- Strategy #1 — Bitcoin: 50% — Buy Bitcoin when Bitcoin P/E or NVT (network value-to-transaction ratio) dips.
- Strategy #2 — Alt-coin: 35% — Buy high visibility, high access coins (platform currencies and top 50 market cap).
- Strategy #3 — Baby-Crypto: 15% — Buy undervalued baby alt-coins based on a measure of liquidity (transactions to price) and buy orders on the order book.
Strategy #1 — (50%) The HODL Churn
I’m a big advocate of Bitcoin. It’s 50% of my crypto portfolio. How do I decide when to buy/sell it? I like to use Bitcoin P/E. What is Bitcoin P/E?
P/E (price to earnings ratio) is a metric commonly used by investment analysts to value stocks with earnings calculated as the market price divided by earnings per share. A possible equivalent to a P/E for Bitcoin was presented at the Token Summit in May 2017 by Chris Burniske. In the following video Burniske provides three calculations for a Bitcoin P/E.
Strategy #2 — (35%) The Mall
I’d like to think that everyone that buys Ethereum or Ripple actually understands what they are buying, but that’s unlikely. Most probably saw the name on a top 10 market cap list somewhere. Some simply reallocated profits from Bitcoin into other coins on the same platform.
- Coins with a unique value proposition, i.e., location, development team, usage, technology, have grown the most over the last 6 months.
- Dogecoin and Bytecoin grew ~400% and are still valued at less than a penny.
- Another privacy focused coin, Verge, grew over 4,000%.
- One of my favorite coins, RaiBlocks, gives everyone their own blockchain — it grew over 60,000% in the last six months.
- Stellar, a coin specializing in digital IOUs is up 2,600% over the same time period.
- The worst performing coin on The Mall is up 1% and that’s because it’s “tethered” to the USD. The name of this coin is Tether.
- Of the 50 coins on The Mall today (1/21/2018), 30 were on the list 6 months ago.
- Of the top 25 on the list 6 months ago, only one was not on the top 50 six months ago. In other words, the closer the coins were to the top of the list six months ago, the closer they were to the top of the list today.
Strategy #3 — (15%) The Incubator
We’ve covered Bitcoin, platform/exchange and high market cap coins. What about baby cryptos? This is by far the riskiest category. As a result, I only invest small amounts in this world of crypto. I also try to use faucets as much as possible.