My portfolio has been a mess from the start. This is something that I regretted not planning in advance. Things would have been in a better shape if I do up my asset allocation properly. I am still in the process of readjusting my crypto portfolio and 2 thoughts came to my mind.
- Add some positions into BTC
- Reduce the number of alts in my bag
I used to convert most of my ETH and BTC into “STAKING” alts to chase for dividends and income. Things were rosy at the start, profits were huge and the dividends were attractive. Then came the crash in 2018, which wiped out 90% of my alts satoshi value.
Then came the institution interest in BTC during 2019, which saw BTC gaining 400% returns from year to date. During this period of time, the majority of the alts still remain in its sunken pitfall. 67% of cryptocurrencies are still down 90% from their all-time high.
The bag of tokens I hold happens to be in this category. They are pretty much 80%-90% down. As a result, my portfolio didn’t recover as much as it should and I am still in a net loss position. This is because when BTC pumps, alts usually get crushed. They lose satoshi value heavily since most alts are paired with BTC. Speculators and traders also convert their alts to BTC to catch the upswing and this would cause a further sell-down in alts.
Would an Altcoin Season Come?
There are 2 schools of thoughts in this 2019 BTC rally. The first is an altcoin rally will come when BTC stabilises or the market cap of crypto reaches a more mature level. This is because when the market is optimistic, people take on higher risks. When the upside opportunity for BTC becomes limited, they move funds from BTC into alts. It is just part of the cycle and we have seen the altcoin rally when BTC peaks during late 2017.
The other school of thought is that alts are dead. The previous altcoin rally will never happen again. It was based on hype and optimism. But now the trends have changed. It is not so much about ICO projects, whitepaper, an ambitious vision. The narrative has turned towards BTC solely. No one talks about Dapps anymore. Institution products and funds manager mostly look at BTC only. The interest in alts are simply not there anymore and they will never go back to its all-time high prices. More advanced trading tools such as leverage and margin trading have become available to traders. The idea of shifting BTC into alts to chase returns cease to exist if they can use leverage on BTC. So we won’t see another altcoin rally anymore.
My belief is somewhat in between. An altcoin rally would come, but they would be very specific and streamlined. Only certain projects that make the cut makes it. The killer Dapp still hasn’t come yet. It is just like the internet bubble. Everyone is trying to make stuff, but only a few survived and those who do does tremendously well. I can only hope I picked the right ones.
To ensure that I don’t miss out on the gains from a bitcoin rally, I thought to myself that it is important to get some positions into BTC. Since I don’t want to pump in extra cash into Crypto, why not convert some of the alts into BTC? By doing so, I am able to fulfil 2 of the objectives I mentioned earlier.
- Add some positions into BTC
- Reduce the number of alts in my bag
NEO & ONT are generating dividends from staking at the moment. ICX is launching its staking in August 2019. OMG is also a staking token but the date of when staking arrives is not known yet.
BAT and ETH is the odd one out. I hold BAT in hopes of capital gain profits. ICX is pumping up lately, but it got crushed immediately when BTC went up. Since ICX staking is going to be available in a few weeks time, now is the time to accumulate more. I only have 500 ICX previously and the dividends are simply too little. I need more to earn a decent amount. Since BAT and ETH have no staking properties, I converted all of them to ICX. After some conversion, my crypto portfolio becomes this. My holdings of ICX has increased from 500 to 1600.
ETH and BAT are taken out of the picture. Now ICX holdings are increased. The staking rewards for ICX can be found here. Dividends are much higher from US$20 to US$60. I have also reduced the number of coins from 7 to 5.
Things look fine initially. Then BTC pumps up heavily again. Because most alts are paired with BTC, the value of alts decrease when the value of BTC strengthens. So I made another adjustment to rebalance my portfolio.
Adding More Positions in BTC
Since the progress of OMG staking is still far away, then it makes not much sense to hold so much OMG at the moment. The rally will come only if and when it successfully delivers staking and enterprises uses its network. But I don’t see that coming soon.
NEO is 1 of my largest bag. I have 50 NEO and it contributes significantly to my profits during 2017. But the staking rewards of NEO has dropped significantly. When I used the NeotoGas calculator, the yields always ranges between 1.5% to 2.5%. This is because GAS prices have dropped significantly. It used to be 8% or something. NEO is moving towards NEO 3.0 which is expected to arrive in 2020. Hence, the rally wouldn’t come that soon either.
ONT is locked up for staking. I need 500 ONT to stake with a consensus node and I only have 511 ONT, so I am unable to do anything with the 500 ONT. While the GAS rewards from NEO is pretty disappointing, I am satisfied with the staking returns from ONT.
ICX, similar to other alts, suffer the brunt of a BTC rally. So I thought to reduce some of my alt positions and move them into BTC.
In conclusion, here is a summary of my conversion of alts to BTC. There is no injection of new funds into crypto. It is all just converting one coin to another.
- 50 NEO > 20 NEO converted to BTC
- 511 ONT > 11 ONT converted to BTC
- 375 OMG > 150 OMG converted to BTC
- 1641 ICX > 441 ICX converted to BTC
Now it looks much better after rebalancing my crypto portfolio. The proportion of BTC has increased from 6% to 25%. I have divested all my non-staking coins and concentrate them into ICX. This is to increase the staking rewards from ICX, which is coming in a few weeks time.
In this way, I am able to catch on both the BTC rally as well as an altcoin rally. Previously, I have ZERO position in BTC, which is something I regretted. While some have moved towards the maximalist version of bitcoin, I still believe in the enterprise use case of blockchain technology in the future.
Volatility of Alts vs Bitcoin
Furthermore, I realised that alts are more risky and volatile than BTC. BTC is steadily increasing and it has garnered huge institution and media interest. But it is hard for BTC to go 2x or 5x from here. On the other hand, while alts are being crushed really bad, it can easily go up to 10x or 20x when a rally comes. That is if they are successful in their endeavour. Here is a list of the coins from their all-time high.
We are still early in the game. Let’s look forward for more exciting developments in the crypto space. After 2 rounds of rebalancing and adjustments, I have reduced the volatility of my crypto portfolio by increasing my positions of BTC to 25% of my total cost. It used to be 0% BTC, then I sold all my DGD and convert them to BTC. So it became 6%. After today, I have decided to reduce my bag of alts and increase BTC to 25%.
I admit I am late to do so and I have learnt the hard way. It was my mistake of not recognising the bullishness and importance of BTC early on. But it is better late than never. At least the positioning of my portfolio has improved. It comes with a cost (conversion fees, transaction fees, withdrawal fees, opportunity cost etc.) The idea of playing it passively and HODLing is not a good idea, especially if you are all in on alts.