The Wolf Den #513 - Defensive Investing

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Professional investing is a competitive game. You are playing to win - against yourself, against the buyer/seller, and against the market. The stakes are high and there are no participation trophies.

It’s go big or go home.

But how relatable is the sports metaphor to investing? Let’s look at tennis as an example.

For the recreational player, tennis is a loser’s game. What I mean by this is that the relative skill is low and the mistakes are abundant. If you rarely play the game, picking up a racket is going to be a nightmare. The sun will be in your eyes, the wind will bother you, and your knees will likely give out. At least these are things you will tell yourself to justify your awful play.

Good luck hitting the ball over the net or in bounds.

Professional tennis is a winner’s game. Mistakes usually don’t determine the outcome of the match - the match is won by the player who can hit the most winners. For these players, it’s all about the right spin, placement, speed, and timing. The pros are so good at their job that statisticians keep track of “unforced errors,” the rare times that the players make a mistake.

In recreational tennis, points aren’t won, they are lost. On the contrary, in professional tennis, points are won.

If you want to win a tennis match, play defensively and let your opponent beat themselves. Lob the ball back in a high arc every single time until the person on the other side of the net becomes so frustrated that they hit the ball out of bounds.

Boring, but effective.

The same is true for the market. If you want to win, simply avoid hitting losers.

If you do happen to be a professional, ignore my advice and keep doing what you’re doing. But the reality is that 99% of us, myself included, are not professionals. We are better off playing a defensive game in both tennis (ok, I am pretty good at tennis) and investing, especially when the market adds a layer of difficulty. If our market was a tennis court right now, we would be forced to wear drunk glasses, play in the rain, and the net would be moving. This market is almost impossible to trade, which is all the more reason to swing defensively.

Much of investing is out of our control, as much as we may want to believe otherwise.

Defense wins championships. To be clear, defense playing does not mean sitting idle - it is an active and protective strategy. You can’t play defense from the sidelines.

You can read more about it by searching “The Loser’s Game” by Charles Ellis.

What more is there to say? Bitcoin was approaching resistance, wildly oversold on lower time frames with bearish divergences. There’s little to hang our hats on, as it appears markets are content to chop sideways and make a fool of anyone who attempts to make predictions.

There’s nothing new to look at on the Bitcoin chart. Just another fake out to hurt leverage traders.

I have been posting the markets wrap article every day, and I am starting to feel like markets are schizophrenic. We have opposing headlines on a daily basis, talking about stocks reaction to oil prices etc. One day oil prices are certain to rise - the next day they will drop.

Bottom line - nobody knows what is going to happen and it changes with the emotions of the market participants. For now, we just need to accept the uncertainty and volatility.

Here are some key events to watch this week:

Some of the main moves in markets:

Optimism is an Ethereum layer 2 scaling solution that just had a highly anticipated airdrop of OP tokens for Ethereum users. The scaling solution was hailed as a big success… but in typical crypto fashion, users are struggling to receive their tokens and the network is struggling to handle the demand. If anything, this tells us that scaling won’t magically be solved overnight.

Lastly, you may be eligible for the airdrop. The criteria to receive OP tokens according to the site are the following, “Optimism User, Repeat Optimism user, DAO Voter, Multi-sig signers, Donated to Gitcoin Grants on L1, Priced out of Ethereum.” To find out if you qualify, you need to connect your wallet and input your address HERE.

Just because it’s a nascent market does not mean that the laws do not apply. A former OpenSea project manager is facing up to 40 years in prison for committing insider trading using privileged information regarding upcoming listings. The sentencing seems overly harsh, but the first to get caught is always hit the hardest. Remember my buddy Charlie Shrem? He is a prime example.

Nate only pocketed 19 ETH from the scheme, so 40 years in prison seems absurd. Frankly, any prison time seems like overkill.

The story goes to show that there is probably a lot more about the NFT market that we are unaware of and regulators are just starting to catch up.

Solana going down has become a regular occurrence. Yesterday’s outage marked the 8th time that the network has reportedly stopped, this time for roughly 5 hours. The outage brought all applications to a halt. It seems as though things are back to normal, for now, but this clearly is suboptimal.

If we want mainstream adoption, then blockchains need to work at scale. Right now, some are barely working even through a low interest bear market.

I remain invested in Solana, but not thrilled with this recurring theme.

Everyone loves Shaquille O'Neal AKA Shaqtoshi. FTX continues to lead the push for mainstream adoption and we are all here for it!

Chief Compliance Officer at BitGo and formerly CCO at Coinbase, Jeff Horowitz is no stranger to regulation. Navigating state, federal, and international policies and regulations, Jeff is playing a crucial role in the future of Crypto. He joined us to discuss The Executive Order, regulatory road-blockers, promising growth at BitGo, and what he’s most excited about for the near future.

In this episode with Jeff, we discussed:

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