Was reading the excellent memo on value vs growth by @howardmarksbook, and thought abt how his insights may apply to crypto, and investing in exponential trends in general 👇

(Texts in images from Howard Marks. Comments mine.)

1) First, low price tag doesn’t mean something is a bargain. High valuation doesn’t automatically equal a bubble. All depend on how you expect future growth path to play out.

Don’t dismiss the entire crypto market off hand just b/c prices seem ungrounded.

2) High-growth assets are volatile. The over-exuberance they inspire on the run up tend to exceed their immediate prospect. When prices correct, they can be correcting for quite a while.

3) That’s why for investments that bet on mega trends (e.g. internet in the 90s, crypto today), long term risk is much smaller than short term. For this type of asset, it’s better to hold over the long haul rather than trying to trade in and out.

4) But that’s intrinsically against human instinct. No matter how deep you think your conviction is, when price crashes, it’s difficult to not want to sell.

The crypto maximalists’ solution to this problem is to turn HODLING into a semi-religion. Don’t think, believe!

4) But we humans have worshipped more than our fair share of false idols.

Internet was the mega trend in early 2000s. Yet you could have easily “hodl on” to Myspace instead of Facebook.

Successful investing depends on qualitative discernment, even if you’re riding a real mega trend.

5) DeFi may be a mega growth trend, but is ethereum MySpace or Facebook?

@stanleydrucken1 thinks the former. I think he’s mistaken, but I see where he’s coming from.

In a bull market every asset looks heavenly, but truly extraordinary ones, those that deserve deep conviction, are always few. Skeptism should be the baseline.


6) Still, in an exponential trend, it’s more optimal to find a small number of high potential bets, develop your thesis, and hold onto them. If you buy a bunch of tokens that you don’t know much about, you’d be tempted to sell at likely the worst timing.

7) You only get a few truly extraordinary opportunities in a life time. This is true for crypto, for investment, and for life in general.

If you think you find one of those opportunities, hang on to it and don’t play small.