A few days ago, I answered the question of how much is “enough” crypto in a post titled “My Portfolio Strategy Part 1: How Much Crypto Do You Need?”
This is a question I get a lot. I’m no expert but I’m happy to share my answer.
The next question, once you have that figured out, is how do you decide where it goes? Do you do the standard 50% bitcoin, 30% Ethereum, 20% altcoin split? 80% bitcoin and 20% alts?
Do you want my opinion?
Flip that proportion. No risk it, no biscuit.
When you’re dabbling in the most speculative asset class on earth, you have to go bold. That means a hefty allocation to altcoins.
As of this post, my crypto is 20% bitcoin, 67% altcoins, 13% stablecoins in high-yield accounts. Read below for why.
Note, for more on this topic, read My Portfolio Strategy in the Crypto is Easy newsletter.
Bitcoin: a core portfolio asset
I treat bitcoin as a core portfolio asset, one of my essential holdings. Risk-adjusted, no asset offers a better investment profile.
Even when the market’s overextended and overpriced, the long-term growth potential makes bitcoin a no-brainer. With Wall Street’s support and many developers building products and services that leverage bitcoin’s blockchain or use bitcoin as a reward, I have no doubt that bitcoin will remain an important and growing financial asset for the indefinite future.
Bitcoin has its own allocation separate from my altcoins. I never mix my bitcoin with my alts.
Altcoins: speculative ventures
I put altcoins in the same bucket as my private equity investments. The goal is to generate big windfalls or gain outsized stakes in new ventures that turn into long-term assets that I can sell as needed.
As a rule, I don’t rebalance or trade alts. I also hold about 60 of them, which may sound excessive.
Here’s the thing: probably 90-95% of altcoins will fail. Most already have.
That leaves about 500-1,000 great, legit projects to choose from. Plenty of moonshots, lots of opportunities, but nobody knows today which ones will win tomorrow.
The ones that succeed will see the prices of their tokens go so high, it will astound you.
As long as you buy tokens for legit projects that are designed to capture value from the growth of their networks, you have an amazing asymmetric investment opportunity. You risk a small amount in return for a chance to see massive growth in the value of your assets. You can spread your investments around many altcoins expecting most will fail.
Your winners will cover for your losers many times over and grow way more than bitcoin.
You need to have enough invested in altcoins to make it worthwhile. Bitcoin will cover you for the long-term—you can keep a relatively small portion to bitcoin for safety, then put the bulk into high-reward opportunities in the altcoin space.
No trading
Why don’t I trade?
Because I prefer to spread my investments around many projects, let the winners run, and let the losers go to zero.
Then I write off the losers on my taxes to get back 20-35% of my investment.
I keep the winners forever (and only pay taxes when I use or sell their tokens). Their gains could reach 1,000x or more. Some have already topped 100x. I only need a few to succeed and those winners will cover the other +50 losers many times over.
Why so many altcoins?
During altseason, it doesn’t matter whether you have 5 or 50 altcoins. Your portfolio will go up.
What happens after that massive FOMO LAMBO MOON mania? Are you that good or so lucky that you can find those very few altcoins that survive?
I’m not.
For that reason, I buy up to a fixed USD allocation and then let the market take over.
Since I stop buying once I reach a certain allocation, I always have fresh cash to buy the tokens of new projects I discover along the way. In crypto, the pace of innovation is ridiculous, you need to have money handy for new opportunities whenever they pop up.
Whenever I can stake, I stake. I view this as a type of passive income, reinvested into the networks of the related projects.
For a broader view of altcoins, read my strategy for altseason. It’s from December 2020 but still relevant, even more so after this altseason ends and before the next one begins.
Over the long run, most cryptos will die. Bitcoin will almost certainly not. I like to have a nice, core position in bitcoin, with most of my investment in the altcoin space.
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.