Creating my own large cap crypto fund on Coinbase Pro (PART 3)


I created a large cap crypto fund for myself based on Coinbase Pro's markets in early September -- read about the setup and historical analysis in Part 1 and Part 2 of the series. 

Weekly buy-ins split equally among my Large Cap Crypto Fund's coins returned 1.24x the total investment by Nov. 10, 2021. The LCC Fund outperformed a benchmark Bitcoin-only weekly dollar-cost-averaged fund by three percentage points. The LCC Fund has so far met the broad goals I outlined in Part 1's "Motivation and Constraints" section. 

This post documents the LCC Fund's eight-week performance so far and the changes to its portfolio cryptocurrency list. I also want to gather community feedback on the fund's performance as I evolve my crypto investment strategies and tools. 

Summary of motivation and original setup 

Traditional index funds are an attractive option for amateur, time-constrained investors like me. Cryptocurrency index funds are not available in the U.S. however, so I decided to create my own multi-coin portfolio based on cryptocurrency market cap rankings.

The top cryptocurrencies by market cap at the time of my LCC Fund's creation -- Sep. 19, 2021 -- are available on CoinMarketCap's historical snapshot page. The filters described in Part 1 created a list of 18 cryptocurrencies listed in alphabetical order below:

  • AAVE, ADA, ALGO, ATOM, BTC
  • DOT, EOS, ETH, FIL, ICP
  • LINK, LTC, MATIC, QNT, SOL
  • UNI, WLUNA, XTZ

I made weekly, equal USD purchases of each coin every Thursday. 

Coin subtractions since the original setup

I either exited positions or stopped weekly purchases of three coins:

  • I exited my FIL (Filecoin) position in early November after research undermined my confidence in its long-term value. I don't see a compelling way FIL could disrupt established products like Google Drive or Microsoft OneDrive that arguably already do what it hopes to do.
  • I exited my ICP (Internet Computer) position in early November after I read about the controversy surrounding its ICO
  • I stopped equal USD purchases of EOS in early November for pretty much the same reasons I gave for FIL and ICP. I didn't sell my EOS however because I think the potential start of the Bullish trading platform in Dec. 2021 might cause EOS to spike. My EOS USD investment is pretty small right now and the coin's active development makes me reasonably confident the price won't plummet to zero, so there's little disadvantage to me holding at the moment.

I haven't done enough research to say FIL, ICP, and EOS are certainly bad projects -- they appear to have ongoing development and good use cases, at least on paper. But there are dozens of coins that look equally good on paper without the issues I described, so I thought it prudent to invest in some of those instead.  

Coin additions since the original setup

I added 10 coins at various dates since the I created the LCC Fund -- AVAX (Avalanche), BNC (Bancor), COTI, DASH, FET (Fetch.ai), IOTX, POLY, and XYO. Below are brief explanations of the reasons I added each coin: 

  • I added COTI because I'm bullish long-term on ADA (Cardano). 
  • I added DASH because I was impressed by its near-zero transaction fees, its longevity, and its widespread use in developing countries. 
  • I added BNC after reading about decentralized finance (DeFi). There are many DeFi projects out there -- BNC was simply the first one I noticed that is available on Coinbase Pro. 
  • I added FET, IOTX, POLY, and XYO after market cap momentum analysis. I'll explain what I mean by momentum analysis in a separate post -- stay tuned! 
  • I added AVAX literally because of Twitter hype during AVAX's Coinbase Pro listing. 

This brings the current LCC Fund portfolio up to 23 coins (or 24 if I count EOS), listed below in alphabetical order:

  • AAVE, ADA, ALGO, ATOM, AVAX
  • BNT, BTC, COTI, DASH, DOT
  • ETH, FET, IOTX, LINK, LTC
  • MATIC, POLY, QNT, SOL, UNI
  • WLUNA, XTZ, XYO

Eight-week performance metrics

The graph below shows the value of the LCC Portfolio's total holdings divided by the cumulative USD deposits made on any given day. 

3693ddc6648ef88b63b428c1aad44553a811bdafd427eca69808f636fd29b808.png

The LCC portfolio's worth was 1.24x the cumulative USD deposits on Nov. 10, 2021. I like to benchmark the LCC Portfolio's performance against a BTC weekly Dollar Cost Average (DCA) portfolio. I use dcabtc.com with weekly purchases of any amount to view the percentage change. The benchmark BTC DCA portfolio would be 1.21x the cumulative USD deposits. 

371c76f23517e224701d26b779539814ae73e13b52547b8178e7be2f07192395.png

The top five performing coins in my LCC portfolio were IOTX, XYO, LTC, SOL, and AVAX. All five were worth more than 1.3x their respective cumulative USD deposits. 

dd289a7055512a0823a2a57b6010e1212431a388dcedf5ed8a790396c878740e.png

The LCC Portfolio's IOTX worth grew to a whopping 5.4x its cumulative USD deposit during the week of Oct. 31. Coinbase Pro's IOTX price diverged significantly from the market and traded at a much higher premium. I was lucky enough to notice this, and I sold my IOTX near the peak of Coinbase Pro's price divergence. 

e0982dec2a79aad4f5d1fca94650da11464479bf7536c4f6c4fe08abd57e791d.png

 

The worst performing coin was ATOM. The LCC Portfolio's ATOM worth was 0.87x its cumulative USD deposit on Nov. 10, 2021. 

7a7aecb623d37f687d87b426ac8bea1af9f2d03e693a20550a5159363c7f761e.png

Final thoughts and moving forward

I'm pleased with the LCC Portfolio's performance so far. Eight weeks is a small amount of time for DCA however, and I'll update the Publish0x community as the portfolio matures. 

I plan at least four improvements:

  • Strongly consider reducing the coin number to 20 or less. I have a difficult time tracking 24 different coins and I want to be able to identify more opportunities like the IOTX price divergence. 
  • Include KuCoin holdings. There are a few coins unavailable on Coinbase Pro that I'm very interested in. KuCoin has far more coin markets than Coinbase Pro and offers a similar API to developers. I'd like to develop my software tools to be exchange-agnostic, but this will take some time. 
  • Add constant documentation to my workflow. I find that documenting the reasons for buying, selling, or holding coins forces me into more intentional actions and makes me a better trader. Publish0x posts really help me in this regard, and I want to be better about consistent posting. 
  • Add software version control to my workflow. I use git to manage my growing software tools, but my usage has so far been sloppy and inconsistent. I need to really tighten up my version control, and I'd also like to open source my tools for community feedback and use. 

A note to the reader

That grew into quite a detailed post -- if you've made it this far, thank you so much for reading. As I mentioned above, these posts force me to pause work and document progress in an intentional manner. I also really enjoy the community engagement I've had so far. I'd love to hear critiques and suggestions -- please leave a comment if you can. I am especially interested in opinions on my reasoning for removing FIL, ICP, and EOS from the portfolio, and on the current coin mix. 

Thumbnail image by Executium on Unsplash.

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simplyrangel
simplyrangel

Aerospace engineer interested in all things data science and cryptocurrency. Based in Houston, Texas.


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