(Continued from Altseason Playbook, Part 3 of 6)
In my last post, I shared my thoughts about buying only big, "safe" cryptos. In this post, I write about spreading your investments across many altcoins or just a few.
This article is adapted from my December 17, 2020 special issue of Crypto is Easy. To read the whole post, including more tips and commentary, visit Bitcoin hit $20k! Prepare for Altseason.
Spread the wealth
What's in your wallet?
Are you still holding large-cap altcoins that have lost their developers and users, with tokens that have no mechanism for capturing value?
Are you clinging to the hope that a project that had good intentions, an innovative design, and an awesome vision four years ago will recover its lost glory? Or that your favorite utility token will come back to life?
Some of those projects will explode and go several multiples above their previous all-time highs. We’ll also see a boom in the value of new projects with new technology or new solutions to big problems.
But nobody today knows which ones will win tomorrow.
Of the +7,000 cryptos, probably 90-95% of them are worthless, dead, or headed to the graveyard.
That means you have about 350-700 great, legit projects to choose from. Plenty of moonshots, lots of opportunities.
BUT they are all either massively undervalued or massively overvalued.
For that reason, I spread my investments around many projects, about 50 as of this post. I let the winners run and the losers go to zero. Then I write off the losers on my taxes and keep the winners as part of my long-term financial plan.
When I lose, I get back 20-35% of my investment. When I win, I keep the gains forever as long-term, durable wealth (and pay taxes only when I use or sell them).
During altseason, every altcoin goes up. It doesn’t matter how big, small, used, useful, or useless it is.
On the flip side, you need to give yourself the best chance to catch those few tokens that survive, prosper, and deliver massive returns for years and decades, not just a month or two. Those coins will make up for your losers many times over.
Some people say you only need a handful of “good” alts.
I disagree. Whether you have 5 or 50 altcoins, your portfolio will go up during altseason.
What about after altseason? Or if altseason doesn't last as long or go as high as you want? What if we don't get that massive FOMO LAMBO MOON mania? Are you that good or so lucky that you can find those very few altcoins that survive?
You're shooting yourself in the foot by limiting yourself to just a few. Don’t set limits. A single 1,000x gain will pay for fifty 100% losers 20 times over.
It's hard to find that 1,000x crypto if you're only HODLing five.
Stay tuned for strategy #5.
Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.
Originally published on Voice.com.
