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Is TAO the ETH of AI?

AI is been ubiqitious this year. Every where you look people are talking about AI and crypto is no exception. We’ve highlights a number of AI tokens to both our free readers and our premium readers. These are mostly higher risk/higher reward beta plays. Today I want to touch on the Alpha play in the sector, Bittensor ($TAO).

If you follow the sector you’ve probably seen TAO explode from $20 to $600. Its growth has been pretty explosive. Recently I dove into TAO with the assumption that it I had already missed the boat on most of the near term gains. It was sitting at 3-4B market cap and here at Phenom we tend to bet on lower market caps with higher potential returns. However, after doing a deep dive I believe we are still early on TAO….

Tao recently launched subnets and I believe this is a game changer for the network. Essentially anyone can create a subnet for any AI product and utlize the compute power of the TAO network. Basically TAO is to subnets what ETH is to Dapps and rollups. I envision TAO eating everything in the AI space the same way ETH has gobbled up most of the wealth and apps from other layer 1 chains. There is a clear value prop to devs building AI products to simple spin up a subnet versus launching their own chain. The same way rollups and Dapps gain value from launching on ETH vs creating their own layer 1.

If this thesis plays out I would expect TAO to be a top 10 coin during the bull market. If thats the case we still have a LOT of gains to book.

Thoughts on Profit Taking

I've gathered quite a bit from the previous bull cycle—not just in earnings, but in the hard lessons about the importance of holding on to those earnings through the inevitable bear market downturns. My approach to profit-taking in crypto has been shaped by witnessing many fall prey to the twin demons of greed and fear of missing out, coupled with poor exit strategies.

My strategy pivots on two key considerations: my investment horizon and whether my decisions are guided by technical analysis or fundamental value. Predominantly, my portfolio leans towards long-term holdings, with occasional forays into short-term trades based on market narratives. Here, I emphasize the necessity of flexibility in profit-taking strategies, cautioning against the emotional trap of over-loyalty to any crypto community that can cloud judgment.

For short-term positions, my focus is on capitalizing on emerging crypto narratives, guided by social media trends, forthcoming catalysts, and movements of 'smart money'. I adopt a 'buy the rumor, sell the news' tactic, often exiting positions just before major announcements. This approach is supplemented with technical analysis, identifying resistance levels as cues for profit-taking.

Conversely, my long-term investment strategy is more about patience, holding onto positions until signs indicate a nearing peak of the bull market cycle. Here, my exits are more strategically timed, relying on fundamental shifts and historical data patterns, such as the Pi Cycle indicator for Bitcoin, to signal the opportune moments to sell.

In essence, my profit-taking strategy is a blend of tactical exits for short-term gains and strategic patience for long-term investments, always with an eye towards the inevitable market cycles that dictate when to hold and when to fold.

BlockBuzz™️

Quick Hitters from the week

• Texas Firm Challenges SEC's Digital Asset Authority: Accuses the SEC of regulatory overreach concerning crypto operations.

• Circle Phases Out USDC on Tron Amid Compliance Efforts: Moves to end support for $313 million of USDC on Tron due to concerns over alleged illicit financial activities.

• Do Kwon's Extradition to the US Imminent: Following a final appeal in Montenegro, reports indicate extradition to the US is next.

• Japan Advances Crypto in Venture Capital: Prepares to permit venture capital firms to hold cryptocurrency assets.

• Vitalik Buterin Proposes AI for Ethereum's Technical Challenges: Looks to AI solutions to address Ethereum's most significant technical hurdles.

• Circle Urges Congress to Tighten Tether Oversight: In the midst of stablecoin competition, Circle seeks regulatory action against Tether.

• Revival in Crypto Venture Funding: Sees an uptick for the first time in almost two years, buoyed by Bitcoin's impressive performance.

• DeFi's Potential to Empower the Dollar: U.S. Federal Reserve Governor Waller suggests DeFi could enhance the dollar's dominance globally.

The Twitterverse

A collection of the most interesting stuff on Crypto Twitter this week

Crypto eats everything

Go home Europe, you’re drunk

Great explanation of the difference between Alpha and Beta investments

WAGMI

For the Crypto Culture

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.