We have all been there, especially when you are just starting out in this weird and wonderful world of magic internet money.
How the hell do I build and structure a successful portfolio?
To be honest, a lot of people know they should have it structured but don’t know how best to do it. There are a few tips and tricks we have found that work best over the years, so we thought it would be best to put them down in writing for you.
I find the best way to think about projects is in three categories of market capitalization. High, medium and low cap coins are best structured in that order.
High cap coins, which could be classified as your big top 10 players or projects of double-digit billion-dollar market caps. In this current market, you have to go down as far as number 15th in the rankings to get to a sub 10 billion dollar project.
So if you are holding projects like BTC, ETH, DOT, LINK etc these should make up a higher percentage of your portfolio. This is because when a project grows to these heights, they generally become more stable.
Now, this is cryptocurrency so the word stable can be used lightly. We know the markets are extremely speculative and emotionally driven so take “stable” with a pinch of salt. But, in general, you aren’t going to see one of these coins fall off the face of the earth or rug pull any time soon.
Moving on swiftly to the medium caps which should make up a smaller allocation of your portfolio. The difference here is that your medium cap coins like OCEAN, FET, LTO, SXP etc are all around a couple of hundred million dollars in market cap. These projects can still pull a 10x if they get their lives together and people starting understanding their true potential.
That being said, a lot of projects are at this valuation because you have spotted them early or they are still just chugging along nicely. Hopefully, it is the former.
Projects at this scale that have been around for a while may still be building and have a few hurdles to overcome before they enter the big leagues.
OCEAN for example, if they get it right, it will tap into an unlimited data market and could be one of the biggest players in this space. For this to happen they need adoption to drive the token scarcity and effectively the token price up. This is the gamble and this is where the big payoffs come from. But you don’t want to be overexposed in case the adoption doesn’t ever come. Make sense?
Now we get on to the degenerate low caps. I must admit I do love to play about in the depths of the degen jungle. There are big gains to be made but also a lot of crap to sieve through to find the gems.
Rugpulls are inevitable. Teams deciding they can’t be bothered to continue the project will happen. Liquidity will dry up and you will be left holding a bag that no one wants to buy. But, it is fun and there is some serious money to be made by being first.
You cannot structure your portfolio in a way that sees most of your holdings in these low caps. These are your high risk, high reward plays that make up a small portion of your holdings.
I know some of you won’t listen here especially when you see anon Twitter accounts shilling their “gains”, no one shares their losers apart from us. It is all on display on our Patreon.
This is to show we still make mistakes, we get sucked into rug pulls and can often buy the top its a constant learning curve. The industry moves so fast mainly due to open source decentralisation and a huge community influence, there is always something to learn and always something new to try.
All-in vs diversification.
Whether you are a maximalist one-coiner or like to hold a billion bags, there are positives of both.
Whilst holding only a few coins can see those gains come in much quicker, they also come with the potential downside risk.
Diversification on the other hand reduces your immediate gains but protects you from one coin drawdowns/pullbacks.
It is completely up to you. I think there is too much opportunity to only hold 1 or 2 bags but I also hate it when I am holdings too many bags (which I always am). It has worked for me and when one of these bags starts to run, you can build the position and hopefully capitalise on the gains.
It is much harder to keep an eye on the price action of projects when you are not invested in them, in my opinion. Having skin in the game has you on the ball with the movements on price and you will naturally pick up information about projects you hold.
One time you have to diversify is when you are playing around with low/micro-cap coins. You cannot go all in one a low cap without other exposure to hedge this risk. If you are in a project with a very low market cap (less than $50 million), be prepared to suffer a loss and make sure you are spread across others to mitigate this risk.
The beauty of low caps is that even if they start to run you can build profitable positions as they still have an awful lot of room to grow, if they are legit that is…
If you are interested in being a complete degen and want to find a low cap gem, you can head to our article HERE for our guide on how to DYOR and pick a 100x gem.
How long to hold crypto?
Another aspect to consider is the duration of the hold.
Low-term holds – Certain projects you aren’t sure about but have a stupid amount of interactions online and a ridiculously cultish community may be great to buy when they are oversold or on a dip.
But at the same time, when a community is extremely emotional regarding a project this can lead to a lot of swings in the price. These projects are great for a quick in and out short term hold.
I suppose the best example of this is the DOGE rally earlier in the year. Hardly any fundamentals in the projects, purely meme and emotionally driven, but as soon as Elon put out a tweet, it was in all honesty a great buy.
Given that the Wall Streets Bets group also got wind of it, this made for an excellent short term flip. Not something I would like to be still holding though…
Medium-term holds. These are projects where given their project goals and the way the market is moving, they could be redundant in a couple of years but in the meantime may play out well.
A lot of BSC projects you could argue fall under this category. Whilst the Ethereum network is congested and gas is ridiculously high, you can see why there are a lot of people flocking to Binance Smart Chain, us very much included.
There are projects on BSC that will for sure be left in the dust as and when ETH sorts its life out, but for now, there is a lot of opportunities here for a medium-term hold.
Long term holds – The majority of your portfolio is better off in long-term holds.
Bitcoin is the king of this example, you are looking for a short term hold with Bitcoin and if you are give your head a wobble.
This is for several reasons. Selling too early is a killer. It is worse than missing the boat completely. Seeing a coin go from a stupidly low price, you selling and it going another 10x is soul-destroying. Holding for the long term hopefully will prevent this from happening.
Another reason is it is much less stressful. Just set it and forget it. Although that still won’t stop you from refreshing your portfolio tracker every 10 minutes. Remember the more you refresh, the more you make… I wish it was true.
Flipping coins – We do like to partake in the odd flipping now and then. Especially on ICOs and IDOs, these can be highly risky but also some good opportunities to flip a quick 2x.
These are all to be researched individually as the current climate usually favours presales which allow people who are in the presale to dump on the retail investors on the point of listing on a DEX or CEX. Very frustrating.
If the presale allocation is low and presale investors don’t get a lot of coins/tokens in this presale, then they are more likely to purchase more when the token lists for trading. These are good opportunities to turn over a quick profit.
However you structure your portfolio, you will want to track it. Believe me, we have tried all the trackers out there and we have found the best one for you.
Accounting, offers the best portfolio tracker on the market, it is always up to date and you can connect to nearly every exchange on the market and hot wallets like MetaMask.
Head HERE to download accounting for your mobile and on your web browser.
If you are looking for a seamless way to file a tax report in only a few clicks, they also offer this as a service. They connect to your exchange of choice through API and boom, all done.
Blocmates readers can get 10% off all crypto tax reports by signing up via our link HERE.
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I always recommend to our clients that you have AAX even if it is just for busy times. But, I will warn you… you will stay.
Why wouldn’t you? The user interface is the most user friendly out there and to top it all off… they are powered by the London Stock Exchange Groups Technology’s Millennium Exchange, bringing scalable, trustworthy powerful exchanges to the cryptocurrency markets.
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