Crypto Allocation Notes: Volatility, Position Size, and Drawdown
Crypto can move faster than the investor's ability to update the thesis. My approach is to make position size do most of the risk control work.
Position size is the first risk tool
In high-volatility assets, a position that is mathematically small can still feel emotionally large. I prefer to size positions so that a sharp drawdown does not force a rushed decision.
This helps keep research honest. If the thesis weakens, I can update it without needing the price to rescue my ego.
Narrative versus structure
Strong narratives can attract capital quickly, but they do not remove token unlock risk, low real usage, concentrated ownership, or weak liquidity.
When narrative and structure disagree, I treat the position as speculative and require a smaller allocation.
Drawdown planning
Before entering a crypto position, I write down what a normal drawdown might look like and what would make the drawdown abnormal.
The point is not to predict every scenario. The point is to avoid inventing the rules after the price has already moved.