Building a Profitable Crypto Portfolio - (Stage 3) Selling Junk and New Investments

This article is the third part in my three part series discussing my approach to building a profitable Crypto portfolio. Having traded very little since the June/July correction, my portfolio has been overdue a reorganisation. I started this process a few days ago, splitting it into three stages:

As I mentioned in my previous posts, I am now trading Crypto full-time which puts pressure on me to be able to draw down an income each month to cover my cost of living. This requirement has changed my risk profile, and therefore it is now imperative that I have a strategy which delivers reliable profits.

The restructure of my portfolio is consequently about ensuring that as the market grows my portfolio grows alongside it, while making speculative investments which may provide exponential returns.

So far in this process, I have restructured my tiered investments around five specifically identifiable performance characteristics and rebalanced my portfolio based on my new risk profile. The final step is to dump any poor performing coins and take out new investments in coins which are a potential high growth opportunity.

Junk Coins

When holding such a broad portfolio, it is important to accept that not every investment will be profitable. Failed investments can be due to poor timing, poor choice or bad luck. Picking the right time to invest can be difficult, particularly since a correction is always around the corner where altcoins are always hit the hardest.

The majority of my investments are in long standing, stable growth coins which will be difficult to dislodge from the top 10. They usually have:

  • A long established history in the market
  • An active ecosystem
  • Evidence of utility
  • An established brand and hopefully marketing strategy

These coins also benefit from being the starting point for new investors entering the market. As an example, Coinbase is a gateway to Crypto for many new investors, and as such, Bitcoin, Ethereum and Litecoin all benefit from being the only buying options on the exchange. As new customers expand beyond these, they will naturally look at the other leading coins such as Dash, Monero and Ripple. In my experience, it is rare that new investors start with small altcoins, particularly since the exchanges can be intimidating and most require Bitcoin to start trading.

Even when traders become a little more confident and start looking at altcoins outside of the top 10, there is a tendency to look at other long standing projects such as Golem, Stratis and Augur, which is why I rarely dump coins within my top 4 tiers.

It is within my smaller speculative investments, my tier 5 coins, that I am looking to make investments which will climb through the tiers or dump should they not perform. These are the gems which deliver the quick 10x results, historically your NEOs, Bitshares and Digibytes. But buying into one of these and seeing those gains is like a game of poker, you can use your skill to pick the right ones, but there will certainly be an element of luck involved.

At times it may be a good idea to cut losses on some of these junk coins and let them go, as such, when reviewing these coins I will consider the following:

  1. Is the trade in a negative position?
  2. Is it a coin which is moving sideways or down while the market is growing?
  3. Does it have competitor coins which are outperforming it?
  4. Is it offering anything unique to the market?
  5. Is there an active community?
  6. What do the charts say?

Looking at my tier 5 investments I have eight trades which are in negative:

  • Zencash
  • Synereo AMP
  • iExec
  • Matchpool
  • Swarm City
  • LomoCoin
  • Mysterium

I then have five which are in profit:

  • Gridcoin
  • TokenCard
  • Zcoin
  • Verge
  • Chronobank

TokenCard and Verge are both performing well and are keepers; they also have a good chance of being moved into other tiers. Looking through the ones in negative:

  • Zencash - this is another anonymous cryptocurrency. Analysing the charts, it is a clear hold. Having hit the markets in June, during the crash and the price falling, it found a bottom at the end of July and has made steady and stable gains since. 
Screen Shot 2017-08-30 at 17.04.55.png
  • Synereo AMP - a platform for rewarding content creators. The price has been jumpy, and the platform is not nice to use. Like a lot of projects within the Crypto space, it is missing a UX and design focus. I don't believe the team can deliver on their objective, so I am dumping this investment.
 U.G.L.Y. Platform!

U.G.L.Y. Platform!

  • iExec - this is another distributed cloud computing project.  There is a solid team behind it, and it is close to being a profitable trade. For me, this is a hold for now but under watch. Still early days.
  • Matchpool - this is a unique project but a tough market to crack and I don't believe in the use case. I think there are better investment opportunities, so I am dumping this investment.
  • Swarm City - I like the project and team, I also feel sorry for them for their hack so I will hold anyway.
  • LomoCoin - Blockchain based game. I don't believe in that this has much of an upside on price, so I am dumping it.
  • Mysterium - this is a decentralised VPN project and a large potential market. It is still early days for the project so will hold for now but under watch.

New Coins to Invest in

There are so many different cryptocurrencies now and investment opportunities. Every week new coins are being released, and ICOs launched. The volume of ICOs which are coming to the market in itself does not concern me. I think of these as like companies, people are starting new companies all the time, good ones survive, and weak ones fail. 

I tend to avoid ICOs as coins can crash when they hit the market. I always want to buy something when it has established its fair market price, and it is what I call the boring zone.

The boring zone is whereby after any price rise or price fall the price bounces around in a tight range for a period of timing. This is my buying area because, as long as there isn't a market crash, then the price is unlikely to fall further, then we are just patiently waiting for the coin to achieve some project milestone or a whale to start moving the price. Being in the boring zone allows you to ride all the waves up and still be in profit with any retracement.

 Three Monero boring zones this year.

Three Monero boring zones this year.

I identify opportunities by using by top 150 market cap coins and keeping notes about potential and zone.

When I research a coin (taken from my strategy section) I am thinking of buying, and I do this in some ways, and the amount of research is dependent upon the size of the investment:

  • A small £250 punt will be a quick look at their website, the team and the roadmap followed by a search of Reddit and Twitter. I can usually do this in around 15 minutes. I am working on a mindset of if I invest in 10, I expect at least two of them to break out and cover the others. So far the ratio is higher than two, and some have brought in significant returns, such as Digibyte (+772%), Antshares (+663%) and Bitshares (+1,784%).
  • A larger investment may take a few hours. I may scan the white paper, but I don't usually read it in detail, often because I don't understand it. I will though spend a lot more time searching the web, looking at the team, looking at what they are trying to do and discussing with others. It is quite easy to get a feel for what is a good project and what is a waste of time.

As such, I am going to make new investments in the following coins:

  • OmiseGo: solid price trajectory up - tier 2 coin
  • TenX: trading in the boring zone - tier 3 coin
  • Civic: trading in the boring zone - tier 3 coin
  • Metal: solid trajectory up - tier 4 coin
  • Mothership: solid trajectory up - tier 5 coin
  • Patientory: solid trajectory up - tier 5 coin

I am reluctant to make too many other investments while the market is rallying so hard. If a correction comes, then it will be likely that some of these coins will be hit the hardest. Also, when a significant correction comes this will be the best opportunity for identifying new altcoin investment opportunities. The rest of my portfolio is performing well so there isn't a need to chase too many opportunities.

I am now going to make all my trades; this will take some time, once I am done, I will update the portfolio page.