How to use the Merrill Lynch clock to grasp blockchain investment? Global Top10 Crypto Fund Reveals Your Secrets | Babbitt Industry Class

In 2020, what are the most noteworthy 3-5 investment directions? What kind of investment logic should bear in a bear market?

On the evening of March 26, the second issue of Babbitt Industry Class "Finance is a Trap or a Treasure of Wealth? —— "Blockchain and Finance" Learning Week continued to be output. Cai Yan, Managing Director of NGC Ventures, lectured on the secrets of the world's top ten top cryptocurrency funds all-weather investment strategies.

Founded in 2017, NGC Ventures is a blockchain technology venture capital fund composed of professionals from the fields of technology entrepreneurship, traditional capital markets, management consulting and other fields. Ranked by TheBlock as the world's top ten most active cryptocurrency funds in 2019. NGC Fund I and Fund II have invested in more than 70 projects covering infrastructure, DeFI, games and many other fields, including Zilliqa, OasisLabs, Mainframe, Certik, Bluzelle, Algorand and other top blockchain projects. NGC also incubated the node service provider NGC StakeX.


The following is a summary of the content of this lesson, and the detailed content can be viewed in the course replay: "All-weather Investment Strategy"

Don't ignore the charm of the cycle, build a digital currency investment clock

Merrill Lynch proposed the "investment clock" in 2004, which captures the two main drivers of the modern economic system, monetary policy (interest and inflation) and economic development (GDP growth) to analyze complex financial markets. The investment clock theory divides the economic cycle into four phases: recovery, overheating, stagflation, and recession, and obtains optimal investment returns by performing related asset allocation at different stages.

According to Merrill Lynch's investment clock, a rational investor should allocate more stocks during the economic recovery period, allocate commodities during the overheating period, hold cash during the stagnation period, and hold bonds during the recession period. Of course, the investment clock is more used as an analysis framework and judgment of the cycle position, rather than directly guiding investment behavior.

Using this as a reference, how should the digital currency market find its own investment cycle? In contrast, digital assets have complex attributes and are affected by multiple dimensions such as business, finance, technology, and politics. Cai Yan believes that the digital currency investment clock with “Bitcoin” as the core may partially apply the Merrill Lynch investment clock theory.

Due to the absence of central bank intervention and weak economic transmission effects, the digital currency investment clock can replace inflation factors with emotional factors. Because the high investment sentiment leads to capital inflows, it will have an effect similar to inflation. The GDP growth can be replaced by fundamental factors (including technological progress and commercial applications), which represent the inherent development and organic growth of the industry. Of course, this can include multiple factors, such as transfers / transactions, the number of wallets, the entry of industry leaders, etc., which need to be dynamically adjusted as the industry develops.

Based on such logic, a rational digital currency investor should configure stock-like tokens when market sentiment is optimistic; configure commodity-like tokens and community-driven crypto projects during the overheating period, and appropriately reduce other tokens' secondary holdings ; When the market sentiment is pessimistic, adopt a fiat currency borrowing strategy to seize M & A opportunities and equity investments, because the project valuation at this time is low; and when the fundamentals decline, holding Staking-like Staking, adopt arbitrage strategies.

Build a portfolio that not only creates long-term value, but also generates solid income

The above is a general description of investment categories, but to pass the cycle, you need to have a good judgment on the project itself. Even during periods of low market sentiment, NGC's first-stage fund has quadrupled as of 2019Q4. Cai Yan's lesson is: to build a portfolio that not only creates long-term value, but also generates solid income. Based on rapidly changing markets, the portfolio will be dynamically adjusted to accommodate bull and bear markets. She gives the following 5 suggestions:

1. In this fast-changing market, investment income mainly comes from the beta of the market, not the alpha of a certain institution, so it is more important to grasp the macro structure of the market than to invest in several head projects; 2. The cycle of the cryptocurrency market Rotation logic is not fundamentally different from traditional capital markets, but the coordinate system and direction of movement need to be modified; 3. Cryptocurrencies also reflect the characteristics of stocks / debts / commodities in traditional capital markets; 4. The allocation of cryptocurrency assets should not be separated The traditional asset management / asset allocation framework should be integrated into and improve the performance of the overall asset portfolio; 5. The lack of fundamentals also means the instability of industry boundaries. The analysis framework and prerequisites can change at any time. Past successful experiences are often future Failed foreshadowing.

Constantly update judgments on industries and markets, and track fundamentals and sentiment indicators

Regarding BTC, both individual investors and institutional investors must constantly update their cognition and review the fundamental and emotional aspects of BTC. These two points respectively affect the long-term and short-term judgments of BTC prices. From a technical perspective, fundamental indicators include NVT, MVRV, Price to Mining Cost Breakeven, etc., and emotional indicators include long-to-short ratio, holding rate, and panic index. If you do not make accurate predictions, you should sell as little as possible in panic, buy in frenzy, and take profit and stop loss in the rebound.

Specific to the current hot concepts in the industry and the market, Cai Yan analyzed them one by one.

The first is the monetary level. Under the circumstances that BTC's story is not told well, it is difficult for digital currencies for currency use to expand the network effect; however, anonymity and privacy are a great demand, and large market value anonymous coins are worthy of deployment.

Second is the underlying infrastructure level. From the perspective of investment themes and technologies, Ethereum has always been a leader in blockchain infrastructure; the ecology of the stock market is difficult to establish, and many public chain projects will be delayed or go offline for a long time because they cannot find a breakthrough, such as Perlin; capacity expansion projects The capture of token value becomes a problem, such as Loom ;, Celer; cross-chain projects are still worth looking forward to, but it is too early to talk about Web3.0;

Finally, the application level and middleware. Investing in middleware is a business of “steady profit and no loss”, but the premise is that the smart contract platform can indeed be expanded. The new story and theme of the application layer still revolves around decentralization and traffic, but the value capture of application tokens is always a problem.

The above is just a summary of the content of the live lecture. Cai Yan also shared in detail PayPal Finance, ANKR, TRIAS, OASIS Labs, DappReview, Phemex, Banxa, Marlin and other cases, and deeply revealed the investment concept of NGC Ventures. Welcome to the full version: 24/7 Investment Strategy

From March 23rd to March 27th, the second phase of Babbitt Industry Class will begin. Every evening from 7: 30-9: 30, five financial leaders from the blockchain industry and traditional capital markets, Zhang Li, vice president of Canaan Technology, Huang Lingbo, partner of distributed capital, Tao Rongqi, founder of X-Order, NGC Ventures Managing Director Cai Yan and Song Shuangjie, the founder of Tongtongtong Research Institute, will give lectures in person.