In this edition, we’re giving you a rundown on 0xWangarian’s thoughts on the market, from thoughts on trending tokens, to trading styles.
0xWangarian is a Co-Founder of Tangent, a group of crypto angel investors and experienced operators, with an impressive list of investments and advisors.
If this is indeed the start of a new bull cycle, the transition from bear to bull brings its own challenges, and requires different strategies. and time frames of trades. Instead of minimizing risk and optimizing for yield, many are looking to position themselves in sectors that may see new capital, and analyzing proven winners.
Stay alert in the markets ⬇
Background on 0xWangarian
0xWangarian is a Co-Founder of Tangent, alongside Jason Choi.
Previously, he worked at Defiance Capital, a top fund in the space.
Unique compared to some other funds, Tangent operates primarily as an angel investment group.
The fund also commits to funding and advising only up to 5 protocols each quarter, and taking a maximum allocation of 3% of token supply or equity of a given project.
Initially started as an angel investing syndicate, Tangent now incorporates various strategies such as low-time frame trading, spot accumulation, and venture investments.
0xWangarian primarilyoperates in these additional ventures, while Jason Choi focuses on venture investments with a three to five-year time horizon.
Tangent also holds a stacked advisory panel including 0xMaki of SushiSwap, Sam Kazemian of Frax, among others.
BTC ETF & Market Views
0xWangarian believes that in the long term (six months or more), he is constructive about where the crypto market is heading.
He mentions being bullish on high time frames since the start of 2023.
He adds that on shorter time frames, there is some caution due to BTC’s rapid rise from 25k to 44k without significant consolidation.
He acknowledges that there might be a temporary pullback but remains optimistic overall.
0xWangarian highlights that ETF approval will be an important event to monitor for Q1 performance.
The positioning and price action around ETF approval will dictate market sentiment.
He adds that historically, events like ETF approvals tend to have knee-jerk bearish reactions initially.
Some people sell into the news while others try to front run by going long.
There can be a time gap between ETF approval and the actual launch of the product.
This gap may lead to a sell-off as people realize they have to wait for the inflows.
He believes that ETF approval signals regulatory acceptance of crypto as an asset class. Improved liquidity flows in the US could result in increased $BTC inflows.
What does the next cycle look like?
0xWangarian says that current market movements are driven by sidelined capital rather than significant retail flows. Retail interest hasn't fully returned yet based on indicators like Coinbase app popularity and Google Trends.
He speculates whether the next cycle will prioritize real use case products over meme coins.
Currently, Tangent hasn't observed too much random trash pumping, indicating limited retail participation.
0xWangarian says that trades under a month focus on optimizing entry levels and scalping for a 10% to 50% move.
Longer-term trades (over a month) are thesis-driven bets, focusing on specific verticals.
He adds that a top-down perspective is used to identify verticals with potential for outperformance.
The holding period for these trades can range from 6-18 months.
Bullish Alt-L1's, AI, BRC-20s
0xWangarian says that alternative layer-1s, such as Solana, are still considered promising due to market comfort with the narrative.
AI is seen as a sector with potential, as it operates in a PvE environment rather than PvP.
Derivative DEXs in DeFi may not perform well due to competition and focus on margin chasing.
Researching teams and conducting proper due diligence is crucial when evaluating AI coins.
Some projects that have yet to release coins are expected to be more sustainable than existing ones.
Web3 functionalities can improve AI-related projects, but the market is still early-stage, making even white paper projects potentially valuable.
PvP and PvE sectors
0xWangarian says that PvE environments like AI coins and BRC-20 tokens are attractive for capital inflows from retail investors.
DeFi, being more mature and PvP-oriented, is considered harder to pick winners in.
He predicts a burst of the bubble moment for AI in which unsustainable projects will fade away.
After a consolidation phase, AI-related projects are expected to come back stronger and experience significant market cap growth.
BRC-20 tokens are also predicted to see substantial market cap growth in the future.
