aware of:

1. Custody risks. Now, when managing others' funds, it is essential to have good custody operations. Recently, some exchanges have been hacked, resulting in losses of hundreds of millions, which is unacceptable in 2024. Investors should use top-tier custody services in the industry to address this issue.

2. Counterparty risk, including the exchange and the investment project itself. Some people lack imagination regarding these risks, as everyone usually holds an optimistic view of the future. However, once problems arise, such as a borrower not repaying or the exchange going bankrupt, investors can face significant losses. He reminds everyone to conduct proper risk assessments and not to easily trust the promises of project parties.

He admitted that he had lost money in both custody and counterparty risk. Starting from 2022, they discovered an imbalance in the market: a large number of venture capital (VC) funds emerged, while the market did not have enough liquidity to absorb this capital. Especially in the United States, the scale of some large VC funds far exceeds the capacity that the market can bear.

This instead provides an opportunity for the Secondary Market, as it is more volatile and many investors are unwilling to participate. More and more quality projects are being ignored after issuing tokens because VCs often focus only on early-stage investments and neglect subsequent operations. Therefore, he hopes to fill this market gap and provide support for projects in need of assistance. The functions of VCs have also become more diversified.

Industry Maturity, How Should Retail Investors Respond?

When discussing the landmark changes of this cycle compared to the last, he believes there are many "watershed" events, such as the FTX collapse and liquidation, as well as a large exchange reaching a settlement with the U.S. government, all of which are milestone events.

"Of course, there will still be some relatively aggressive strategies in our industry, but I believe it will become increasingly difficult. This year's performance is a reflection of why Bitcoin reached new highs while many people feel they haven't made much money. Because our positions in the primary market and small-cap coins are usually larger than in Bitcoin."

"The biggest change is that the market is indeed moving towards a more institutional direction. The largest exchanges in the industry have reconciled with the U.S. government, so they may face more operational restrictions in the future."

How to determine entry and exit timing?

A venture capital friend asked: "I often read your investment reports, and the performance is very good. In this process, there are many opportunities that you see but others may not. You also have heavily invested tokens, and the market liquidity may not be very good. How do you determine the entry and exit timing for specific targets?"

He stated that this is indeed the most difficult to grasp. Market timing is very important for this circle. He believes there is no completely correct answer, and adjustments need to be made according to market conditions; they have been making adjustments all along.

He believes that the biggest difference between this cycle and previous cycles is that when you see projects with strong fundamentals, you should be more proactive about taking profits.

"During this cycle, I believe the truly good profit exit window does not exceed two months. In fact, it is from the second half of March to the first half of April; this short month is the best time to exit for profit. If one does not exit, it is easy to be far away from the peak."

"So you need to consider the market situation, take into account macro factors, pay attention to market liquidity and trading volume, then look at market sentiment, and also check whether the funding rate is positive or negative. We are also continuously increasing the analyzable data to find better allocation timing from a macro perspective."

In terms of fundamentals, he will also pay attention to on-chain transaction volume, whether there are large-scale purchases and sales.

We also need to look at the growth of the fundamentals. Because sometimes, from a fundamental perspective, many blockchain projects can rise from extremely low valuations to extremely high valuations in a very short time. The AI sector is the best example.

He believes that the AI sector was relatively undervalued last year. At that time, everyone was quite conservative about crypto AI. But once the bull market arrived, people started to speculate heavily, and many projects rose by more than ten times.

The Most Successful Investment Experience

According to his recollection, the project with the highest peak return rate was a certain gaming project, with a peak return rate close to 2000 times. The investment cost was around $0.08, and the highest price exceeded $160. Of course, it's impossible to sell everything at the highest point, as some tokens are still locked, and although the return rate is very high, the investment amount was quite small.

During the first round of financing for this project, it was believed that there were very few investors in this sector, and coupled with the fact that it was during a bear market, the total financing for that round was less than 1 million USD, so they did not invest a lot of money. However, in terms of return on investment, this project had the highest.

If we look at the track, the most successful investment is in Decentralized Finance (DeFi). Having entered this track quite early, I have basically invested in most of the currently successful DeFi blue-chip projects, such as certain well-known decentralized exchanges and lending platforms.

Their investments in the Secondary Market have also been very successful. In the early stages, many DeFi projects did not have a so-called seed round; if you wanted to invest, you could only do so by purchasing tokens or participating in liquidity mining. Some of the projects mentioned above are investments made in the Secondary Market.

Lessons Learned from Major Events

After experiencing some major events, he has higher expectations for the team's integrity. If a person's character has issues, no matter how successful their project is, it could collapse in a short time.

The industry has experienced many similar events; individuals and institutions that once held great power in the industry ultimately collapsed due to personal issues and breaches of moral boundaries. For investors, such investments hold little significance unless they are seeking very short-term gains.

Famous American angel investor Naval Ravikant once said: "When choosing business partners, value wisdom, energy, and most importantly, integrity... If you only choose smart and driven people, you might end up with a clever and hardworking fraudster who will eventually deceive you."

In other words, if only smart and energetic people are chosen as business partners, then they might just be a smart and hardworking scammer. The actions of morally depraved bad people can be more extreme and may backfire.

Another reflection is risk control, and he has done quite well in this regard. Although he invested in certain failed projects, he did not suffer significant losses.

After that, he raised the second round of funds, and many of the original investors continued to support him.

As he said in the end: "If a person's character has issues, no matter how successful their project is, it could collapse in a short time."

Reflecting on his experiences, it may be his integrity that has achieved today's success.