Why I value my crypto altcoin portfolio in BTC and ETH and you should too

in #bitcoin3 years ago (edited)

This is one of the top questions I get regarding cryptocurrency trading.

How do you know if you’re losing money? Won’t you lose money focusing on BTC value if (insert hypothetical scenario here)?

There are two issues here. The first is that some people don’t understand trading pairs and gaining value relative to trading pairs. The second is that other people don’t trust bitcoin to hold or gain value.

What are trading pairs?

Trading pairs are two currencies, traded against each other. If you were trading GBP and AUD, you wouldn’t be worried about the value in JPY, you’d be focused on growing value within the trading pair.

Example 1:

Trade 1: GBP > AUD

You’d patiently wait for AUD to rise or GBP to drop relative to each other then make a trade back to GBP.

Trade 2: AUD > GBP

You’d now be waiting patiently for AUD to drop or GBP to rise relative to each other.
JPY had no bearing on you gaining value in the trading pair.

They say, “But Ash, I bought my bitcoin with USD! I need to end up back in USD!”
That’s fine. It’s just two trading pairs.

Example 2:

We’ll use numbers for USD/BTC, letters for BTC/ANS (any alt and fiat are the same, just picked one of each).

Trade 1: USD to 1 BTC
Trade A: 1 BTC to 1k ANS ( then wait for gain in BTC value)
Trade B: 1k ANS to 1.2 BTC (then wait for gain in ANS value)
Trade C: 1.2 BTC to 1.2k ANS ( then wait for gain in BTC value)
Trade D: 1.2k ANS to 1.4 BTC
Trade 2: 1.4 BTC to USD (wait for higher USD value if necessary)

This is simplified, but it makes it easy to see that by focusing on using alts to increase your BTC value, you focus on increasing your BTC at cash out. The fiat value of ANS doesn’t matter for your trades, because it’s going to hugely fluctuate; it is going through two trading pairs after all.

Trusting BTC to gain/hold value

You understand the concept of gaining BTC, after all 1.4 BTC is better than 1.0 BTC, yet you’re still asking what about my fiat.
The issue here is your trust in BTC (or ETH if you’ve got ETH-based trading pairs) not you missing the concept of valuing alts in BTC.
You get the idea of aiming for more BTC, but you worry that the BTC won’t be worth USD or as much USD when you get it.
This is the most common issue I encounter, thought they voice it as “what happens if (insert 74 hypothetical situations here)”.
Your uncertainty is not in the soundness of the idea of trading to gain more BTC, but in not knowing if BTC will be worth fiat when you want to cash out to fiat. I trust that it will.
I can’t make you trust BTC.

I can tell you:

BTC has been around since 2009
BTC, while volatile, has an overall strong uptrend.
BTC has crashed due to outside issues but has always recovered nicely.
If a downtrend is a concern, it will be because of major news that you will be aware of.
BTC is not your only exit option, you can also exit the crypto market through ETH, LTC, and Tether.

By delineating trading pairs and focusing on gaining value relative to your trading pair, you maximize your growth. Focus on building BTC/ETH (and potentially LTC) value while monitoring for major news impacting the viability of your primary in your trading pair.

Happy HODLing!
Ash

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Thank you for yet another great article. It really helps one to understand how to better trade and accumulate more BTC (or ETH, LTC and s.o.) and then gain more when cashing out.

Thanks for the clear and easy to follow examples. I contemplate this a lot :)

Great post. I had a quick question though. Let's say today bitcoin is $2750. If I want to use the $2750 to buy 1000 LISK, wouldn't it be better to wait until tomorrow? Let's say tomorrow Bitcoin is only $2000. So I can save $750 if I wait until tomorrow. I don't like buying alts unless BTC is down. Is this thinking wrong?

It would depend.
If you have $2750 fiat, then the smart thing to do would be to enter at $2k each and get 1.375 BTC.

If you have 1 BTC then the USD value is irrelevant to your BTC/LISK trading pair and you need to focus on a good entry relative to the pair you're trading. Current price is about 72k sats (.00072 BTC each), so if you'd entered at that price with your full BTC, you'd get about 1,389 LISK. You wait a bit and LISK rises in value relative to BTC, say 5%. So you "capitalize" on this gain by moving back to BTC, but now you have 1.05 BTC.
You see that LISK has moved back down, so you buy back in again, for simplicity sake, we'll say its back to 72k sats, so this time your 1.05 BTC buys 1458 LISk. You wait again and it raises 5% and you go back to BTC again, this time you have 1.1025 BTC.
So you'd have gained crypto, no matter how you look at it
1.1025BTC >1 BTC
During this time however, BTC could be up down sideways to the moon, whatever. That doesn't matter until you're cashing out.
If you're not gaining BTC, you shouldn't trade alts, because it's more advantageous to stay in BTC if you're not focused on gaining BTC value.

Havent had enough coffee yet, lol. You answered thejavascripts question with: "It would depend." I was hoping for a yes, no or it doesn't matter!! lol Let me rephrase his question: As long as he/she/we have the underlying belief in BTC (or ETH), then whether we spend USD to buy BTC today when BTC is $2750 or tomorrow at $2000 (of course the "tomorrow" could have meant that BTC was UP $750 instead of down $750) doesnt really matter...... because LISK will be up or down SATS wise based on BTC. ~~~~~~ separate thought(s): Today BTC is currently about $7500 - if I buy some BTC today and purchase an ALT today with that BTC, and 5 weeks from now BTC is around $5500, and nothing fundamentally has changed with that ALT, would you expect the trade to be in a PROFIT or LOSS state at that juncture?
by the way, thank you so much for what yo offer to the community on the cct community on fb; I'm quite the beginner here on Steemit, but appreciate what you provide to us cryptoKrazies. Thank you!

Fantastic insight thank you for putting so much effort into this post.

Thank you for this article. I'll be using this to send to people asking me the exact same questions.

Great, glad you enjoyed it :)

Hello, thanks for this - I was looking for some thoughts on that exact subject.

I have recently started getting interested in crypto, also trading with relatively small amounts and did not like the idea of passing through BTC all the time, thus I gravitated mostly towards */ETH pairs.

At first I was trying to track my portfolio in EUR or USD or BTC or All of the Above, but now I only look at how my trade might affect my ETH equivalent, I have mostly stopped looking at ETH/Fiat fluctuations at all, I simply assume that the future of ETH is covered (it would take way too long to talk about why I feel that way :))

You are awesome, I am so glad I recently found you on Facebook and Steemit, your content is amazing 😃

I saw your frustration on flakebook and popped over to grab your steem link... mainly because I'm also tired of arguing with people's fears on losing "fiat" or paying high btc fees and like you said, any number of other scenarios. :/

Good write up, you laid it out clearly.

That was another good one. I love Steem.

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