At $DIGITS DAO, we produced a $1,416,358.63 RFV gain in Q1 of 2023 with a starting capital of $2,691,883.28. This is a solid 52.61% gain in just one quarter.

So, how did we do it?

What strategies did we use, and what strategies do we see working further into 2023?

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We have a spreadsheet that records all of our trades—wins, losses, and open positions—which is updated frequently to reflect our holdings. All of this information is verifiable and also on-chain.  https://docs.google.com/spreadsheets/d/1NngZ0J207UgKg_u3otzU_pTL6cBRRbmdmpmnEHJSXec 2/54

This is really useful when looking back to determine the types of strategies that worked monthly or quarterly to determine which strategies have the highest probability of winning in the future. 3/54

I highly recommend you track your trades in this way or another, so you can also look back and see what's worked and what hasn't frequently. So, what do we see winning as we enter further into 2023, and what strategies do we consider high risk? 4/54

Looking at data is important, so let's pull up some recent trades as examples. 5/54

In January, we can see that it was a relatively slow month with fewer positions opened than usual. Our biggest winner, $BIT, contributed 50% of our total RFV gain this month. As a concentrated high conviction bet DAO, this is pretty normal to see.

Why did it work? 6/54

Information Asymmetry: $BIT was a case of seeing an inefficiency in the market through public governance, finding this information before everyone else, and smashing the buy button hard. This strategy of information asymmetry we see working well in the future and beyond. 7/54

It's something that presents itself in bear and bull markets alike on rare occasions and is always, in my opinion, high risk to reward. If you're a gem hunter, on chain analyst, or governance sleuth this is your bread and butter. 8/54

Before you read the rest, please bear in mind: This post is not about a specific ticker; it is an analysis of our trades and the ones which have succeeded and the ones which have failed. I am using the ticker as an example. 9/54

Dip Buying On-Chain Strategy: At this time, we attempted to put a long on $FOLD, a token we have over and over again tried to long. It was said that there would be a partnership with Sushi Guard coming soon and the APR of staking with FOLD could get as high as 80%. 10/54

Unfortunately, this team is riddled with delays and, at the time, had unstable management, so even if they had delivered in the future, we deemed it risky to hold. 11/54

FOLD is a token that, even if it goes up, is something that we, in my opinion, should never touch again. We have tried to long it over and over again, suffering paper cuts, slippage due to price impact in and out, and deadlines being moved and visions being changed too much.12/54

When you see a project and team being relatively unstable, constantly moving deadlines and the bar, and not providing clear timelines, it's not a good thing for a swing trader (us) because timing is very important in trading. 13/54

We are not investors, so trying to trade a token in and out can become a challenge when the team is changing dates on you constantly. 14/54

I want to make it clear that our style of trading is different from investors who are happy to ride volatile price action for a chance in the future that the protocol works out. We don't do that. 15/54

We also found FOLD to have heavy bag holders ready to dump at any green price action. This makes securing multiples very hard. You can view this pattern of pain on many alt charts; not to pick on FOLD, it just happens to be an example that has constantly caused me pain... 16/54

The pattern looks like an M with lower highs constantly being met. As price comes up, bag holders in pain will induce selling pressure on any good news to get out and rid themselves of the token that has tormented them. You can see it occuring on most time frames. 17/54

It's nothing new; it's just human nature to want to get rid of the bag that's kept you up at night and ruined your emotional well-being for months. 18/54

So, what did we learn from FOLD: be careful of teams that constantly miss deadlines, unstable or overtly abusive team members, or those that seem to pivot, especially if they are not delivering to token holders. 19/54

Also, be aware that in a bear market, buying a chart which has already had a few run-ups is increasingly risky as bag holders look to exit on large pumps. 20/54

Questions to ask yourself for dip buying:
1.  Has the token had run-ups before, and who is holding this bag looking to exit on the next run-up?
2.  Is the team communication good? Are they updating their investors frequently, does the community have a positive vibe? 21/54

3.  Has the team delivered on timelines before, or are they generally late?
4.  Is the roadmap being followed, or have they continuously changed direction?

