I learned about this from a friend recently when I asked him for his thoughts regarding cryptocurrency investing.
I am clearly in need of a strategy for hodling and building up a portfolio of worthy crypto assets.
This was the strategy offered:
- To have 50% allocation in bitcoin
- Invest 25% in altcoins, which should be no more than 5 different altcoins. Again, big caps should be allocated more than low caps, according to risk appetite.
- Keep 25% in USD stable coins ready to buy the dips.
The idea is to rebalance regularly to keep this proportion of 50:25:25.
Fundamental to this plan is to take profits on the altcoins, and distribute to bitcoin and USD stable coins. This way the overall portfolio worth can grow with the growth of the crypto market.
This sounds like a reasonable plan to me.
I see that the main premise behind this plan is that bitcoin remains the best store of value asset in the crypto space, having a huge proportion in bitcoin cushions drastic drops in the crypto market better vis-a-vis having a huge proportion in the altcoins. When altcoins tank, they tank way more than bitcoin. They bleed more.
Avenue for growth is also catered by allocating 25% in altcoins. In particular, gains from it can be locked in, either in bitcoin or USD stable coins.
The best part of this strategy is that when bitcoin drops, there is gunpowder to deploy to benefit from the 'sale'. But not in buying bitcoin. The plan should be to invest in altcoins, assuming they too dropped and dropped more than bitcoin. The altcoins should bounce back faster, giving us more gains. This way we can read the bitcoin dips more positively.
There are, of course, other complexities if we also think about staking, yield farming, and ... in Hive's case, HP and time needed for un-staking to keep the balance. Also, when buying the 'dip', best to do in smaller tranches, according to him.
Maybe I will have to come up with a revised Strategy 2.0.
As usual, this is not financial advice, please think through carefully before investing.