Bitcoin is going through some weird shit right now, and the crypto space generally, as bitcoin futures are coming online.
Today, 12/12, on GDAX, for example, Litecoin went up over 130% on it’s 24 hour price before crashing back down to 20%. Pretty clear pump and dump in my book. It may continue down further or stabilize, idk. Bitcoin itself has been fairly stable and rather uneventful, but we still have another futures launch next week, so I’m still cautious as recently stated.
The immediate weirdness doesn’t stop me from thinking longer term – in fact it forces it in some ways. What if, as discussed in the earlier linked article, Bitcoin is about to run into a big slowdown for the next several months? Admittedly it has differences from gold, but a slowdown unto it’s own recent history anyway. Well, one alternative is altcoins.
In the past altcoins were sketch and volatile. Today they are still sketch and volatile, but there are many more of them and they are easier to transact. These guys have some, but less, exposure to slowdown from the futures changes. They also have potential many multiple returns compared to bitcoin, as bitcoins is becoming a more mature and stable coin.
One risk minimizing approach is to diversify across these individual alt-coins and create a fund. Prism by ShapeShifter is supposed to eventually make this super convenient via an automated tool, but they haven’t let me in the beta yet so I’ll have to do this by hand. One chick did a very nice diversification case study about what would happen if you had spent $100 on each of top 100 coins a year ago. The answer is you would’ve gotten hella rich and bitcoin would have been a minor driver of that growth. After some corrections downward:
…a new total of $109,819, or basically 11x/1100% with the readily available information
It’s worth noting that this is almost no different from investing evenly in the Big 3: Bitcoin, Ethereum, and Litecoin. Bitcoin has matured and the growth rate is decreasing. Is this the case for Ethereum? I’m not sure. If you think the answer is that eth is still wildly undervalued, maybe stick to a Big 3 for simplicity. I’m going all alt.
I would more or less stick with that lady’s strategy, but I’ll make a few adjustments:
- Trust and fundamentals: Prefer tokens with a fundamental use case I know about. A story. Even if they aren’t in the top 100. Eg Gnosis, Neblio, and LBRY.
- Also, avoid tokens where there’s good reason to think it’s scamming or on the way out, eg Tether.
- Momentum strategy: Prefer tokens on the trend up, avoid those on the way down.
- Trust and fundamentals, social network version: I’ll be separately tracking these bc it might be an awful strategy, but I’ve had some personal friends recommend a few coins.
- In direct opposition to point 1, don’t go too far down the list so you end up with coins that can’t sell because they have no market.
With the above, I’ll be proceeding with the below following portfolio. I’ll try to do a retrospective in 1 year where I compare this biased semi-momentum strategy to the Big 3 and to a flat 100 – 100 strategy.
The below portfolio is less than ideal: I’m not sure how much I can trust PRISM so I’m limiting it. I’m spending 5 eth evenly among 30 coins. I started by looking through coinmarket’s top 100. My initial criteria were:
- Awesome story, or
- Fundamental winner, or
- Momentum (5%+), or
- Recommended by Friend
This proved to be too generous so I upped Momentum req to 15%+. I also am holding BTC, ETH, and BCASH outside of this fund, so those are excluded.
Within the 101-200 range there are a few select coins with a cool story, friend recommendation, or very good trend:
So I ended choosing:
- Power Ledger
- Request Network
- Metaverse ETP
I actually ended up transfering 5.1 eth just because idk what exactly fees were being taken out beforehand.
After trying to set up a coin I realized these were not all via ShapeShift. The ones available were finally selected, final quantity in parens:
On the one hand, this may not be enough diversity, but also it might be just right. My reference point is Ecclesiastes 11:2, “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” Plus, I hold some btc, eth, and bcash as mentioned. Plus, I hold some stock and other stuff. So, (importantly), it won’t ruin my life if this flops. But I hope it doesn’t.
So then I found out Salt can be bought from ShapeShift but not from PRISM? So I freaked out and panic bought Monero instead….Monero was a momentum buy but it was at 8% trend, not 15%, so that wasn’t evenly applying my criteria…
My plan? Don’t even look for 3 months, since that’s when I think btc recovery begins. Dollar-cost average in further if it’s doing very well, or hold if not until 6 months. At that time decide if I want to sell or hold the full year.
Here’s my exchange link for the PRISM. Wish me luck! You can try to join the PRISM beta at any time by the way.
You can also see the transaction sent here. Value was about 3700 USD as sent.