IMO, dip buying old on-chain coins will be increasingly risky in 2023 and should be avoided. 22/54

I don't mean to pick on FOLD; the same thing happened with our NFTB and TETHYS swing trades this month. Both old coins couldn't swing, had no follow-through, and closed for small losses or scratch. 23/54

Farming:
At the same time, we entered a $GRAIL genesis farm with our ETH-USD. We can see that over three months, this farm, including a little top-up of grail to boost it in the beginning, produced a hefty 300% gain this quarter. 24/54

This is partly due to the APR, which was 200%-300% at one point, ETH appreciation, and GRAIL number going up. 25/54

Farms that last are rare, but when you catch one or can rotate frequently between them, you get some amazing gains over time. This is not a strategy where you will make 300% in a week but rather a slow and steady drip over time. 26/54

I expect much chop/sideways for the next quarter and even leading up to 2024. With this overall bias, farming plays a crucial part in our portfolio. When things go sideways, why not get paid to wait for the market to enter another bull cycle? 27/54

I like putting assets I want to hold to work, and as we have seen with a 300% gain on our Camelot farms, this is a profitable strategy in 2023. 28/54

When you're checking out new farms, it's essential to find out:

1.  if they are using audited tech or are audited themselves,
2.  how many partnerships they have with other good protocols,
3.  who is on the team and if they are doxxed, 29/54

4.  if the tokenomics of their farming token make sense, so the yield can stay relatively high. 30/54

A new farm I'm excited for is @ChronosFi_, which IMO fits all of my criteria. They have partnered with some of the biggest protocols, including @fraxfinance, which is not an easy thing to do. 31/54

They continue to update the community with more partnerships and news, have solid tokenomics with a twist to keep token price up and APRs looking good, and although the team isn't doxxed, the code they're using is audited and undergoing more audits, which IMO makes it safer 32/54

New On-Chain Projects:

New on-chain projects have been our most profitable trades for 2023 because of two main factors:

1.  We are generally early to new narratives.
2.  We know how to analyze a team, their docs, tokenomics, and make sure there is lower risk. 33/54

3.  We can get in at a low market cap and valuation by taking a bigger risk, being early without confirmation the product works, etc., before people get comfortable.
4.  There are no old bag holders in pain waiting to dump their bag on your face. 34/54

New projects can mean a seed round, private, public, getting in right at launch date super early, or simply buying something that hasn't launched yet like Bera Chain NFTs @berachain. 35/54

We've had the most success this year with our Bera Chain NFTs appreciating in value as the team continues to communicate well with their community, and the community continues to spread the word about what's being built. 36/54

This is by far our best trade from 2022-2023, and I believe it will continue to be as we get closer to and into 2024. 37/54

It's a good product, can be speculatively quantified so we know our risk and potential reward, has a solid roadmap and good tech, and boasts an amazing community and good communication from the team. It checks all my boxes and more. So we keep holding most of our collection 38/54

$PSI and $WINR were two public sales that worked out really well for us. We identified these projects while the narratives were hot and saw that the FDV would be low at launch, so we played them for a swing. 39/54

This get-in, get-out style on launches is something we like to do a lot. Sometimes we cut the trade too early, but a lot of the time, this protects our gains, and we continue to be profitable over time due to this in-and-out nature. 40/54

What did we like about PSI and WINR, and what questions should you ask yourself before entering a private or public sale?

