Managing crypto portfolios
Hi Steemians
I just finished restructuring my portfolio and the method how I manage it. That is what I like to share with you today. It might give an impulse to some of you to improve their own portfolio but also I am very curious about your thoughts on my approach. I love to learn and approach it even further.
Please keep in mind that I am no professional and that projects selected are no investment advice.
basic idea:
I want to focus on the market leaders BTC and ETH. I see a lot of potential here. The greatest risk is that a challenger might surpass one of them. That is why I want my portfolio to be diversified. I also see use cases in certain industries which I find very promising. I also try to keep my portfolio diversified industries wise.
I tried to implement mechanics which force me to make decision because there are so many interesting projects out there and it doesn't make sense to invest in to many projects. It does not make sense from my point of view because than the percentage you invest in each project is so little that even if it gives you 10x it won't move your portfolio significantly. Also it is really hard to follow more than 20 projects and keep yourself up-to-date.
That made me think that I need categories with different strategies for each one.
The first level of categorization is about the quality of the projects. I defined 4 categories:
- "Leading Edge" making 50% of my investments limited (at the moment) to BTC and ETH
- "Prime / A-picks" making 30% - limited to 6 pics from different industries. Projects I see a huge potential in. I monitor those regularly and try to be up-to-date about their progress. I do understand their business model in depth.
- "B-picks" projects (15%) I like and see great potential - they are contender of the "A-picks" and might replace one of them over time. Limited to 15 projects. I monitor the projects but not too closely. I like the use cases and understand them - but not (always) the same detail level than the "A-picks".
- "C-picks" projects (5%) which I want to be invested in an keep track of. Often projects with a special technical advancement or a promising use case which first need to get some "grip" and show some results to become part of the B or A pick list. I monitor them sporadically and like the general concept of them. Limited to 25 (might strip it down to 15-20).
Second level of distributing the investment amount is different for each category:
- For Leading Edge it is direct %-wise distribution. At the moment I am weighting both BTC and ETH equally (50/50) but that could change.
- For Prime Pics same thing. I am distributing the investment amount %tage wise to the 6 projects. Here I am assigning %weighting individually. Steem is a big junk here only surpassed by EOS
- B-Picks: Here I am looking for the distribution over industries through distributing the investment amount to industries first - than to projects within those industries.
- C-Picks: The 5% investment is just equally distributed over all projects - I see it as "standard investment amount".
So the target investment volume is calculated as follows (example wise per category)
For 1'000$ investment volume
- level 1 category leading edge 50% x project weighting BTC 50% = 25% of total investment = 2'500$
- level 1 category A-picks 30% x project weighting Steem 20% = 6% of total investment = 600$
- level 1 category B-picks 15% x industry weighting "currency only" 15% x project weighting Dash 50% = 1.1% of total investment = 110$
- level 1 category C-picks 5% x even distribution / 25 = 0.2% = 20$
Projects can move up or down. Than the limit of the category above forces me to make a decision which project that one replaces.
For each project I monitor performance on a weekly basis. Due to different performances the %-tage within those categories and overall is going to shift. That again forces me to make decisions. Do I see the performance differences temporary or fundamental?
What does that mean for the lower performing project? Are that the right picks? Do I want to just accept the shift in weighting in my portfolio? Do I want to level (sell/buy) back to target weighting?
Leading edge and A-Picks are "long-term" investments anyway - my target is here only to accumulate and not to sell short term. So here I would rebuy if those projects drop below target weighting and accept if the performance brings them above the target weighting.
For B and C picks I might decide to level (buy/sell) unless I decide a high performer moves a category up or a low performer moves a category down.
Here a picture of how that looks like in my excel sheet which I am happily share if someone is interested.
And here the excel for download
What I am still struggling with:
-Number of projects still seem to big. I would be happier with a total of 30 or so projects.
-Is the 50% for BTC/ETH too low - should it be more like 60% or so?
-Does the "industry" distribution enforced through the categories in B-picks makes sense? Or should I just ensure that the pick list is done balanced from different industries? Would reduce some complexity.
