(Continued from Altseason Playbook, Part 1 of 6)
Altcoins are zooming but don’t forget about your boy bitcoin. You might not want to keep all your eggs in the altcoin basket, because once altseason ends, you know who’ll still be standing.
In my last post, I wrote about overall portfolio planning. In this one, I’ll share how I split my portfolio between bitcoin and altcoins. How do I decide how much bitcoin I should have compared to altcoins?
This article is adapted from my December 17, 2020 special issue of Crypto is Easy. To read the whole post, including more tips and commentary, visit Bitcoin hit $20k! Prepare for Altseason.
Bitcoin-to-altcoin allocation
I keep a strong, core bitcoin position.
It’s one of several assets I hold in my overall long-term investment portfolio along with real estate, stocks, bonds, cash, and cash-equivalents. It’s not a speculative investment. Everybody should have some bitcoin.
Bitcoin Investment Thesis
On the other hand, all altcoins are speculative, even Ethereum. As a result, I never mix my bitcoin with my altcoins.
Today, bitcoin makes up about 30% of my total allocation to crypto.
Altcoins make up the rest. At some point, I expect some of them will mature into a long-term, core portfolio asset. For now, I keep them separate from my bitcoin.
For each individual altcoin, I buy an equal amount in USD. Always averaging in a little at a time, staking when I can, never taking profits, never “rebalancing” into bitcoin. When I use some of my altcoins, I replace those tokens with the equivalent amount of USD.
For example, I put $100 into altcoin A, $100 into altcoin B, $100 into altcoin C, and so on. Not all at once, but in small amounts over time. Doesn’t matter about the market conditions or how much an altcoin has gone up.
If I use $10 worth of their tokens, I buy $10 to replace them.
As a result, my investment in each remains uniform in USD terms, spread among several projects without risking too much on any one of them.
Very strict, I know, but in this market, opportunities abound. Moonshots are everywhere. I don’t want to put so much into the losers that I can’t get some good juice from the winners.
On the flip side, that means my winners don’t bring back as much as somebody who puts a lot of money in the 10,000% superstar.
With so many opportunities, I can’t get salty about missing a few. I already have some moonshots in my portfolio. Only time will tell which one will deliver that 10,000% gain. Two have already topped 5,000% and a few others could get there, too. No need to get greedy.
I also hold some bags from 2018.
If it seems odd to hold cryptos I don’t want or use anymore, it’s because I bought them when I didn’t know any better. At the time, I liked them.
Once I started researching altcoins for Crypto is Easy, I realized some of them sucked. Some just flat out sucked, bad choices, no good, dumb money decisions. Others were great projects with tokens that aren’t designed to capture value.
With altseason going bonkers, it doesn’t make sense to sell those sucky tokens yet. Let’s see which ones do a random 10x pump, then swap them for bitcoin.
For the others, they go to zero or infinity. The few altcoins that succeed will return far, far more than the majority that fail.
At that point, they will move into the long-term portfolio asset bucket, along with bitcoin.
How long will that take?
I don’t know, but I’m willing to wait as long as necessary to find out.
Stay tuned for strategy #3.
Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.
Originally published on Voice.com.
