The Survival of the Fittest

Those who know me or have been reading my content lately, will quickly be able to conclude that as an investment manager, I am more fundamental than quant or Technical.

However, there are times (specially in turbulent ones) where one needs to sit back and rethink the tactic or even the long-term strategy. And that makes sense because based on the work of one of the most brilliant scientific minds in history Charles Darwin and his theory of evolution and the survival of the fittest, is the fastest and most capable to adapt to the new changes and challenges who will be able to survive and not the biggest or the strongest.

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In crypto 2022 language, that means being able to modify slightly our investment thesis bottoms to tackle different situations.

Apart from Ethereum that is entering its interesting 2.0 stage where a more environmentally savvy consensus mechanism will be implemented and Polkadot that simply I can’t understand why people of not buying $DOT at $10 like maniacs, the button clicking process at the moment should be more based in short term trading strategies rather than romantic long-term hopes.

To be able to do that effectively, a specialized tool needs to be exploited and utilized. One of my preferred weapons in the Toolbox is the Woodies CCI Indicator.

The Woodies CCI Indicator is an obscure 14 period oscillator that helps us to identify overbought or oversold positions. The difference with the popular RSI and the reason why I prefer this one is because it is a zero-based indicator with no upper or lower cap. As opposed to the RSI that is bounded by a zero to 100 range with a 30 to 70 safety band.

That feature will allow us to explore more in detail the depth in the extremes that is where Alpha used to live.

I spent a few lines summarizing the philosophical and theoretical roots of this strategy because we are reaching a moment where the oversold level of the Woodies CCI indicator precedes the beginning of an uptrend movement in the price of Bitcoin.

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I am not saying that we are at the doors of the next Bull run. I am just saying that you should apply a scientific method to your investment decisions process. That is:

1)    Have a clear goal in mind,

2)    Assess the environment,

3)    Formulate a Hypothesis,

4)    Test it or reject it (repeat if necessary),

5)    Design the strategy and the tactics,

6)    Use specialized tools for specific purposes,

7)    Measure and reassess,

8)    Pivot and adapt or repeat.

Professional investment teams like the one I have the privilege to lead in Belobaba are the ones who always apply the rigor of scientific method.

I will expand more about Strategies and Technical methods in Bear to Lateral markets such as the current ones in the next episode of my Podcast “Finding Alpha with Carlos” Stay tuned.