I hope you were able to pick up some ideas for your crypto portfolio and now I am very interested to hear your thoughts on my approach and learn from your experience!
Thanks for sharing! I don't think you have too many projects, and I like your industry distribution! I actually think 50% for Bitcoin and ETH is a little too high. Both projects are facing fierce completion from better technologies. They were both first to the market and have an enormous name recognition advantage, but will that be enough?
I just made a similar investment strategy and spreadsheet!
I also decided to have 30% of my capital in my top 2. I only have 15% into Bitcoin, and 15% in Dash. I have high hopes for Dash Evolution to bring crypto to the mainstream this fall.
The next 3 get 10% each. So my "prime" picks include Ethereum, Steem, and IOTA. I see IOTA and Steem as "slam dunks." I'm more reserved about ETH, because it has so much competition, but it can't go lower than 10%.
My next 5 get 5% each. My "B-Class" includes EOS, Golem, BitShares, Lisk, and Iconomi.
The next 10 get 1% each. My "C-Class" includes Litecoin, NEM, Waves, Siacoin, Gnosis, Basic Attention, OmiseGo, Swarm City, Veritaseum, and Ethereum Classic.
The final 5% can be split into as many as I want. If I am interested in a crypto, I will usually buy at least $20-$30 worth to help me "keep an eye on it." I'm looking to move Wagerr, Ubiq, LBRY Credits, and NEO up the list. Is there any I should "demote" to make room? Do I have too many ERC20 tokens?
Thank you for contributing your ideas. That is really interesting and it seem there are several similarities in how we manage the portfolio as well as in the picks we made.
Your post let me rethink my evaluation of DASH. Why is it one of your two most favorite picks? Your argument for ETH that it has many competitors would fit here as well. Dash has a lot of competitors: XMR, PIVX, ZCash, Komodo just to name a few. What I feel is special about Dash are the master nodes (but on the other side that concept doesnt seem as good as the graphene concept of BTS, EOS and Steem) and the privacy bit which seem to be better solved in other coins (zero proof etc.). That is why it is "only" a B-pick for me so long. Did I missed s.th.?
I see IOTA also very strong. But it has the lowest percentage together with GNOSIS within my A-Picks. What makes you feel that IOTA is equal to Steem a "slam dunk"? I am very interested in your arguments.
Regarding your questions: The first two coins I would rethink if I would like to move other coins up are BTS and ICN. BTS is great - graphene - Dan (ex.) all that is great. No. of transactions is high so it is used. A few week BTS would have been at least a B-Pick for me. But I think EOS will cut into BTS. With parallel processing game will change in terms of transaction speed. And to be really successful BTS you would need to evolve to that.
That brings me also to your ERC20 token questions. Actually I haven't marked how many of my tokens are ERC20 ones. But that is a very good point which I have to take up. Because if EOS will change the game to parallel processing all dapps on etherum will get a problem I guess. So from a project business perspective that doesn't matter but it might bring up competitors who are doing same thing but are designed for EOS an therefore come with certain advantages also for the user.
NEO is starting to get my attention as well.
Thanks for your input! I agree that the long term potential of BTS could be disrupted by EOS. I was lucky to get into both BTS and ICN somewhat early, and have already sold off a few chunks. I see ICN as more long term than BTS though.
I like Dash so much for a few reasons.
As for IOTA, "Slam dunk" may have been the wrong term, because I do not see it as a sure thing. I see it more as a "no brainer" to invest in because the risk-reward ratio is absolutely off the charts. The "Tangle" of IOTA could disrupt the blockchain industry before the blockchain even goes mainstream. The instant transactions and total lack of fees are exciting, and I think the sheer amount of tokens will be an advantage in the coming years, as new investors will be intimidated by the prices of most cryptos, and will find comfort in buying millions of IOTA for a few bucks.
BUT they need to develop a more user-friendly wallet. IOTA might also be ahead of its time. Before the Internet of Things takes off, a new technology might find a way to do it better.
Finally, a thought about handling ERC20 tokens.. Perhaps it would be better to own these tokens as a percentage of your ETH instead of as a percentage of your portfolio? For example, my ETH + all ERC20 tokens = 20% of my portfolio.