1.  What is the FDV? If it's already going to be at 50mm FDV at launch, who's going to buy it from me? 41/54

2.  Is there enough interest in the raise, and will there be people who miss out? People who miss out are the best; you need a raise that is hyped and people who either didn't see it or couldn't get filled to buy your bags. 42/54

3.  What's my vesting like? Is there enough coming to me that I can at least cover my risk, or do I think this has staying power?
4.  Is the team doxxed, do they have audits, or who are they partnered with? Not just which favorite influencer likes them. 43/54

Dig deep on this one; it's especially important for rug detection. Sometimes you can try your best to be ahead of bad actors but still get hit. I still get hit. 44/54

We got hard rugged on the Raisensu pub sale this month, but when you look at the profitability over the quarter, winning on things like $PSI and $WINR, this strategy is still worth the risk. 45/54

But what if you can't get in the sale or it's a stealth launch? You can still be early if you can't get in a sale, but you need to be mindful of pre-salers, their lock-ups, what multiples they're at, and who can dump on you. 46/54

Buying post-launch is often profitable in a bull market but has less risk/reward in a bear market as there's likely less follow-through. 47/54

This can work in new narratives like our $ZERO trade, but it can be detrimental when a private sale has no lock-ups and an instant dump, like $SATIN. Just be extra careful, especially if not in a bull market, doing this. 48/54

You'll see on our sheet an increased allocation to VC positions. This is due to our past experience this year, seeing this strategy work far better than other trading strategies. With limited capital floating around on-chain, it's more important than ever to be early. 49/54

We're looking forward to the $GND and $GRAIN launches, which we participated in, both having great, renowned long-term teams with visions, large communities, communicative mods, and well-run protocols. We feel very confident in these investments. 50/54

We're also looking forward to a new risk to earn GameFi protocol @etherwars_ launching this quarter. We incubated this project so had our input from game mechanics, tokenomics, launch, FDV etc. Tokenomics and sale are non-predatory with some flywheel mechanics I'm proud of. 51/54

You can see on our sheet we're already practicing what we preach, with a larger portion of our capital in farms and VC (I also include Bera Chain NFTs in this category, although they still sit in NFTs). 52/54

We will continue to migrate more capital to these VC and Farm categories moving into 2023 and think this will further increase our profit moving forward. 53/54

I hope this was a helpful thread, and if it was, let me know in the comments, and I may do a quarterly review like this every quarter if there's enough interest. 54/54

Digit DAO's Q1 Performance and Strategies for 2023

I'm a big fan of trying to get to narratives early, so when everyone was preoccupied with $ARB and the future of France, we bought some $ZERO and started focusing on the LSD narrative to come in April.

But how do you know if you're early or late? 🧵

A lot of the time, it pays to forward-think the market because if you get itright, you really capitalize on the maximum RR you possibly can get. When no eyes are on something, it's really scary to buy, even for me.

But when you feel this fear, you're likely very early, and the RR is great. This is when you can capture the multiples everyone talks about.

Feeling: feeling in trading is so important, and listening to your body and understanding how it reacts is paramount to any trader's success.

When you feel comfortable, for instance, this is usually when you are late, everyone has shared it, the protocol has shown that the tech works, and your favorite influencers are threading about it.

What does all of this confirmation do for us? It makes us feel comfortable.

What does it do for price? Likely this confirmation and comfortable feeling we feel others have felt or are feeling, and price has sent. Your RR has drastically changed.

This is when I try to be careful, and even if I am going to long it, I will do so with a reduced position size.

What happens when everyone is focused on $ARB, but you want to buy an LSD token forward thinking the next narrative? You see that $ZERO is posted in a chat, and everyone ignores it. No one replies to it. You think okay, whatever, I have some time.

You read the docs, you search Twitter - crickets. My god, what am I doing? This thing is surely a rug, you think to yourself.

This is when we did some increased due diligence and tried to find out as much about the team as we could. Anon team - nothing. Jeez, that's scary, isn't it? Price is not moving. Why is it not moving? This is an Alchemix for LSD with good tech, and the market cap is 1mm.

Rug risk is still there, so take that into account, but after digesting the docs, you feel you're early anyway. Still afraid? What do you do? Well, we size in.

