Risk Management in Extreme Market Conditions: Rethinking Cross-Cycle Asset Allocation

After the article was published on the 26th, I was a bit surprised by the number of readers who left comments and questions. This is because the situation I shared in the article was the worst-case scenario I had previously speculated about regarding Bitcoin and Ethereum, and when I presented this worst-case scenario, I had already shared my planned actions regarding Bitcoin and Ethereum.

So I believe that since we all have a contingency plan for this outcome, we wouldn't be too surprised even if this situation occurs.

However, the actual feedback has still differed from my expectations.

Therefore, in the next few articles, I will focus on answering some typical questions and those raised by readers during this period:

1. NEUR, HTERM, TETSUO, AVB, PROJECT89, AGIXT are the AI projects I currently hold. Are there any that you are optimistic about?

In fact, rather than whether I am optimistic about these projects, what is more important is why investors themselves are optimistic about them.

And when preparing to invest in them, have they considered corresponding strategies to cope with potential risks?

For investments in the AI agency sector, I have previously suggested:

If you really want to participate in the AI agency sector but lack confidence in general AI agency projects, then invest in reliable platforms. There are far fewer platform projects, making them much easier to judge, and the investment risk in platforms is relatively smaller and more controllable.

From this reader's question, I feel that there is still a lack of deeper consideration regarding the above issues when participating. If the considerations are insufficient or if there is still a lack of confidence, a better approach is actually to wait and see, observing more and acting less.

Additionally, there is one more point I want to emphasize:

Investing in these types of projects is essentially venture capital, so the risks are very high. Therefore, before taking action, one must ask oneself whether they can bear the risk of these projects going to zero.

If this risk cannot be borne, do not act lightly.

So regarding the current situation, my suggestion is:

You still need to ask yourself if you have confidence in these projects. Have you thought carefully about the above questions?

If you have confidence and have thought it through, then continue to hold.

If you lack confidence in those projects but still want to maintain a position in the AI agency sector, then replace them with platforms you have confidence in.

If you lack confidence in the platforms as well, then replace them with Bitcoin or Ethereum.

If you also find it hard to bear the potential declines of Bitcoin and Ethereum, then simply convert everything into stablecoins.

2. I invested in 1.6 Bitcoin at $18,000 and 5 Ethereum at $1,800. Later, I exchanged Bitcoin for Doge and Virtual.

Although this reader invested in Bitcoin and Ethereum, I am not sure if they maintained another very important point: that is, "Bitcoin + Ethereum" should account for at least 50% of their total crypto assets.

If this point has not been maintained, I suggest at least converting 50% of these holdings into Bitcoin or Ethereum.

If it is also difficult to bear the potential declines of Bitcoin and Ethereum, then convert to stablecoins.

At any time, no matter how tempting any other asset may seem, I will never sacrifice this ballast to chase that profit.

For me, controlling risk always comes first, and profit comes second.

By controlling risk, we can always stay at the table. And as long as we are always at the table, there will always be new opportunities.

3. How am I currently managing my assets?

So far, I have not sold any of the assets I hold.

Regarding Bitcoin and Ethereum, my subsequent actions will still follow the approach I previously disclosed:

If $100,000 is the peak of this round for Bitcoin, I will continue to hold it. If it exceeds $100,000, whether to sell or not will depend on the overall market conditions at that time.

For Ethereum, as long as it is below $2,500, I will resume dollar-cost averaging.

For other assets, I will continue to hold and observe as long as the fundamentals remain sound, according to my previous judgment criteria.

4. Is the bull market not here yet? Is it still a bear market?

By my standards, it has always been a bear market; this round of market conditions has not seen a bull market.

Finally, let me summarize my views:

The trend of this round of market conditions is different from before, but looking at it over a longer time frame, I believe it is just a moment in the long river of crypto ecosystem development. This temporary predicament will not hinder the trend of ecosystem development.

People's emotions seem to be overly pessimistic. I have always firmly believed that the future of this ecosystem is bright.

Especially the recent rise of AI is likely to be a factor that can greatly catalyze this ecosystem.

Recently, while listening to some audio courses from internet technology bloggers, I coincidentally heard them say that they would strengthen their focus on the crypto ecosystem this year because they also believe that AI is likely to bring unexpected changes to the crypto ecosystem.

What reason do we, who are in the midst of it, have to be so pessimistic?

We just need a little more patience and confidence at this time.

Additionally, it is important to note: even in the worst market conditions, as long as "Bitcoin + Ethereum" accounts for no less than 50% of total crypto assets, our risks are basically controllable.