SOLANA - Don't hate the playa, hate the game
Updated Exit Strategy
Welcome 👋🏽
For those new here, every month I write about these four topics:
I’m sure my wife would disagree, but I’d say I’m a simple man.
Back in November 2022, I allocated 75% of my net worth to crypto.
I then allocated the remaining 25% over the next few weeks.
Of my total investment, 45% went to a single asset at the time.
Solana ($SOL).
About a year later, I released my first newsletter.
It was my $SOL thesis when SOL was trading around $20 (it’s $170 today)👇🏽
Now, I know what you’re probably thinking.
“The degeneracy of this clown to allocate 45% of his net worth to a single asset”.
and you’d be right.
In fact, in late October 2023, I sold my $ETH bag for $SOL and it’s now sitting at ~85% of my net worth.
It was difficult considering the $ETH ETF narrative, but I’m glad I made it as this play alone yielded me 192% ROI more than if I had kept my existing bag.
So, I’m ABSOLUTELY a degen and a clown.
But I’m also calculated. The risk to reward on the $SOL play was astronomical and so far it has paid off in spades.
The other thing you might be grappling with is
⚠️ DISCLAIMER ⚠️
The content provided by PROJECT 10X PTY LTD (Filip Brnadic) is for educational purposes only and is not financial or investment advice. PROJECT 10X PTY LTD is not a licensed financial adviser under Australian law.
Investing involves risk, including the potential loss of all funds. Seek independent advice before making any financial decisions.
“don’t the textbooks tell us to diversify?”
Yes. Yes, they do.
In fact, any finance textbook, student of finance, financial advisor or High Net Worth Individual (>$1M net worth) will tell you that diversification is the best strategy.
That’s sound advice.
Do you know what those people are not?
Ultra High Net Worth Individuals (>$30M net worth).
What do the UHNW individuals have to say?
I once heard Stanley Druckenmiller (legendary fund manager, $6.2B net worth) say
“put all your eggs in one basket and then watch that basket very carefully”.
I think that’s also sound advice.
I’ll give you an example.
After Bill Gates became friends with Warren Buffett, he began to diversify his portfolio and sell his Microsoft shares.
Bill Gates' fortune today is ~$138B. If he hadn't diversified it would be ~$1.33T.
So, why am I telling you all this?
For the normies reading my newsletter, allocating 100% to crypto and a significant portion to one asset might sound crazy.
The voices in my head tell me you’re probably right.
Just kidding.
My point is:
✅ when you’re so sure of where the space is going long-term; and
✅ nothing comes close in terms of the returns we’re seeing each cycle; and
✅ the strategy I have is clearly working
Then it doesn’t make sense for me to focus on any other asset class.
Now, it took years for me to build that level of conviction. Upon doing so, I realised:
➡️ if I know one thing well, it’s tech.
➡️ the fastest horse in the tech space is crypto, so I focus on crypto.
➡️ the strongest narrative in crypto is Solana, so I allocate to $SOL.
It all adds up, right guys?
Guys?
Back to my thesis.
At the time, my main concern was that $SOL wouldn’t clear the 0.618 Fib golden pocket level from the long-term downswing (2021 peak to 2022 trough).
Why?
In my SOL thesis, I showed that
➡️ after their first bull run, most altcoins never hit their ATHs again.
➡️ in their second bull run, most altcoins peak at most in the “golden pocket” of their long-term Fibonacci extension. The 0.618 to 0.702 level.
Now, given
➡️ the $SOL narrative in this bull run; and
➡️ where we’re at in the crypto cycle (disbelief, going to hope)
I’d say we’re about 50% of the way there.
$SOL has already cleared the golden pocket before retracing in the last few days. That tells me it’s only a matter of time before it breaks ATHs and there are only two questions from here on out.
Where do you think the price will get to in this bull run?
How big is the set of balls on you (or ovaries, I don’t discriminate 🫡) aka where will you sell at?
These are two very different questions.
One is your calculated best guess, and the other is your comfort level.
If the price doesn’t get to where I think it will in this bull run, then I’m left holding the bag while my frens drive off in their lambos.
We can’t have that.
Me likey lambo too.
So, where do I think the price will get to?
The long-term 1.618 Fib extension tells us we’ll probably see ~$400 SOL at the peak.
The 2.618 Fib tells us it could go to $668.
Remember, Fibonacci extensions are magnets for assets in price discovery. Go check out my Fib extensions for ETH and BTC here, or see how price is drawn to key Fib levels for a bunch of altcoins in my SOL thesis.
Log curves paint a more reserved picture, but as you can tell, $SOL broke through the top of the log curve in the last bull run for a short period.
The Log curve tells us that it’ll hit $288 as of today (it increases as price increases)
The final indicator, SOL dominance, is a little more obscure.
If you've been following my "Selling the Top of the Crypto Bull Run" newsletter series 👇🏽
you'll remember #12 assumes crypto total market cap (MC) could peak at $7.2T. My more conservative estimate and my Take Profit (TP) level is $5T.
Assuming $5T peak MC and SOL dominance stays where it's at now (~3.5%), that would price SOL at ~$363 or roughly double where we are now.
For reference, Binance’s $BNB token hit 4.75% dominance in the last bull run. It was the third largest token by MC, excluding stablecoins. $SOL just overtook $BNB as the third largest token by MC in this bull run.
On this basis, a 3.5% $SOL dominance is being conservative.
To Recap:
👉🏽 Fib Extensions: $415
👉🏽 Log Curves: $288 and growing
👉🏽 $SOL Dominance: $363
So, how big are my balls, aka where will I sell at?
Admittedly, not that big, LOL.
Given that all three indicators point to >$300 by the end of the bull run, my TP level for 40% of my SOL bag will be at ~$250-$300.
We’ll see resistance there.
The other 60% of my bag will be based on when my ‘selling the top’ series indicators signal that the top is near.
That’s all for now.
Catch you next week.
✌🏽
Filip Brnadic