When you feel fear, sometimes it's because you are early. As human beings, we crave the comfort of the herd. As traders, we need to be mindful and careful of this comfortable feeling because it brings complacency. And complacency makes us lose money.

This same complacency and comfortable feeling are what get people to go all-in on BTC at 69K. We want to be a part of the group, we want confirmation that everything is okay before we bet, we don't want to lose. This same human nature is exactly what makes us lose.

So how can we protect ourselves against ourselves? When the herd is euphoric, especially in a bear market, and you are feeling amazing, and you decide to share your PnL screenshot with your group and your friends - you're late.

In this scenario, I try to take risk off the table, but I don't always get it right. Sometimes even for me, emotions get the better of me.

When the trendsetters come out, and everyone is euphoric, including yourself, you have to breathe deep and ask yourself "who is going to buy after me?" If your answer is everyone knows about it already, the catalyst happened, and it's flooded in all my groups and on Twitter...

When you feel fear to enter because no one is talking about it, if you have done your due diligence, and this is a good product by a good team with good tech and it has good tokenomics and it has passed all of your tests, it's time to put some risk on.

Use this fear as a guide to if you are early. It is a different kind of uncertain fear than the fear you may feel when you size in too big at the top or put too much risk on (that's for a whole other thread in itself).

It is a fear feeling of uncertainty, and it is the most profitable feeling we have.

Knowing When to Invest - Feeling

Let's talk about the impact of the Federal Reserve's interest rate decisions on the #Bitcoin price.

2/ In my opinion, a 0bps rate decision could trigger a significant upward movement in #BTC, while a 25bps hike could require careful analysis of Powell's post-meeting speech.

3/ Lower interest rates are typically favorable for #Bitcoin, as they reduce the opportunity cost of holding non-interest-bearing assets like crypto.

4/ A 0bps decision could lead investors to allocate more funds towards riskier assets, such as #BTC, which could trigger a surge in demand and melt up its price straight to 30K+.

5/ However, a 25bps hike could dampen investor sentiment (it's mostly priced in) and lead to a sell-off in risk assets, including #BTC. The market will likely be paying close attention to Powell's post-meeting speech for guidance on the Fed's future monetary policy decisions.

6/ In his speech, Powell may provide insight into the Fed's outlook on the economy, inflation, and the likelihood of future interest rate hikes.

7/ If his comments are perceived as dovish, suggesting that the Fed may not raise rates again anytime soon, it could be positive for #BTC and other risk assets.

8/ On the other hand, if Powell's comments are perceived as hawkish, indicating a more aggressive monetary policy stance, it could lead to a sell-off in risk assets, including #BTC.

9/ It's important to remember that the impact of interest rate decisions on the #Bitcoin price is not always straightforward.

10/ Many other factors, such as global economic conditions, market sentiment, and regulatory developments, also play a significant role in shaping market trends.

11/ However, if the Fed decides to hold rates at 0bps and Powell's speech is perceived as dovish, it could present a unique opportunity for #Bitcoin investors to capitalize on a potential surge in demand.

12/ If the Fed decides to hike rates by 25bps, investors should pay close attention to Powell's comments to gauge the potential impact on #BTC and other risk assets.

13/ It's important to keep in mind that the Fed needs to balance its monetary policy decisions with the needs of the struggling banks. While some rate hike may be necessary to curb inflation, the Fed cannot afford to be too hawkish in its approach.

14/ My bet is on a melt-up for #BTC as rates come in at 0-25bps with a dovish Fed, and as u know I'm already long. I'm looking to add if we see $26K, but I don't expect a full retrace to $25K. I would be a little concerned if this level does not get front-run and monentum fades.

Federal Reserve's Interest Rates and Bitcoin Price

I was expecting a Sunday dump to add to my $MAGIC bag with the upcoming gaming convention next week. Didn't get it. Still happy.

A lot of the time in trading, I try to create a scenario where I will be happy if the number goes up.

