- Derek Lim is the Head of Crypto Information at the third-largest crypto derivatives exchange Bybit.
- He started buying SOL at less than $2 in 2020 and sold his position at around $240, making a huge profit.
- He shares his framework for early identification of strong projects and tokens he is betting on now.
In the fast-paced world of crypto, early risers and risk takers tend to reap the biggest gains.
That was the path to digital assets charted by Derek Lim, head of crypto insights at Bybit, the third-largest crypto derivatives exchange by open interest and trading volume, according to a report. CoinGecko Ranking.
As bitcoin surged to $20,000 in the fourth quarter of 2020, Lim, then a full-time teacher in Singapore, made the high-stakes career transition to full-time crypto.
Starting out in kaleidoscopic space, he tinkered with what he calls “social trading,” a glorified phrase that describes crypto trading based on social media chatter and word-of-mouth recommendations from friends.
“I didn’t really know what I was doing,” Lim recalled in an interview. “I didn’t really care about on-chain metrics or technical analysis,”
In a rage
, it seemed like everything and anything had nowhere to go but up. As Lim delved deeper into the wild west of crypto, he started paying attention to the fundamentals and looking for frameworks that could help him identify promising projects early on.
The blockchain trilemma
One of the concepts he clicked on early on is the blockchain trilemma. Coined by Ethereum co-founder Vitalik Buterin, the phrase refers to the three issues that often affect blockchain layers: decentralization, security, and scalability.
While a perfect blockchain network would theoretically be decentralized, secure, and capable of supporting an enormous amount of transactions, balancing the three has proven difficult, as evidenced by Ethereum’s high gas fees and network congestion. .
However, Ethereum’s scalability issues have been a huge boon for rival Layer 1 protocols looking to resolve the trilemma. This is how Lim came to buy solana (SOL) between $1.474 and $1.944 during the last three months of 2020. On behalf of a team of friends, he invested five figures in the SOL token, which was quite obscure at the time, according to captures screenshot of its transactions seen by Insider.
“Solana is the one who really solves the trilemma in a really strong way,” Lim said. “I personally don’t believe in branching out too much in this space. I believe that if you’re strongly convinced in a piece, you’re investing a hearty sum for more meaningful results.”
Unlike Bitcoin’s proof-of-work model or the proof-of-stake consensus mechanism used by other blockchains, Solana proof of history The mechanism enables lightning-fast transactions without compromising decentralization and security, according to Lim.
Although the jury is still out on whether solana has successfully solved the blockchain trilemma given her series of network crashes and outages, the SOL token jumped exponentially to nearly $260 in the last year. Despite recent waves of selling, the token was still trading at around $103 on Tuesday morning in New York, up around 1,076% from a year ago, according to CoinGecko Data.
Lim, who saw the warmongering of global central banks as a sign of near-term headwinds, began selling his SOL holdings in November and December last year between $230.75 and $247.39, according to captures. screenshot of its transactions viewed by Insider.
Altcoins he’s betting on right now
As the macro headwinds continue to be felt, Lim expects more price corrections to affect major cryptocurrencies in the near term.
“The macro side of things is definitely more volatile, whether it’s rate hikes or geopolitical tensions mounting around the world,” he said. “Even though the on-chain metrics have been bullish over the past few months, I think the macro sentiment trumps a lot of these bullish signs.”
As bleak as the outlook may be, signs of short-term weakness can create long-term buying opportunities. Given how the crypto market has evolved since late 2020, Lim no longer thinks the blockchain trilemma works as well for identifying strong future projects, although it remains an important concept for evaluating smart contract platforms. .
These days, he pays close attention to trends that might emerge as more important investing themes. One of the trends he has spotted is the revival of decentralized financial applications, which have seen a
since reaching their all-time highs. Lim said he is looking for DeFi applications with strong ecosystems and value accumulation frameworks.
Another trend on its radar is metaverse-related projects. Instead of cramming into the usual virtual worlds, he enjoys ambitious projects that give investors a stake in the future before the metaverse becomes an ubiquitous thing. For example, social tokens and music tokens would fall into this category.
Based on these trends, Lim said he’s betting on layer one protocols, including Phantom (FTM), Earth (MOON), avalanche (AVAX), and cosmos (ATOM), which are up 1,103%, 890%, 130%, and 47%, respectively, over the past year, according to CoinGecko prices.
In the middle of a layer two boomLim also likes metis (METIS) as a short-term game because the network has yet to secure strong venture capital backing. He added that he would try to quit his entire post by April or well before that. For now, Lim is generating a return through the METIS/USDT pair in a yield farming pool that he believes is generating a three-digit annual percentage return.
The METIS token has plunged 50% in the past month, but is up 27% in the past two weeks, per CoinGecko Databut the yield farming strategy serves as an effective hedge for his position, Lim said.
Another bet includes a little-known decentralized investment platform Beethoven x (BEETS). The BEETS token, which has surged 67% in the past two weeks, was trading at $0.863199 as of Tuesday morning in New York, according to CoinGecko Pricing.