I so much enjoy to read your views on things. Thank you for taking the time to share your thoughts so sorrowfully.
Regarding dash: I was aware of the fact that the master node concept leads to a huge number of coins being locked. For me that was also one main driver for DASH taking of beginning this year. In my evaluation I ignored that fact to be honest. I might need to reconsider. It might make sense to go so far to try to reach being a master node.
IOTA - I agree on your points - It sure has great potential and is an obvious use case.
I think summarizing all ERC20 tokens und ETH is to restrictive. You could imagine that an successful dapp migrates on other plaftforms. There might even be "adapters" or "VM" for making that possible. So I could imagine there is a "ethereum on EOS" VM which helps projects to migrate. Of course on the long run the would need to be rewritten (parallel processing) or might not if the don't need that transaction volume.
But as a risk indicator it would make sense to see the % of your investment is related to the ethereum platform. I need to include that in my portfolio and check what the outcome is. Than I will decide what for rules I like to give my portfolio about that.
I just saw that I haven't mentioned why I considered ICN as a possible replacement candidate in your portfolio. I just see TaaS as a stronger candidate with it's dividend strategy and being swiss based (a personal thing).
Thanks again! I was not aware of TaaS, but it looks solid and very exciting at a market cap of 17 million! I haven't had much time to read about it yet, but it looks very promising! If I understood correctly, TaaS will manage a hedge fund and return profits to the token holders, while ICN allows individual users to manage their own accounts and gain "followers" to invest. I'm also taking a closer look at Lykke and Filecoin thanks to your recommendations!
I think a Dash masternode would be one of the best investments right now. If I had the $$$, I would get one immediately! Also, I forgot to mention one of my favorite things about IOTA. It is already scalable and resistant to quantum computing hacks. I am not a technically gifted person, so I don't know exactly what that means, but I've heard much more intelligent people than me say that will be a huge advantage in a few years.
Also, great point about successful ERC20 tokens migrating to another platform. I had no idea this could be possible, and has given me one more thing to think about and research.
Yes - you summarized the idea of TaaS quite well. What I also consider an advantage is that TaaS (like Lykke and ethereum) is based in Switzerland and here are the regulations quite positive for cryptos compared to other countries like the US for example and Switzerland has a huge history and knowledge in Banking. So Hedge Funds (TaaS) and Financial Platforms (Lykke) are great. You can see that also in how Lykke is handle. It is the only project I know of for which you find a regular (like a stock) annual report (2016). Which increases my trust in that project dramatically.
I am glad that the discussion was a fruitful one not only to me but also to you. Let's keep in touch about Cryptos on this platform.
Thank you for your in-depth comments @skycornish! Definitely inspired me and I gave you some credit on the recent tweaks in my portfolio approach :-)
Definitely keep on bringing these great thoughts to the platform!
Hello mate! nice insight. regarding to this "Both projects are facing fierce completion from better technologies." what technologies are you talking about? I'm new in this world of cryptocurrencies and every information I can get is valuable, Cheers!
I think that Dash, NEM, and IOTA are all currently better technologies than Bitcoin. This could obviously change, but the governance of Bitcoin is locked into fighting and bickering instead of actually fixing their shortcomings. Bitcoin's Proof of Work also consumes ridiculous amounts of electricity and computing power, which is very hard on the environment. The free market may decide they want a more environmentally friendly world currency.
Ethereum is arguably facing more competition from the likes of EOS, Waves, Stratis, Lisk, etc.
Wauw! I really like this post. Great details about your portfolio, you've inspired me ;-)
I've also just posted an update on my long term portfolio. Not as detailed, but maybe you can let me know what you think of it?
https://steemit.com/cryptocurrency/@cryptotem/my-strategic-cryptocurrency-portfolio-update-3
Thanks!
Thank you for your comment. I like your posts as well. Already took some ideas out there to improve my portfolio. Will comment on them as well and following you.
Cool, I will definitely follow yours as well!