And also happy if the number goes down🧵

What I mean by this is if you are fully allocated at the start of a trade, and there is some volatility before your catalyst takes off, you might puke your entire bag, sell at a loss, and watch your entire thesis play out.

Your bet size has to make sense or you'll fumble. If you're right, and your entry is spot on, and you have 75% of your max position, are you going to be upset? Heck no, you will be very happy, and you'll ride it.

As you're riding, forget what the number looks like, and exit as you should on catalyst or new info.

If you're a little early, and your entry isn't spot on, and price dips a bit, maybe you'll add size, maybe you won't, but you're less likely to puke the entire bag due to normal crypto market volatility than if you had over-allocated from the start.

This "make sure you're happy in all scenarios" method has saved me from fumbling many bags before and has allowed me to hold on until my thesis plays out. It also helps inform your bet size, and you are different, your emotions are different, your feelings are different.

I find it completely asinine coming from a Forex background where the entire industry promotes 1-2% portfolio risk every single trade, and no more or less. This static sizing makes me sick... I could take about that forever. But more on that for a bet sizing thread...

For now, try this simple trick. When you are entering a position, ask yourself the simple question:
Will I be happy if the number goes down?
Will I be happy if the number goes up?
Adjust size based on your answers.
Be happy.
GM. This morning I am happy.

Creating Trading Scenarios for Happiness

Timing and size are the most important aspects of trading. So, how do we time entries and exits properly, pick the correct size so we don’t get blown out, and manage these trades while things change in the middle?

Here’s a 🧵 on how I do it, and how you can do it too (TLDR #35)


What if you were right that BTC was going to send to Valhalla, but you used too much leverage and got stopped out last night on a 1,000 scam wick price movement yesterday only to watch it climb to 50K in the next month without you? Did you get liquidated? Bet size.

What if you thought you bought an arb coin that had a new product launch in 1 week, only to get delayed a month due to audit problems and you watched the entire ecosystem pump without you, while your coin evaporate 50% after arb season, and the catalyst was still delayed?

A recent trade we took at @digitsdao was $GRAIL pre-Arbitrum announcement.

The thesis was simple - there was another myth and chatter going around Twitter that Arbitrum was going to have a token drop soon, so we wanted to play the rumor even if it didn't come true.


We had no idea the rumor was true, as it had failed multiple times before, and was not yet confirmed by the official team. Risk.

Timing was good; we got into GRAIL very early and because it was liquid decided to go for a fairly large size. We used the majority of our liquid stables to enter GRAIL, knowing that if the rumor was fake, we would take a modest 5% hit from where we entered.

As the rumor spread, we were sitting in profit and decided to close because multiple times before, Arbitrum had a rumor that the coin was dropping only to disappoint. History is important and should almost never be ignored.

This happened to be one of the rare times where “this time is different'' actually came true. This was the most risk-averse exit, and one we took.

Hindsight is 20/20, and if you look now, GRAIL is up a lot from where we had exited. We re-entered the trade higher today looking for a much higher blow-off up to the Arb coin launch. Why? Never feel bad about buying things you sold higher when information changes.

Now we have confirmation of an Arbitrum token airdrop (we did not have this before when we exited), GRAIL has proved to be a higher beta to the market and Arb ecosystem by being one of the most liquid coins on-chain.

It is a coin we can size into comfortably without getting hit with too much price impact (bet size), and the timing feels right to ride higher beta Arbitrum ecosystem up to the token launch. All of this confirmation makes the trade less risky, in my opinion.

We see a high probability of $GRAIL continuing its upward price pressure and discovery as we near closer to the airdrop.

We also see $BTC going further here, pulling the rest of the market up with it, and when BTC does that, we want to be allocated to hot narratives (Arbitrum ecosystem as a whole).

$GRAIL is our proxy, and although we cut the bag in the most risk-averse fashion before, information now has been confirmed, and it is an easier hold and entry making it still a great trade, in my opinion, up to the Arbitrum token drop.

