21
During red days like this, the potential value of your crypto portfolio is more important than the current value. We all know that the price of crypto is very volatile. And regardless if you are a hodler or not, this does have/could have impact on your mental health or could decrease your faith in crypto in general.
Since the beginning of the year, I have move my portfolio tracking from Excel to IOS numbers. This did come with a fresh start and is still a work in progress. During the build of my sheet, I decided to add the potential value for the overall portfolio as for the most important cryptos in my portfolio.
What is the potential value of your portfolio!
Well this is relatively easy. The current value of your portfolio of for instance a coin, is your holdings multiplied by the value of the crypto!
So suppose that you only do hold BCH in your portfolio and to make it easy you just do have exact 1 BCH. Than the current value of your portfolio is 1 BCH times $390.62, making indeed $390.62.
But BCH isn't at his all time high. The all time high of BCH is $3,785.82. So the potential value would be 1 BCH times $3,785.82. That is a huge difference than the current $390 isn't?
So, if you do this math for all coins in your portfolio, you will have on one side the current value of your portfolio and on the other side the potential value of your portfolio!
Take my Hive holdings as example:
The blue line represents the current value of my holdings, while the green line is the potential value. As you can see the decline of the price of Hive did start at the end of last year, but the potential value does keep on rising.
How can this give you a better insight in your portfolio?
Well there are multiple metrics that can be used.
First of all when you are a real hodler, the potential value of a coin of your portfolio can never decrease, regardless of what the market it doing. The all time high will still be the same in a bear market or in red months. The only reason that the potential value of your portfolio of from a crypto can decrease is when you do sell some of it.
I for instance do make monthly statements/posts of my portfolio. In 2021 the current value was almost every month increasing, but if we do enter a bear market there won't be many months in the green. But hey I am still building up my portfolio, earning some passive income, earning some BCH by blogging and so on. But during a real red month, the current value of my portfolio can go down, while I did increase the holdings of some coins.
But when I do have a look at the potential value then, I do see an increase. This because I do own a bigger amount of some crypto.
Now you can say that you can also look at the increase of the holdings of a specific crypto, which is correct! But human beings as we are (or most of us). We do like to also see the value in fiat money.
Secondly if you do want a complete insight in the overall portfolio it is hard to see if it is climbing or going South!
The potential value of this portfolio does give you this insight.
Also here the blue line is the current value; while the green line is the potential value. The blue line had a great ride in 2021, but since the end of the year the fun ride is over and decided to go south. The green line on the other hand had the same ride as the blue line, but continues to increase on a daily basis.
You can also see in the green line that I did sell some coins in March, which did hurt my green line, but 2021 was the year that I did withdraw all my fiat investments ever made into crypto back to real life.
Pitfalls?
Like always there are things which could and does blur the insight. Probably you do have coins in your portfolio which never will reach their all time high again! I kid you not. Even when crypto would take over fiat, there are some coins which will never come even close to their all time high.
Another pitfall could be that you do have all historical information. This is clearly visible in my KCS holdings.
KCS did break his ATH last year, but I don't know when and what the previous record is, this of course does give a blurred insight.
To get this insight, you do need to know how far a crypto is away from it's all time high on one side and you should have an idea if I could reach that ATH again or not.
If you do wonder if this is still possible, you should wonder why it is still in your portfolio.
As you can see, the gap between the green and blue line is immense, probably Fun token will never get close to it's ATH again, but the reason I do have this coin in my wallet is to be a premium member on freebitco.in. By holdings these I do get extra spins at their wheel of fortune!
Eos is another example of a coin where I don't have so much faith in anymore, that's also the reason why I did sell some of them during 2021, which is clearly visible in the graph below.
I know that it is hard to say goodbye to a coin, but one it now only has 10% of the value of their all time high, it probably will never get close again. Still we keep them, hoping that a miracle will happen!
So, I don't know if keeping the track of the potential value makes sense or not. On one side it will always be a blurred vision due to the fact that it is utmost impossible, even in cryptoshpere, that all the coins you have would reach there ATH at the same moment, and some never will come close again, but on the other hand it is a pretty decent thing to track the overall performance of your portfolio.
Do you keep track of the potential value of your portfolio or not?
And does it make sense or not?
Open for discussion as always.
