How to Design the Ultimate Crypto Portfolio

Background, and yes – you have to read this.

During Bull Runs, almost everyone win. Well… you can only look at the most winning coins or farms and wish you’ve been there earlier, however it’s endless, and pointless.

During Market Crash or worst – a long Bear Market era, almost everyone lose. Well… you can look at stablecoins or some projects that were planned to launch during these time period and jealous, however it’s endless, and pointless.

When Market Going Sideways, also almost everyone lose, mainly due to lack of discipline. You’ll try to time the market, sell, then market will go up, feeling FOMO you’ll buy again (in higher price) and then the market will crash, you’ll switch to stables and swear to god you’ll never do it again – however you’ll do it again, cause you’re human, and that’s what the ‘composite man’ take into account – our psychological vulnerabilities been exploit.

Richard Wyckoff, Wikipedia. Read more about The Composite Man (not him).

And there’s also the Black Swan Event. Nobody can really be prepared for black swan event, cause you can never know which kind it’s gonna be. Yes, climate change, world war III, another pandemic, financial melt down, etc. It can be crypto-space local black swan event like USDT (finally) losing its peg – due to bank run caused by US regulations/sanctions or some other reason. However being prepared for all black swan event types means you can’t continue leaving your life the way you do now…

By fir0002flagstaffotos@gmail.comCanon,

So… we need a Single Portfolio that will be Profitable during Bull Run, will not go to zero during Crash or Bear Market phases, will be accumulating during Market Going Sideways era and also will provide us a safety net when Black Swan event is triggered. Is it possible? Yes! And you came to the right place.

OK, I’m convinced. Now what?

Building the ultimate portfolio is a manual sisyphic task to do, and it’s not over once your portfolio is ready to go. You need to design your portfolio strategy first – what are you up to? What’s your collateral and for how long you can invest?

Then divide the portfolio into sectors accordingly – short/long term, low/high risk, stable coins, etc. Then decide allocation for each sector, the tokens to invest, and ONLY THEN you need to find the protocols & pools if any; for some alpha tokens there won’t be any yet.

You can track my portfolio for ideas, however it has to be planned by you; you may advise with other people, like me, the advisor should tailor it to your needs, you can’t use a general purpose portfolio (!) cause you might gonna stuck months or even years with locked funds or the opposite – less yields cause the online portfolio was meant for short term, or else.

Let’s summarize the steps for building the ultimate portfolio

  1. Question yourself – what are you up to? how much collateral you can invest? what’s your limits or ‘no-no’ rules? for how long you can forget about those funds? are you tech savvy? can you afford wasting time to listen for periodic and breaking portfolio related news and updates and adjust the allocations and investments accordingly?
  2. Design your portfolio – according to the questionnaire in clause #1 above. You need to end up with four sectors typically –
    1. Stablecoins – that’s your cash flow and partially your safety net. It will earn money, don’t worry, much more than you can imagine if you’re new to DeFi, and on certain times it will be the most profitable sector in your portfolio.
    2. Classic Crypto – mainly BTC and partially ETH. The ETH can be farmed however only on ETH network and bluechip DeFi protocols, preferably Curve, cause it’s for a long term and we don’t know who will survive after this long period. If you believe some other assets may be here for long term and will resist crashes bear market and even black swan events – that’s your problem, I don’t believe in it.
    3. Trending Crypto – those are the assets you planned to invest in when you start reading this post… So, yes, you’ll do it, don’t worry. Leading L1/L2, mid-level L1/L2, NFT, Metaverse, growing projects – bridging, multichain, layer 0, whatever, just don’t lose your mind – we’ll come to allocation soon later on.
    4. Early Projects – high risk assets, of course with highest potential return.
  3. Percentage Allocation – it’s personal, mainly due to the characteristic and time you can afford not touching the investment, however also due to existing market climate – see The Two State Portfolio Strategy. I tend to recommend 25% on Stablecoins, 15% for Classic Crypto assets, 50% for Trending Crypto and 10% for Early Project stuff. The dynamic allocation is between Stablecoins and Trending crypto or sometimes even Early Project sector, however Classic Crypto asset allocation should be never touched. It’s your safety net, it’s your kids college funds, it’s the only thing that will survive after the 4th world war, and maybe the 5th. Sorry I’ve gone too far, there will be no more world war, everything’s gonna be just fine. I truly believe it. However don’t touch BTC anyway. πŸ™‚
  4. Implementation
    1. Find the assets you would like to invest for each of the four sectors mentioned on clause #2 above, prioritize and diversify however don’t over-diversify: you’ll have to maintain this portfolio, you’ll have to be able to digest huge amount of information, sometimes on a daily basis, so don’t go wild.
    2. Research the networks and protocols, wallets, pools and more and invest. Again – diversify, but don’t over-diversify.

Are we done yet?

Almost. Now you need to keep track on it, from time to time cash out and rotate pools/chains/protocols/assets, claim rewards and swap / manual-compound. Find better opportunities, make sure they’re for real and safe and decide whom are the losing horses in your portfolio to shift funds from them into those opportunities.

Listen to crypto & DeFi news, get involved in social media.

Last but not least

Security. We didn’t talk about security. And be aware of risks. And Tax. And tell your wife/husband/mistress – it’s part of the risks on this space… πŸ˜‰

Read this, and more content on this website before proceeding, and stay away from macro news, cause otherwise…

Leave a comment

Your email address will not be published. Required fields are marked *