Writing an investment thesis, and the kill criteria that go with it
The thesis is not paperwork. It is the only defence you have against your own reasoning changing quietly to protect a position.
The problem a thesis solves
You buy for reasons. The price falls. Without a written record, your reasons change to accommodate the loss, and they change so smoothly you do not notice. The trade that was a six month bet on a product launch becomes a long term hold. The stop that was going to be at thirty percent becomes "I am not selling at a loss".
This is not a discipline failure. It is how human reasoning works under loss, and it is universal. The only reliable defence is deciding in advance, in writing, when the decision costs nothing.
The one page format
Kill criteria that actually work
The distinction is between something observable and something interpretable. Interpretable criteria are always satisfiable in whichever direction you already want.
- Good: "Protocol revenue falls for two consecutive quarters."
- Good: "The team misses the stated mainnet date by more than one quarter without explanation."
- Good: "A named competitor passes it in volume for a full month."
- Good: "Any unannounced change to the unlock schedule."
- Bad: "The fundamentals deteriorate." Who decides, and by when?
- Bad: "Sentiment turns." Always arguable in both directions.
- Bad: "It goes down a lot." Price is not information about your thesis, and this is the criterion that quietly becomes never.
Reviewing honestly
On the review date, reread the thesis before you look at the price. The order matters enormously. Looking at the price first colours every subsequent judgement, and knowing that does not prevent it.
- Reread the thesis in full, price hidden.
- Mark each assumption: confirmed, unresolved, or broken.
- Check every kill criterion. Triggered or not, as a yes or no.
- Ask the replacement question: knowing everything I know now, at today's price, would I open this position today at this size?
- If the answer is no, the position exists only because you already own it. That is not a reason.
- Now look at the price, and act on the conclusion you reached before you saw it.
The habit that compounds
Keep every thesis, including the ones for things you decided against and the ones that went badly. After a year you will be able to see your own patterns: whether you consistently overrate teams, underrate dilution, or exit winners early. This is the only mechanism by which judgement actually improves, and it costs an hour a month.
Most people in this market cannot say why they own what they own. Having a written answer places you in a small minority, and the effect on returns is larger than any indicator or tool.
BEFORE YOU MOVE ON
Common questions
What is an investment thesis?
A one page written record of what an asset is, why you expect it to rise, what must be true for that, the strongest case against it, what would prove you wrong, your size and reason, and how the position ends in both directions.
What are good invalidation criteria?
Observable events with dates and numbers: revenue falling two consecutive quarters, a missed mainnet date, a competitor overtaking on volume. Anything interpretable, like "fundamentals deteriorate", is always satisfiable in whichever direction you prefer.
How often should I review a thesis?
On a date you set in advance, regardless of price, and reread it before looking at the price. Looking first colours every judgement that follows.
Risk warning: crypto is highly volatile and largely unregulated. You can lose everything you put in. Nothing here is financial, investment or tax advice.