To give you my personal thoughts on what you are ‘struggling with’:
All in all, there is just so much information out there and so many promising concepts, we need discipline and focus to profit optimally. It is fun and exciting, but very time consuming as well. Hopefully we can help each other out a bit by writing about it here and share our thoughts :-)
Great comment - I enjoy the discussion very much and it makes me rethink which is a good thing for me.
Your comments are totally in line with my thought process inspired by all the comments of the last days.
My conclusion
-Industries: I think I keep the % distribution for now. But with less project I might change that to just a descriptive figure which I look at making decisions and not a hard wired distribution mechanism.
And yes - I think best is to work together and exchange knowledge on protfolios. Actually that is what I am doing with @knircky several times a week since a couple of month now. It helps a lot.
When I redone my portfolio I will repost it here.
Nice, I will try to share my research and portfolio on a regular basis as well and follow @knircky more closely as well!
Looking forward to your next update!
Sound good
Thank you for the upvote and support ehujra!
Nice post @famunger! I am amazed to see how a lot of cryptocurrencies you can manage with your sheet! There are so many many different coins you hold. If I were you, it would cause me an endless headache.
Really thanks you for this sheet! I am downloading it now to test it!
Thank you for your comment.
You are right - there are too many coins. I am in the process of optimizing my approach based on all the feedbacks. Will bring out another update soon and post it here.
Do you plan to add more coins to the portfolio? Can I know your maximum budget for the portfolio because there seems to be a lot of coins? That's amazing!
Your Excel sheet is very useful! Looking at the Prime picks, Lykke is very stable in term of price, but I believe it would go big in the future since their service is really good.
For me, i would also trade the Leading Edge type too :D
I dont understand one thing from your sheet. How do you calculate the total weight?
Thank you for your comment. Yeah - Probably trading would make sense for all - I'll have to see about it.
The calculation of the total weight I was trying to explain with the examples in the chapter starting with "For 1'000$ investment volume".
In general total weight just shows the actual weight over the whole portfolio. So the sum of all "total weights" is always 100%. E.g. for Lykke it is 30% as Lykke is a prime pick multiplied with 15% in category weighting equals total weight of 4.5%. Which means the other way around that my target is to invest 4.5% of my portfolio into Lykke. If I do so for every project on my list accordingly I will have invested 30% in prime picks as I planned.
Does that make sense to you?
Ok, I got it! Thanks for the explanation! Your way to manage it is very good. If you dont mind, can you share this spreadsheet to me so that I can try to use it to manage my portfolio too?
Of course - I would be happy if that helps somebody. What is the best way to get it to you?
Ok lets try it this way:
Link:
Portfolio Excel
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STOPThis is so thorough... wow
I take that as a compliment. But sometime I ask myself if I do it to complicated though.
On the other hand I am invested in crypto for more than a year now and it helped me making decisions.
SOUND INTERESTING......HAVE YOU HAD GOOD RESULTS WHIT THIS.
Very good question - at the end that is the only thing that counts. I fully agree on that.
I have remanaged the portfolio today (before I had more dominant the industry focus). I think it is hard to really judge at the moment if I am able to bring alpha to my portfolio. Because in the past probably just betting on BTC and ETH would have brought better performance. The question is answered in my point of view only on the long term as it reduces risk versus a pure BTC/ETH strategy for example.
But what I can say:
-It helps me to identify what are the real winners and losers in comparison. E.g. one coin which doubled can be a loser if all other coins tripled in the meanwhile.
That are "semi-tangible" result which I can confirm at the moment.
Just download the excel file. I will try to invest those below $0.2 which I can afford and probably hold on to them for the next 10 years. I'll let you know then if I made a profit. Thanks for sharing, cheers :)
Hey @famunger, I'm convinced with your distributed portfolio, But don't you think litecoin has potential to come out big maybe by this year end? So shouldn't it been consider in 30% stake ? and what would like to hear your opinion on siacoin, would market accept it ?
Thanks for your comment and questions.
I see Litecoin having the "being second" advantage. It always need an alternative to an market leader in my opinion. So I do appreciate LItecoin. But compared to the other project in the A-List I do see more potential in other coins.
SIA seems a good project. I like the "cloud" approach. I decided to go for Filecoin though also keeping in mind to not have too many projects in my portfolio.