0xWangarian says that simplification is crucial for investors, as 99% of annual performance can be attributed to two to three specific decisions.
He adds that the three most important decisions throughout the investment cycle are:
When to go full risk long.
How much leverage to use, if any.
When to go full risk off and not buy back in.
0xWangarian says that many people struggle with controlling greed when it comes to using leverage.
It is advised to avoid using leverage in most situations.
The hardest decision is knowing when to take risk off the table and not buy back in.
Timing the market top is challenging, and there is a tendency to re-enter at higher prices or miss out on further gains.
How to Stay Humble & Manage Risk
0xWangarian says that it is essential to stay humble and avoid letting greed control your actions.
Keeping a trade journal can help track emotions during price movements and prevent irrational decision-making based on past euphoria.
All analysis becomes worthless if you cannot stick to your plan.
He adds that when a position has run way above what he considers fair value, he would invalidate that position.
He prefers to make beta calls and cut positions across the board, especially for longer-term positions.
0xWangarian says that rather than cutting specific coins based on individual performance, they prefer to reduce risk from a beta point of view.
He believes that trying to predict which gaming titles will be successful is challenging, as it requires deep knowledge of the virtual gaming economy and specific games.
Crypto Gaming
0xWangarian says that merely being a gaming chain does not automatically attract flows from investors looking for exposure to the gaming sector.
Immutable and Ronin are currently the main platforms for gaming chains.
These platforms may experience increased attention if they have hit games or successful virtual economies associated with them.
He adds that compared to other layer-1 chains, gaming layer-1s are relatively undervalued in terms of market cap.
Being Wrong on SOL
0xWangarian says that determining valuations for alt layer-1 chains is challenging. '
He currently relies on relative valuations to assess whether a chain is cheap or expensive.
Looking at fee numbers alone does not make sense, as some chains may have high price-to-sales ratios.
He adds that fundamental metrics like TVL or market cap do not necessarily predict price movements.
Price often leads fundamentals, rather than the other way around.
Finding an idea or shelling point that the market will accept but has yet to accept is crucial for price movement.
0xWangarian says that price speculators should think about what the market may be like in the future and position themselves accordingly.
Examples such as Sei and Celestia demonstrate how people initially struggled to value these assets when they first launched.
Anticipating narratives and understanding what the market will appreciate next is crucial but challenging.
Problems with $ETH
0xWangarian says that two years ago, there was a trend of moving from Ethereum to cheaper chains like Polygon or Avalanche due to high gas fees. P
eople are still frustrated with the Ethereum experience despite its position as the second-largest coin.
Some argue that ETH is trying to be money but falls short compared to $BTC.
Scalability remains an issue for Ethereum as it does not scale as well as other chains like Solana.
He adds that the argument that high fees deter users from using Ethereum doesn't hold up when considering high fees on $BTC transactions.
People are willing to pay significant amounts for transactions on $BTC because they believe it promises greater profit potential.
Once there is a renewed promise of profit on $ETH, negative aspects will be overlooked by investors.
0xWangarian says that currently, institutional funds are not showing much interest in $ETH due to its liquidity and perceived risk.
Crypto-native funds cannot significantly impact the price, while institutional funds find it too illiquid to deploy their strategies.
The introduction of an ETF for $ETH in the future could potentially change this dynamic.
He adds that $ETH serves as a source of funds that flows into various micro-narratives within the crypto space.
As retail investors make money, they often rotate their profits into $ETH. If there is an influx of retail flow into $ETH, it could potentially drive up its value.
0xWangarian says that the lack of significant price performance in $ETH indicates that retail investors have not entered the market yet.
Most crypto natives are already familiar with $ETH and would typically buy it when entering the market.
The marginal buyer who would traditionally buy $ETH is now more likely to trade it for other cryptocurrencies.
He adds that comparing $ETH’s performance to $BTC can provide insights into the average wealth of crypto natives.