Timing is something you have to feel as a trader; it’s not always rational, but there are some things that can help you time exits and entries properly, but the most important rationale for timing for me is always a catalyst/narrative.

OK, so we took the most risk-averse exit on $GRAIL, but what new information did we get from the Arbitrum token being announced, and how can we use this strengthened thesis to inform future trades?

One trade we recently took today is $gFLY, a gamefi project part of the $MAGIC ecosystem on the Arbitrum. TLDR gFLY has great statistics when it comes to user growth and product.


MAGIC is one of the largest communities set to receive a huge $ARB token payout, and we see $gFLY as being a higher MAGIC beta play durring a gamefi arbitrum season narrative.

@alpinestar17 explained it has a good product with consistent and constant user growth, it has good tokenomics and decent liquidity, and it was a trade he brought to the table weeks ago.

We decided not to take the trade at that time because it felt early (timing), but the time is right now. FYI Alpine is also someone you should be following if you're not already.

There is a big gamefi conference next week, GDC, and you better believe we can expect some type of announcement from the $MAGIC team here.

More eyes on $MAGIC  mean more eyes on $gFLY (higher beta), and with a good working product, consistent user base growth, we think it's a good bet going into next week.

How did we choose our bet size? Liquidity is fairly thin, but we feel like this could do multiples, so we were happy to take a 5-10% price impact hit on entry.

This is a rare occasion, and one where I will only agree to if we are what I consider “early” to a trade or narrative, and I shrug the price impact off like the tax on a meme coin.

When you are early, you HAVE to take advantage of it, even if it costs you some slippage.

With the GDC conference coming up, I felt it was an easy decision to eat this price impact. With the current market environment, there was no way we were going to get a TWAP on, and with our wallet being public and watched, it would make it nearly impossible in this environment.

We don't exit when the “number looks good” on our trading account. For us, it's simple - we exit mostly on a news catalyst, product release, or some type of inefficient pump in price we can sell into. Sometimes this means we exit way too early.

Most of the time, this protects our profits, and we simply move on and do not become bag holders. Our style is to try to capture some of the move, not all of the move, and get out before anything changes in narrative/thesis/macro.

Sometimes this style of entering and exiting means we enter and exit the same coin multiple times in the lifetime of a trade/narrative like we have with $GRAIL.

We won't sit in a trade waiting for the devs to do something. We won't sit hoping people buy our bags so we can cut at entry. We won't become community members and convince ourselves this is the future of France. This keeps us alive and surviving so that we can thrive.

Here is the TLDR points: Never make your bet size so big you can't sleep at night or sit through normal volatility. You’ll most certainly fumble the ball before you get to the goal.

Never convince yourself the team is good, and things are coming in the future if you don't have a set catalyst on the way. Never size in too big you risk liquidation (survive first)

Always feel comfortable buying back a bag higher and don't get attached to your original entry and exit. Every trade is a new trade. Always consider how long the narrative will last, if it is still hot, and when your catalyst will be in this narrative.

If timing changes while in a position, analyze the change and don't convince yourself to hold, cut the bag. Don't exit a bag just because the number looks good on the screen. Exit for a reason.

Trading is a never-ending learning experience that requires constant effort and improvement. The most important aspects of trading are timing and size.

As a trader, you need to find the right balance between taking enough risk to generate profits and not risking too much that it leads to a significant loss.

To time your trades properly, it's essential to focus on catalysts and narratives that drive the market. By following this approach, you can make better-informed decisions about your trades and be more successful in your trading career.

Remember always to be comfortable with your bet size, understand the risks, and don't get too attached to your trades. Every trade is a new opportunity, and there will always be more opportunities in the future.

By learning from experienced traders and constantly improving your skills, you can become a successful trader and achieve your goals too.

You can read the unrolled version of this thread here: https://typefully.com/DigitsCapital/hQkzp2B