In a recent Twitter thread, professor and investor Adam Cochran drew his 2022 portfolio thesis and a “shopping list” of probable top performers in the year ahead. He said,
“…investing in real assets that aren’t just hype is like startup investing, you need to be in it long term.”
Buy on Dips
However, he reiterated that investors will be best placed to prioritize these purchases on dips, instead of buying all “at once.”
Having said that, Cochran also commented,
“A lot of projects in its ecosystem are also in FDV [Fully Diluted Valuation] hell, so even though they are great products, it’s unlikely they outperform.”
In this regard, these projects might fail to surpass the index return, the analyst added. One such example that the professor gave was of Solana. It is noteworthy that the project gave a stellar return of 11,219% in the last 12 months. However, he explained,
“Solana had a breakout year, it would be tough for it to outperform the market again next year.”
As we can see with the onset of January, Solana has failed to evade the larger market sentiments that remain bearish. At press time, SOL maintains a 24-hour range of $167.85 and $176.78. While the weekly returns remain close to negative 10% on CoinGecko.
Four Key Parameters
So, the billion-dollar question- How should an investor take their portfolio call? Cochran reiterates four essential parameters for a project to make it to the 2022 shopping list. Firstly, it needs to be a working product. Secondly, the new year should be a potential catalyst for the said project. Thirdly, it needs to have “room for growth against its peers.” Lastly, special importance to the projects where prospects of external cash flows are considered positive. Something that he has also focused on in his thesis that says,
With that, the analyst also pushed for a correctly-weighed and diversified portfolio. He said,
“No portfolio is 100%, and you don’t weigh all assets in a portfolio equally.”
At this point, it is also crucial to note that as per the analyst, most crypto cycles didn’t really have the equivalent of “value” stocks. Therefore, he recommends looking at protocols that “drive real revenue.”
He further explained,
“Even protocols that don’t drive give revenue to a token (yet) still see huge demand, such as lending protocols which had an average 10x increase in borrow rates in 2021.”
However, Cinneamhain Ventures’ partner was also focused on “dissecting the quality and origin of the revenue” with which he concluded that,
“…what is clear, is that protocols that have *actual* revenue have often drastically *underperformed* in 2021.”
The “God Tier”
This essentially means that his ‘2022 picks have classic DeFi products’ with experienced teams. Therefore, for his “God Tier” category, he has picked Ethereum (ETH), Convex (CVX), Yearn (YFI), and Keeper (KP3R) with “strong price appreciation” being a driver for the category.
Meanwhile, Ava Labs President John Wu is seeing “Ethereum killers” going into 2022 portfolios. He recently told Forbes,
“Ethereum 2.0 might have been a gamechanger two years ago, but this new generation of Layer 1s has beaten it to the punch.”
Some projects in the category include AVAX, SOL, and DOT.
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