I would like to begin this post by recognizing that we are not in fact an investment DAO. This proposal/guideline will simply be a formal way for the DAO to consider investing partial amounts of the treasury in crypto projects be it ETH, BTC, etc in an effort to expand our exposure and grow the treasury just we have with all the events that we've thrown.
I feel that I am in a position to create this guide as I've been trading/investing for over 7 years and have placed first in numerous trading competitions on Binance, DYDX, and some private ones. I've also created formal investment guidelines in the past when I had a crypto hedge fund back in 2017.
Everything below this point is operating under the assumption that the treasury maintains a balance of $200,000 USD.
Traditional investment rules dictate that we should never risk more than 2-3% of our total net worth.
There are two ways to look at this:
- One is that we only invest a maximum of $6,000
or
- That our maximum loss shall never exceed $6,000.
There is a very large difference between the two, for the purpose of the DAO, it makes more sense to go with the first view. If you're confused about the difference the simplest way to put is if we put $100,000 into Coin X we would have to cut our losses and exit the position as soon as our loss was equivalent to $6,000 versus if we put in $6,000 you pretty much never cut the position until all hope is lost.
Why should we risk it?
ATX DAO however is not a traditional organization, and crypto itself is not a traditional market. Our organization is inherently tied to crypto which to me means that our risk is already great. I believe that this means that we should be willing to take on more risk with our investments in crypto. Essentially if crypto is going to die, we're going to die so we might as well take on more risk as we're already betting on the success of crypto for the longevity of this organization.
I propose that ATX DAO's maximum risk is 15% of the total treasury value meaning that the maximum amount we should invest is $30,000. This 15% should be diversified into 3 categories which will be defined as follows:
1. Blue Chip Crypto: 10%
- Established crypto projects minimum of 5 years since the foundation date
- Legally can be purchased and used within the United States
-Team is "doxxed" (we know who they are, not just a pfp on twitter, BTC being the exception) or sufficient community development team.
-Market Cap Greater than $2 Billion
-Average 5-year annual return greater than 14%
-Examples include BTC, ETH, ADA, XRP, XMR
2. Green Chip Crypto: 3%
-Established crypto projects minimum of 2 years since the foundation date
-Market Cap Greater than $2 Billion
-Average 2 year annual return greater than 14%
-Provides Utility Service
-Large presence in the community (https://metrics.unlimitedcope.com/)
-Examples include: AVAX, SOL,
3. Red Chip Crypto: 2%
-No requirements, the community must vote as a majority in a project through the proposal process
It's important for ATX DAO to not only invest but also recognize that markets are in constant turmoil and there's no good reason for the DAO to continue holding any investment through a significant downturn, and no reason that the DAO should not exercise its position to take profit. However it's important for rules to be established because without rules investing is just gambling, if we don't establish rules for ourselves our decisions will become based on emotions which is the number one reason traders fail.
Some definitions to establish beforehand:
Bear Market - Any downturn that causes a minimum of a 20% downturn in the market and lasts longer than 6 months.
Bull Market- The market continues to make higher highs and lower lows during a 6-month time frame.
Blue Chip Category Investing Guidelines:
- A Blue Chip investment position should never be forfeited at a loss unless voted on by the community.
- A Blue Chip investment position should take profits at major resistance points in an expectance of a downturn when investing in a bear market. These resistance points will be defined prior to an initial investment.
- Blue chip investments must be held in a secure wallet and not in any exchange.
- The treasury will invest a percentage of its total allotment in any accepted blue chip that incurs a 70% decline within a 6-month period.
- The treasury will invest a percentage of its total allotment in any accepted blue chip that incurs a 30% decline within one month.
- Positions should be scaled to best catch wicks/compensate for decline in past of major supports
Green Chip Category Investing Guidelines:
- Green Chip investment positions are required to have predetermined stop-losses
- Green Chip investment positions are required to have predetermined take-profits
- Emergency snapshots require a minimum of 10 votes and a majority of 70% to exit a position if not predetermined.
- Initial investments are required to be voted on by the community with a minimum of 20 votes and a majority above 50%.
- Green Chip investments must remain on a liquid exchange
Red Chip Category Investing Guidelines:
- They must be voted on by the community requiring a minimum of 20 votes and a majority of 70%.
Guidelines for proposal of investments:
Name of the coin:
Category:
Market cap:
Total circulating supply:
Is the team doxxed:
Year of foundation:
Average annual return:
Major resistance levels:
Major support levels:
What's its utility:
Why does this matter:
Why now:
What Entry Price do you want:
What Exit Price do you want:
Please provide any and all thoughts, comments, questions, and concerns; all feedback is welcome.
I've created an ongoing google doc for this, if you would like access please dm me through discord.
