Crypto Investment Strategy

Bitcoin has increased by 300% in the last three months from $10k (Oct 3) to $33k per $BTC (Jan 3). Ethereum has also increased by 270% in the same period from $350 (Oct 3) to $950 (Jan 3) per $ETH.

I started buying Cryptocurrency in early 2013 ($BTC mainly) mainly because I thought it was an interesting concept at ~$50 a coin. I ‘lost’ most of these coins as part of the Mt Gox Bankruptcy in 2014. I’m hopeful that 10-15% of our holdings may be returned soon, after seven years of waiting.

The US government has printed more than 20% of the total USD in circulation in 2020 alone (over $USD 9 Trillion) and many people have no idea we just got a lot poorer. Given this is happening globally (across governments) I’m starting to think that I should have a more significant percentage of my savings in $BTC and cryptocurrency in general over fiat ($USD). There are also lots of other benefits/value of cryptocurrency beyond inflation protection but I won’t cover them here.

Ultimately, I’d like to allocate 10%+ in Crypto, 20% in technology companies (private), 30% in real estate and 40% in public equities (mostly in tax advantaged retirement and non liquid accounts) but this will take many years and a good amount of luck, too 🙂

Given these observations, here is how I’ll modify my strategy going forward.

Crypto Strategy

  • Focus on $BTC and $ETH: Most of my $BTC is locked up in Mt. Gox (stuck in bankruptcy proceedings), and this counts towards my overall allocation. I assume around 15% of coins returned at some point as $BTC (not fiat). My next largest position is ETH which I’ve had for years. I plan to hold BTC/ETH/All Altcoins in a 50/35/15 ratio in terms of USD fiat value.
  • Regular Purchase: I started taking 15% of my paycheck (2x per month) and purchasing $BTC and $ETC in an equal ratio (50/50) as I am over indexed in $BTC. The goal here is to remove emotion from the decision and dollar cost average over the next few years.
  • Crypto Savings Account: I moved all my extra money to BlockFi and now Celsius (referral links). I have kept some $BTC and $USDC (USD stablecoin) in BlockFi the last year and would rather make 5-8% interest vs. 0.5% interest in traditional finance alternatives. Note that BlockFi is not risk free (they are lending like banks do) but they do have strong security measures to protect your collateral.
  • (optional) DeFi: I have positions in all the stuff powering Decentralized Finance (DeFi) on the Ethereum network, which started for fun but now is more significant (which is how $BTC started for me anyway). I play around with staking, liquidity pools and lending but beware the gas fees (I got burned). My largest position outside of ETH is in this DeFi Pulse Index (https://defipulse.com/blog/defi-pulse-index/) which is a weighted index of all the tokens powering DeFi.

I also hold small amounts of other Altcoins like Stellar Lumens ($XLM), Polkadot ($DOT), Ripple ($XRP), Filecoin ($FIL bought in the 2017 SAFT), Arweave ($AR), UNI ($UNI), Sushi ($SUSHI), Cosmos ($ATOM), Solana ($SOL) as well as about a dozen others, but those are more out of interest than part of an actual strategy. I also added NFTX as an index for collectibles to the mix.

All of this is still very experimental, and I wrote this up to share more easily and get feedback. Despite dabbling for eight years, I still feel like a n00b most of the time in the crypto world.