Unit 4 · Level 5 · Protocol due diligence: capstone
Position sizing the frontier
Frontier bets (restaking farms, AI coins, brand-new protocols) can go to zero without warning, so you size them for total loss. The barbell approach: keep most of your capital in things you deeply understand and can hold through a crash, and cap the speculative frontier at a small slice you could lose entirely and shrug off. What you avoid is the mushy middle: half your savings in things you half-understand.
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What you get asked
What does 'size for total loss' mean for a frontier position?
Rug pulls, exploits, and depegs don't honour stop-losses; frontier assets can gap to zero overnight. The only reliable protection is entry size, decided before you click buy.
Your total crypto allocation is €4,000 and your personal rule caps frontier bets at 10% of it. A new restaking protocol excites you. What's your maximum position in euros?
4,000 × 10% = €400, and that cap covers ALL frontier bets combined, so a second bet shrinks the room. If €400 vanishing would genuinely hurt, the cap is still too high.
Match each holding to its barbell bucket
The barbell has two ends on purpose. The middle (meaningful size, shallow conviction) is where portfolios quietly die.
Your €400 frontier bet 10x's to €4,000, which is now nearly half your portfolio. The sizing discipline says...
A winning lottery ticket is still a lottery ticket. Untrimmed moonshots turned into round trips for thousands of 2021 portfolios. Taking profits is how paper gains become real gains.
Why does barbell sizing beat 'just pick better projects' as a survival strategy?
Even great analysts get blindsided; FTX fooled professional funds. DD improves your odds; sizing decides whether a miss is a bruise or a funeral. Same spirit as the 1% rule from the Trading course. 🐜
The rest of this unit
The full framework: vet anything, size it for the frontier, and graduate scam-proof.