Contrarian Intrinsic Value Investing (CIVI) is a stock market strategy which I believe would apply well to crypto investing. I'm going to briefly explain the strategy and then apply it to Nano.
What is CIVI?
Contrarian investing means investing against current market trends. Value investing is investing when the price of the asset is lower than the intrinsic value of the asset. For example, if Bitcoin currently has a value of $75k per coin, and is trading at $50k per coin, then buying is a value investment. You believe that BTC's price will soon reflect its underlying value. The market will, at some point in time, reduce or remove the price/value disconnect, increasing the price.
Combining these ideas, you create CIVI. CIVI is investing in undervalued assets, against the market trend. Sometimes the asset is just not the flavour of the month, or the market is overestimating the effects of certain news events etc, creating a huge disconnect between price and value and offering an asymmetric risk/reward opportunity.
Common CIVI pitfalls
There are a number of cases where people believe they are correctly applying CIVI but are in fact mistaken. These are changed from the stock market version to apply them to crypto. They are:
- Optically cheap - the asset may have a relatively low market cap, but that does not mean it is undervalued. The asset must not merely be cheap, it must also have a use/value, not just a low market cap.
- Weak community and dev team - do not invest in a fickle community and dev team which will leave when times are tough.
- Reversion to Mean - You cannot just hope that the price will just return to what it was previously, you have to have a reason to believe that the price will go up and it cannot just be hope.
- Disruptive forces - You must think about competitors who may be disrupting your coin over the long-term and will stop the value being realised in price.
CIVI Framework
This leads to the generalised CIVI framework. One needs to look for coins that meet these criteria:
High quality coins + Out of Favour + Discount to Intrinsic Value + Patience
Applying CIVI to Nano
Nano has not done well recently. It is down 35% in the last month and is only up 245% in the last year (low for crypto standards). Its market cap sits at a low $460m, which pales in comparison with other coins.
The market currently does not favour Nano. Payment coins in general, are rather out of favour in the market, with DeFi, decentralised platforms, and L2 scaling solutions being the market picks right now. XLM is only up about 100% and XRP is only up 321% (low for a blue-chip coin) YTD.
Here, I believe, lies a great opportunity for Nano. Payment coins may not be desirable currently, but I believe that high fees from debit/credit card providers and payment processor's overly paternalistic nature (such as Visa and Mastercard's blocking of PornHub) gives room for payment coins to shine. I believe the market will change its tune on payment coins over the next 3 years, offering huge rewards for the patient.
Additionally, due to the Bitgrail fiasco, combined with a fall from grace in the 2018 bear market, means that sentiment around Nano is not very good. Buying when sentiment is poor can create huge rewards.
Nano also has strong fundamentals, it is green, feeless, instant, and decentralised. This gives it the fundamental side of the CIVI and gives a reason why its fortunes will change, over mere hopium.
Moreover, it seems that FlowHub will use Nano to bank weed dispensaries (which currently mainly use cash for legal reasons) and another major partnership is in the works (according to the Nano Foundation). This adoption should provide reasons to break out of its bearish price movement.
Nano's community is anything but fickle, known for its passion and commitment, even in the face of adversity. This provides a strong backbone for a patient long-hold.
Conclusion
I have illustrated the idea of CIVI and explained how these could apply to Nano. I think all of the points paint a picture of an undervalued coin that is down on its luck. I believe a buy-and-hold strategy in Nano provides a strong investment opportunity with low risk and large upside.
Not financial advice.
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