If retail flow increases and more bids come into $ETH, its value may rise accordingly.
0xWangarian says that as of today, there is no immediate need to own $ETH.
The US institutional problem of ETH being too small needs to be solved before significant changes occur.
Once the $BTC ETF approval is done, it may mark a turning point for $ETH's value.
However, despite expectations, the disappointing trading performance of $ETH suggests that many people are already positioned for this change.
There is uncertainty about whether $ETH will go up or down in value.
He adds that if the $BTC ETF is approved, it could be catastrophic for $ETH as well.
The strength of the $ETH ETF narrative depends on whether the $BTC ETF news is positive or negative.
If the $BTC ETF is bullish, people may focus more on bidding $BTC rather than investing in $ETH.
The lack of promise for greater profits within the Ethereum ecosystem makes it less attractive compared to other ecosystems with airdrops and meme coins.
0xWangarian says that despite widespread optimism about $ETH’s potential, its trading performance has not met expectations.
This suggests that many people have already positioned themselves in anticipation of future developments but without significant movement in price.
Due to this uncertainty, there is no strong view on whether $ETH will go up or down in value.
He adds that, unlike other ecosystems like Solana or Cosmos, the Ethereum ecosystem lacks promising opportunities for greater profits.
Airdrops and meme coins in other ecosystems attract retail flows, making them more appealing to investors.
There is a need for something new and novel to be introduced to the crypto market, similar to the introduction of NFTs in the previous cycle.
Currently, there is a lack of innovation that has come to market in this cycle, which hinders potential profit potential.
0xWangarian says that the absence of new innovations since previous cycles has hindered significant growth and profit potential in the current crypto market.
While many projects are being built, few have actually hit the market with innovative products.
This lack of innovation is not limited to Ethereum alone but also affects other ecosystems like Solana.
The recent hype around Solana is due to older projects on its network finally launching, creating renewed interest through airdrops.
To drive significant flows into Ethereum, there needs to be a new concept or product that attracts both web3 enthusiasts and general web participants.
He adds that to see a surge in retail buying and increased activity in the Ethereum ecosystem, there needs to be a new and novel development.
This could involve bridging to different chains, creating new apps, or introducing innovative concepts.
Crypto markets are unpredictable, and significant changes can occur when least expected.
He acknowledges being wrong about Solana's potential but recognizes that the market is starting to show a preference for monolithic ecosystems like Cosmos and Celestia.
Traits of Successful Traders
0xWangarian says that elite traders have the ability to respond well under high-pressure situations.
This skill is not easily learned but is related to one's fight or flight instinct.
Recognizing this skill and practicing it can lead to significant profits.
However, not everyone possesses this trait, and forcing it can be detrimental.
He adds that many people held onto their coins in the last cycle because they believed their coins were special and would succeed in the next cycle.
Recognizing that you're wrong and cutting your positions is a hallmark trait of an excellent investor. A
dmitting when you're wrong and being able to take a loss is crucial for success in trading or investing.
0xWangarian’s Trading Style
0xWangarian says that his trading style is more medium to longer-term driven, where he develops a thesis and patiently let things play out.
He acknowledges that short-term fluctuations may make it tempting to deviate from their strategy but stresses the importance of humility and self-awareness.
He admits to being more active on lower time frames but prefers concentrated bets with aggressive sizing.
He emphasizes cutting losses quickly to keep drawdowns smaller than wins.
He adds that when experiencing a cold streak, it's important to step back from trading for a few days and reset mentally.
After taking time off, start by sizing smaller trades as confidence builds up again before gradually increasing position sizes.
Trading and investing involve a psychological battle with oneself, where biases and emotions can impact decision-making.
Admitting mistakes and managing emotions are crucial for success in the markets.
0xWangarian says that many people make the mistake of changing their lifestyle drastically based on unrealized gains during bull cycles.
Treating crypto holdings as points on a scorecard rather than real money helps maintain a disciplined approach to trading and investing.
