The Long Term Case for a Diversified Crypto Portfolio

( ͡° ͜ʖ ͡°)
Aug 28, 2017 · 3 min read

This article is purely an opinion piece and not to be taken as financial or investment advice, cryptocurrency is risky and you assume your own risk by taking part in any financial activities relating to this article.

Say you start with 1 BTC to invest into the crypto market -

“But there are so many projects, how to decide where to put my hard earned BTC!”

This is one of the hardest and most important decisions of investing in cryptocurrency today, but also not what this guide is about.

Anyone even vaguely familiar with Bitcoin, or cryptocurrency of any kind is aware of the potential to greatly increase or fall in value over time.

The industry has done nothing short of “blown up” none could deny over the span of the history of blockchain tech, nobody argues about the explosive rise of the entire crypto economy over the last few years.

Many argue that the technology and advancements being created in the blockchain industry are changing the world.

Many also argue (and will continue to do so…) that cryptocurrency is nothing but a bubble on the brink of bursting at any moment, will be an absolute failure, and leave investors holding worthless “digital tulips” with no market or real world value as money.

The following arguments in this post assume that bitcoin or at least other competing blockchain currencies will continue to exist and be traded in some capacity for the foreseeable future.

__

You do research, you decide to diversify your 1 BTC into a variety of altcoins and crypto projects that you believe have a reasonable chance for success.

You’ve chosen to invest .02 BTC into 50 different cryptocurrencies

“Casting a wide net”

You do nothing. No trading for say, 1 year?

There are, obviously, MANY possible outcomes to this scenario.

Let’s assume -

You set your stop loss to execute orders at -40% slippage on all 50 coins.

What’s the price of bitcoin?

Let’s just assume it stays the same as it is right now.

Even if Bitcoin were to “crash”, say some type of “contentious developer controversy” causes loss of confidence, money surely would have to flow into competing cryptocurrencies (although they would likely experience a drop from such an event, this is all a scenario for hyperbole as it were anyway.)

So let’s assume — worst case scenario, most of your cryptocurrency bags got REKT! Sad! you didn’t pick as well as you had hoped!

40 out of 50 of your bags sold at your stop loss (-40%)- OWIE!

40 bags * .02 BTC = .8 BTC * .6 = .48 BTC remaining from failed picks

Well. being that this is crypto, and some of your bags MUST have experienced some % gains! (remember we’re assuming this stuff is here to stay ;))

Out of your 50 selected coins today only 1/5 even made a profit at all!

BUT — THIS IS CRYPTO!

Let’s try some very, very, very conservative estimates of what would happen to the top 1/5th of cryptocurrencies around today that would continue to be traded!

Out of 10 let’s say….

5 coins: Sold + 40% gain (5 bags * .02 BTC = .1 BTC * .4 = .14 BTC)

4 coins: Sold + 30% gain (4 bags * .02 BTC = .08 BTC * .3 = .104 BTC)

1 was a great pick and it did 20x! (not even uncommon, if you’re new) ( 1 bag @ .02 BTC * 10 = .4 BTC)

That brings us to…

.48 in failed bags

and .644 in successful bags

= 1.124 BTC

So even in this example, a whacky scenario where you somehow pick 40 out of 50 coins that each lose you 40 percent of their value in BTC, you still now have a 12% profit on your initial investment, a very respectable number for any traditional investor over 1 year time.

If you believe in a future where digital currency like Bitcoin continues to exist and function at an equal or greater capacity as it is today, you may find interesting the prospects of a diversified, long term cryptocurrency portfolio.

)

( ͡° ͜ʖ ͡°)

Written by

Based Fidget Spinner Merchant

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade