Tag: Shiba Inu

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investing crypto

Crypto Spotlight 9: altcoin season about to start?

Of the largest tokens, Dogecoin stands out with over 20% rise, but Shiba Inu is the winner with 34% rise in a week. 

Again (and I can repeat this almost weekly): I don't give financial advice, but the public markets determine the financing of innovations that startups develop, the core of this newsletter. That's why I try to follow the public markets for stocks and crypto.

It is particularly notable that Bitcoin passed through the $65,000 mark again this week, leading many analysts and experts (of which I am certainly not one) to suspect that the altcoin season has begun.

The strange thing is that the huge increases in Dogecoin and Shiba Inu, the big memecoins, were not accompanied by a good week for Ethereum, which remained flat. That leads to a dilemma:

"Recently, Glassnode founders Jan Happel and Yann Allemann, also known as Negentropic on X, revived hopes of an approaching altseason. According to them, the crucial moment could occur when Bitcoin surpasses its previous all-time high (ATH) of $74,000. For now, altcoins are merely hitching a ride on the leading crypto's upward trend, but a shift could be near.

They believe that once this threshold is crossed, the crypto market could experience a general surge. The usual cycle would then begin: “Bitcoin in the lead, followed by Ethereum, then large caps before mid and small caps,” Negentropic specifies. But since May, Bitcoin has made three surges without triggering this famous altcoin season."

In other words, no one understands what is going on, but things are looking good.

Crypto is no longer a fad

From the comments, I understand that crypto is a very polarizing topic. Returns (or losses!) of 20% to 35% per week are only for the investors with strong stomachs. Next month marks the 16th anniversary of Bitcoin's white paper, so we can conclude that it is not a short-lived fad.

If you are reading this newsletter, I assume you are interested in innovation and not too conservative to try new things. My main arguments for at least starting to experiment with crypto with a limited amount are, first, financial sovereignty, the fact that you have complete control over your own assets without the intervention of a bank or broker; and second, protection against inflation, especially with crypto currencies with a guaranteed maximum supply like Bitcoin. 

I hate to end this newsletter as some sort of quote from Wikipedia, but I don't want to leave unmentioned that smart contracts in blockchain are similar to Lego bricks in that, as building blocks, they offer infinite possibilities to automate services and processes. Compared to Amazon's AWS, for example, smart contracts offer the same flexibility and scalability within the blockchain, but without a centralized service provider. And instead of users then just lining the pockets of Jeff Bezos and Amazon shareholders, participants in crypto ecosystems share in the profits.

Of course, governments must protect consumers from fraud and money laundering, as I wrote about the problems at Binance in 2022. But it will be interesting in the coming weeks and months to see how Kamala Harris, if elected president, will strike the balance between ensuring investor safety and encouraging innovation.

Categories
crypto

Those who cannot take their losses very well should stay out of crypto

The most frequently asked question of 2022 is without a doubt: how much money should I invest in crypto? Over the next few months, I will share how I try to build a balanced crypto portfolio with limited active trading. This is NOT advice. It is mainly to prove that it is possible to invest in crypto without reaching for your phone like crazy every second because you are afraid of missing the next hype or crash in Bitcoin.


In 2017, legendary investor Fred Wilson (Twitter, Tumblr, Zynga, Etsy, Coinbase, etc) gave this answer, based on the investor's profile:


- young, aggressive risk taker - 10% of net worth in crypto
- sophisticated investor seeking a high performing portfolio - 5% of net worth in crypto
- average investor, slightly conservative, but with some appetite for risk - 3% of net worth in crypto
- retiree seeking to preserve portfolio value and generate income - 0% of net worth in crypto

A detailed and careful answer. And, in my opinion, completely unnecessary. Some elderly people are incredibly well able to make a substantial dent because their house is already paid off up to and including the geraniums. While many young, aggressive risk takers have to sell their textbooks and become delivery drivers at Gorilla's when they get their memecoins see evaporate. Because I don't know any young aggressive knuckleheads who manage to limit their crypto gambling to 10% of their net worth, as Wilson advises. (I'd like to see more research on the investment decisions women make; are there still fewer women than men in crypto, or are they really just smarter because quieter about it?)

When people ask me how much to invest in crypto, I always answer with a counter-question: can you stand to see everything you put into crypto go up in smoke? Evaporate to nothing? Binance, Binance, alles ist vorbei? And just as important: will you get into a fight with your partner if you lose everything?

The couple lunatics go-getters who then remain always ask the same follow-up question: which crypto should I buy? To that question, too, Fred Wilson was kind enough reply to give:

"A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc), the major Defi protocols (Uniswap, Aave, Compound, etc), storage protocols (Filecoin, Arweave, etc), telecommunications protocols (like Helium), some layer two protocols (like Stacks, Polygon, etc), some gaming assets (like Axie, Decentraland, etc), a maybe some NFTs."

Wilson sometimes forgets to indicate which of these companies he himself, or his fund Union Square Ventures, has already invested in. But that doesn't make his answer any less relevant. Previously, Wilson stated that he and his spouse have invested 5% of their assets in crypto, both directly and through funds.

In the coming months, I will share here how I try to put together a crypto portfolio using a more conservative methodology than Wilson. No gaming assets or NFTs for me, those are too difficult and time consuming for me to understand properly. I am in crypto for the long term and want to reduce all costs as much as possible, preferably passive HODL-end.

Summary:

1. I am convinced that "something huge" will come out of crypto innovations. Decentralization and transparency bring an intrinsic new value that cannot be achieved in other ways.

2. I believe strongly in the crypto market, but I don't have the guts to assume I can pick the winners. This has proven difficult with every disruptive advance in technology. The challenge is to identify potential winners early.

The plan is to buy layer 1 tokens in proportion to market cap that are as Proof of Stake as possible, i.e. have lower energy consumption than Bitcoin. It has the disadvantages that Ethereum will be over-represented (well over half of my crypto portfolio) and that I will always get fast-growing hypetokens into my portfolio too late.

Of course, everyone dreams of that one stale token that rises 45 million percent in value, like Shiba Inu did in 2021. Whoever bought SHIB for $100 at 1 minute past 12 on Jan. 1, 2021, and sold them again in December, got to credit over $45 million. But I would then fret about the right time to sell, which is why I avoid these tokens.

My goal is to eventually have at least 100 tokens in my portfolio that each have a minimum market cap of $1 billion. The crypto market is not that big yet. Preferably I will automate all trading through a liquidity pool, but more on that in the coming months. In any case, the goal is to make the portfolio transparent for everyone. And it is explicitly not investment advice. It just needs to make clear that it is possible to invest in crypto without reaching for your phone every second like a crazed neurotic for fear of missing the next bitcoin swing.