Crypto portfolio update

Invested in: USDC, JEWEL

Net return: 561.7%

Comments: The bear market drags on, and the general sentiment across risk markets remains weak. 

Everyone seems to be looking for the next crypto "sector rotation" but I find the risk-reward to be unfavourable; In a falling tide even the best boats have trouble staying afloat.

I believe that until BTC starts performing again, there will be limited upside for the majority of altcoins. There will be exceptions of course, but I'm expecting most altcoins to bleed against BTC for the foreseeable future.

So, as you might imagine, the only play I am remotely interested in right now is in the OG cryptocurrency: Bitcoin.

With BTC approximately 40% off it's all-time high, I consider now to be a good time to *slowly* DCA into a long term hold. I wouldn't be surprised to see its price fall further to $30k, but I wouldn't try to time the bottom. If I believe Bitcoin will be worth multiple six figures some years from now (and I do), it wouldn't matter whether I got in at $40k or $30k.

The only reason I haven't yet allocated a portion of my portfolio to BTC is because I'm using the funds for short term trading. This said, if the price of BTC gets closer to $38k I'd probably start accumulating.

Current portfolio allocation:

 DeFi Kingdoms

Users (30 days): 125.8k (-4%)
Transaction volume (30 days): $423.0m (-21%)
Number of xJewel wallets: - (info not yet available)
Discord members: 89.0k (+0%)

The recent drop in transaction volume is likely due to the 'Perilous Journey' event, where 27% of all heroes were sent on a 10-day mission and couldn't participate in the usual profession quests.

Other than this, little has changed as the number of players and Discord members have remained stagnant.

The next major event will be the launch of Crystalvale on 30th March, when players can single-stake JEWEL for CRYSTAL, and join the new Crystalvale liquidity pools.

Personally, I've decided not to allocate any more funds into the DFK ecosystem because a large portion of my portfolio (40%) is already in it, and for reasons I will talk about next.

The bear case for DFK

In my view, the case for investing in DFK is deteriorating as the weeks go by without the release of an engaging combat system.

And from the looks of things, we won't see anything close to it for another few months at least.

Meanwhile, other GameFi projects are charging forward on their roadmaps, which will inevitably draw interest away from DFK towards those projects.

DFK is still my favourite crypto game, but that's largely because I got in relatively early and have built a significant stake in it. If I were completely new to GameFi I'm not sure I'd be as interested in DFK as I'd be in other projects with actual gameplay features.

What I'm saying is that I think DFK is squandering its lead in the GameFi space. Instead of focusing on delivering the combat aspect, the team has been spending resources on developing what I consider to be inconsequential/peripheral features.

For example, do we really need DFK merchandise (stickers??) or grant programs before the core game feature (combat) has been shipped? How much of a difference do these side initiatives really make?

I've been heavily invested in DFK since September 2021, so take this from one of its longest supporters: I want to project to do well. But it seems like the team does not yet have a clear vision about what the main gameplay mechanic (combat) looks like, and they're still experimenting with the different ways it might work.

From a player perspective, this is not a problem. There's no downside to waiting for the dev team to come up with something fun.

From an investor perspective however, there's a major problem.

You see, until the DFK team delivers enjoyable gameplay, the aggregate inclination of players tends towards extracting value from the system; Their aim would be to withdraw more capital than they've put in, as soon as possible.

This is, for obvious reasons, neither sustainable nor desirable.

The crux of the issue is the inflating JEWEL supply amid the lack of something fun to do in-game. And without increased in-game activity (increased demand), the ever-growing token supply quickly dilutes the value of existing JEWEL holdings.

This dynamic is worsened when the main goal of players is to extract as much value as they can from the system as soon as possible. In such a situation, people are encouraged to sell JEWEL, which, combined with the ever-inflating JEWEL supply, bodes poorly for its price.

Thankfully, the status quo is about to improve.

The bull case for DFK

DFK's expansion to the Avalanche blockchain will introduce fresh capital into the system, hopefully at least doubling the current market cap of $320 million to $640 million.

This will buy the devs some time to work on the combat system while the influx of new players get acquainted with the complexities of the game.

In the end though, any rally in the price of JEWEL will not be sustained in the absence of a good combat system.

If the devs take too long to roll out the core combat features, we'll inevitably come back to an unfavourable situation similar to the one we face today.

TLDR

The DFK team has been spending resources on things that don't matter, at the expense of the things that do. My view is that the team should be focused on delivering the first (basic) version of the core combat mechanic over everything else.

The Crystalvale expansion will give the devs some time to add combat features to DFK, failing which I would not expect to see a sustained recovery of asset prices (heroes and JEWEL).

There's still time to turn the ship around, but the window won't stay open for long.

Admin update

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• If you missed the previous newsletter, you can read it here.

 Weekend read

Check out this interesting exposé of Justin Sun, founder of cryptocurrency Tron (TRX).

It's normal for industry pioneers to push boundaries... but just how far is too far?

I hope you enjoy this article as much as I did.

 Quote of the week

Often the best decisions have no immediate payoff. The best choices tend to compound. Most of the benefits come at the end, not the beginning. The more patient you are, the bigger the payoff.

- Shane Parrish

Thanks for reading, and have a great weekend.

Cheers,
Slowmad

P.S. If you have any questions or feedback, let me know at: chris[at]digitalslowmad[dot]com

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