Unrealized gains should not be assumed as real money until converted to fiat currency in a bank account.
He adds that some individuals mistakenly assume that their angel investments will unlock significant wealth within a short period.
Lifestyle inflation, such as buying expensive items or increasing expenses prematurely, can lead to financial difficulties when market conditions turn unfavorable.
Until funds are converted to fiat currency in a bank account after paying taxes, they should not be treated as real money.
0xWangarian says that when achieving financial goals through successful trading or investing, it is advisable to withdraw the achieved amount and hold it in a bank account for some time.
By experiencing the reality of having money in hand, individuals can better assess their financial situation and avoid unnecessary risks.
Reinvesting a smaller amount and attempting to replicate previous successes is a more prudent approach than risking the entire initial investment.
He suggests that instead of withdrawing all profits, it may be more optimal to take out only 50% and continuously reinvest the remaining 50%.
This approach is recommended for traders or investors who have exhibited the ability to significantly grow their portfolios (e.g., 100x returns).
By keeping half of the profits invested, individuals can continue with their successful strategies and potentially make even larger gains.
0xWangarian suggests implementing a rule to withdraw a specific percentage (e.g., 50%) of profits once a predetermined goal is reached.
This ensures that individuals have guaranteed funds in their bank accounts, which can be life-changing for many people.
At the same time, it allows them to keep investing and rolling with their successful strategies using the remaining funds.
How to Find New Narratives
0xWangarian believes that the key to success lies in predicting and investing in what will become the next popular narrative or trend.
When such a narrative is identified, it is crucial to size up investments and hold onto them even when others doubt their potential.
These opportunities often result in much larger gains than initially anticipated.
He admits that finding hotball narratives is not easy and has only done it a few times throughout his career.
However, when such an opportunity arises, it becomes crystal clear and should be capitalized upon. It is essential to consider liquidity when sizing up positions.
If a market lacks liquidity, it may be challenging to exit large positions without causing adverse effects.
0xWangarian mentions being bullish on AI coins and BRC-20 tokens as potential investment opportunities.
He believes these verticals have significant growth potential, with no limits on how high their value could rise.
He also mentions the importance of keeping a portion of the portfolio in cash or $ETH to take advantage of new opportunities as they arise.
He prefers not to predict specific investments but instead waits for emerging opportunities that others have not yet recognized.
He believes that if an investment represents a game that has never been played before, it holds significant potential.
The key question to ask is how big the dream can get, indicating the growth potential of a particular investment opportunity.
0xWangarian suggests keeping a portion of the portfolio in dollars and observing market trends daily.
By doing so, individuals can identify net new opportunities as they arise and quickly take action.
He emphasizes that recognizing unique games and assessing their growth potential are crucial factors in successful investing.
LSTs are an example where despite their interesting concept, limited growth potential makes them less attractive compared to AI coins or BRC-20 tokens.
He believes that investments with no limits on growth potential, such as AI coins, have a higher chance of outperforming.
He highlights the importance of considering the dream's size when evaluating investment opportunities.
0xWangarian mentions that AI coins like WLD have already reached significant market valuations.
He speculates that there is no stopping these coins from potentially reaching even higher valuations, such as $100 billion or even becoming the first trillion-dollar coin.
He adds that some individuals prefer to hold cash and catch onto different narratives in the crypto market rather than holding onto cryptocurrencies for long-term capital gains.
He believes that in the short term, crypto can be seen as a trading vehicle to achieve financial returns.
However, they also mention that in the long term, crypto will bring value in different forms than what is currently expected.
0xWangarian gives an example of $TIA’s price increase from $2 billion FDV to $15 billion FDV without any improvement in its technology or use case.
He highlights that while early investors experienced massive wealth creation due to this price increase, the actual value of $TIA’s use case did not change.
This example emphasizes that short-term price movements may not always reflect the true value or potential of a cryptocurrency.
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