How to get rich in the crypto market: A six-step strategy from top investors

Original source: Crypto, Distilled

Original translation: TechFlow

Everyone dreams of getting rich through altcoins, but only a few can actually do it.

Why? Most people don't understand the asymmetry of risk and fail to manage risk effectively.

After studying hundreds of top investors, I found an investment strategy that works.

Origin of the strategy:

Inspired by @0x_Kun, who gained freedom before the age of 30 through crypto investing.

His strategy is simple and works for any skill or capital level. It has 6 steps, bookmark this thread and check back at any time!

Step 1: Manage Risk

Step 1 is all about managing risk.

No matter how smart you are, failure to manage risk means ultimate failure.

What is the most effective way to manage risk? Through smart portfolio construction.

“You can evaluate opportunity by the same criteria you use to measure risk. They are all interconnected.” - Earl Nightingale

Portfolio construction?

Risk isn’t just about individual investments – it’s the interactions between them.

Adjusting asset type/amount/weighting changes your overall odds of success.

Goal? Make sure your gains outweigh your losses over the long term.

Cornerstone: 50%+ in $BTC:

Kun’s strategy recommends investing more than 50% of your funds in $BTC.

Why? Even if all altcoins fail, $BTC’s long-term growth usually ensures profitability.

It acts as a safety net against investment mistakes.

P.S.: Most altcoins fail (hat tip to @coingecko)

Multi-cycle blue chips: 25%

Kun recommends allocating 25% of your funds to blue chips that can survive multiple cycles.

For most people, this is usually $ETH or $SOL.

This increases your likelihood of outperforming $BTC while reducing downside risk.

Remaining 25% in small-cap altcoins:

The final 25% should be diversified across 4-6 equally weighted altcoins.

Think like a venture capitalist: a few big winners can make up for losses in other investments.

This approach allows you to pursue 10x to 20x returns while still sleeping soundly.

Why equal weighting is important:

Equal weighting gives each investment a fair chance to balance out the others.

Weighting by conviction is not smart — why include a low-conviction asset?

Equal weighting balances potential gains and losses more effectively.

Diversifying beyond crypto:

Finally, diversify structurally.

Your net exposure to crypto should take into account your age and other factors.

Kun hedges his crypto holdings with gold. Quality stocks also help with diversification.

Step 2: Assume You Might Be Wrong:

Most people skip this step, but it’s crucial.

Always assume you could be wrong. Focus on probabilities, not outcomes.

Be prepared for different scenarios and adjust your strategy accordingly.

Visualize Worst Case Scenario:

Imagine the maximum loss you can sustain and still make ends meet.

If losses are too high, consider investing more in $BTC and less in altcoins.

Be honest with yourself and reflect on past losses and the emotional impact they have had.

Are You Wrong About Crypto:

What if you are wrong about crypto?

How do you hedge? Gold can often be used as a hedge against the $BTC thesis.

Or diversify income streams to further reduce risk.

Step 3: Seek Asymmetry

Patience is key to finding asymmetric investment opportunities.

This means that the potential gains far outweigh the potential losses.

Kun aims to achieve 10x to 20x gains while managing 30% to 50% downside risk.

Don’t Go All In:

After identifying an asymmetric opportunity, resist the urge to go all in.

Remember, the goal is to compound your wealth over time.

Step 4: Develop a Theory:

Once you have identified an asymmetric opportunity, develop a clear investment thesis.

The theory should clearly explain why you are making this investment.

Then, create clear methods to test whether your theory holds or fails over time.

Example Theory:

A theory could be that $BTC reaches a market cap comparable to gold.

One invalidation point could be if Satoshi suddenly dumped all of his $BTC.

While this is an extreme example, it illustrates the point.

Multi-Factor Sell Strategy:

Selling is often more difficult than buying.

To combat this, Kun suggests setting multiple sell conditions.

This helps to protect against market uncertainty and personal bias.

Kun's Three-Factor Sell Method:

Kun suggests breaking down your sell points based on three factors: time, theory, and price.

For example:

· Sell 25% at the end of 2025

· Sell 25% when $BTC reaches $100k

· Sell 50% when $BTC’s market cap exceeds that of gold

Step 6: Develop a post-profit strategy:

After making big gains, many investors make the mistake of selling their gains.

To avoid this, go back to step 1:

1. Re-evaluate your portfolio and look for new asymmetric opportunities.

2. Avoid reinvesting profits into the market too early.

Manage psychological stress:

In addition to financial strategies, manage your mental and emotional health.

Has the crypto market taken its toll on you? Consider taking a break after a solid gain.

Invest time and money in what you love. Balance is the key to long-term success.

Thread Recap:

1. Manage risk through a portfolio.

2. Assume you are wrong and plan.

3. Seek asymmetry and be patient.

4. Use theory validation and failure.

5. Use a multi-factor selling strategy.

6. Go back to step one and make a plan for after profit.

Pure sharing, does not constitute investment advice.

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