The Two States Portfolio Strategy
- Non-stablecoins portfolio. When BTC reaches ATH, wait couple of days to make sure the downward trend from ATH is not momentary, and then switch to #2.
- Stablecoins only. When BTC drops ±30% below latest ATH and stays on this level at least 2 days, switch to #1.
According to the time of writing, 2021-12-5, we should now switch to state #1.
The transition from the states doesn’t happen in one day, it consumes time, research and validating BTC resistance & support levels and of course updating the other portfolio type after probably months.
Of course this is not an algorithm, just a guideline and based on unproven yet assumption. One should check fundamentals before taking action, if for example there’s a serious reason for the drop that still valid (as oppose to Elon Mask twitting something silly, or yet another ‘China Crypto Ban‘), or if the drops are still in progress.
You should treat the 30% and 2 days as variables, and tune them yourself. Conservative implementation will increase the 30% till 40%-50%, and 2 days to 2 weeks.
Final note
I’ve heard endless times people trying to find the point to ‘buy the dip’ or finding the ultimate entry or exit from crypto to stables and vise versa. Yeah some of ‘those people’ were me. 😉
I think this one is different from two reasons –
- It doesn’t try to guess the ATH or the bottom. I’m aware it’s impossible and humbly willing to absorb temporal losses. Instead (of guessing ATH/bottom) it gives guideline what action to talk when ATH have been already reached – and what action to take when a certain drop from ATH had already been reached. See the (huge!) difference? We’re not guessing it – once it happen, we use it.
- You always earn with this strategy, and not left ‘outside’. In the past, people swapped to stablecoins and left them on CEX doing nothing or almost nothing for long bear market periods – now on DeFi (and we’re here for this purpose) we’ve been trained to learn how to earn safely 20%-30% and soon 100% on stables while we’re ‘out’.