Bloggers going en masse into crypto in 2021 proved to be near the cycle top and judging from my last crypto-related post, I have also been a pretty good bottom indicator for crypto. Following the FTX fall-out and having sent some friends/readers into “permanent losses”, I capitulated at the market bottom. I simply stopped buying until recently.
A little bit of self-mocking, but maybe an inverse-15HWW crypto indicator would have done really well. And if you believe in “not taking advice from losers”, read the rest of the following with a shovel of salt.
Assessing The Carnage
Crypto continues to surprise. I thought I could easily take at least 6 months off after the FTX collapse since confidence in the industry was at an all-time-low. But it took less than 2 months for the community to brush it off and green shoots to appear. My Twitter timeline is insanely bullish, maybe people just pumping their own bags. Well, both BTC and ETH are up ~50% from their lows, not to mention the performance of certain alt coins. Yes, Aptos, looking at you.
Even after the recent run-up, I am still down by about ~30% in terms of capital deployed. Not sure if that counts as “survival” but if I look around at the number of participants that left the whole scene, the consolation is that I probably outperformed more than half the participants in the previous cycle, simply though two actions:
- Diversification so as not to get totally wrecked by a fraud or collapse
- Refusing to sell at the bottom
And with headline inflation numbers down, it seems interest is picking back up at this casino already, judging by the price action.
Why I Am Still Participating In This Scam/Casino
Simply put, I have not made it. A little sad, considering I have devoted a big chunk of my last 10-15 years focusing on personal finance and investing. I was not able to build up a sizeable net worth so that my family could weather any economic outcomes during the biggest money printing era in history.
Maybe I am a tad harsh considering I did double my networth in the past 5 years. But with the speed of inflation, it means I am barely ahead of schedule.
I would need to double my networth again within the next 5 years to be able to take a bit of the foot off the gas pedal. I have the intention of buying a nicer flat for my nucleus family and taking a weekday or two completely off as I enter my forties.
Since I opted out of the income game, unless I start a business, I would have to learn my lessons, up my game, and deploy capital better to achieve the desired positive outcome.
And that would mean coming out ahead in the biggest ponzi/scam/casino in history in the very near future.
The Allocation Ahead
Some simple Math and let’s assume the humble goal is to double the networth.
If I allocate 5% to crypto, I would need a 21x to reach 200%. That’s not really realistic for my skillset. During the past cycle, I have realised that I am not GMGH or at the very least, I am no longer that early in the game to expect those returns without going absolutely way out of the risk curve.
If I allocate 10% to crypto, an 11x would suffice. Much more achievable but I am looking at between 20 to 30%. For 20%, I need a 6x and for 30%, I just need a 4x. Crypto OGs might shake at my lack of ambition but hey, there is some PTSD going on here and when I wake up in the morning and stare at the mirror, I do realise I am no longer the spring chicken I once was, the one that started this blog a decade ago.
I do not need to reach 8 digits, although of course I would not mind. I am after all, a man with simple taste.
If we are discussing about allocation within the allocation, since I am uncomfortable with full self-custody (technical know-how is still limited beyond a cold wallet), the bigger ramp-up is through buying crypto stocks like MicroStrategy and Coinbase. In addition to holding BTC in cold wallets, staking my ETH, providing liquidity in protocols like Curve and GMX and having a little alt exposure in LDO, FRAX and AAVE.
The prevailing mass market sentiment is still “Crypto is dead” and many on the sidelines are coping , thinking “the recent price pump is just pure manipulation”. I personally think the bottom is in so I might still have some time to allocate in the next few months and front run some narratives by listening more attentively to the grapevine.
Maybe when the time is right, I will degen again just like in 2021 and then exercise better discipline to take profits.
A man can only hope that it’s the season again to take on slightly more uncomfortable risks to realise a bigger payoff and eschew predictable but small returns (that do not beat inflation).
Thanks for reading.
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Hi 15HWW
How much do you plan to allocate to crypto?
20-30%. Still some room before I hit there.
Hey, what about your returns from your non-crypto side of things? Including them will definitely reduce your risk of exposure to crypto (2x your networth in 5 years while losing 30% of your invested capital in crypto is impressive.)
Anyhow, I’ve made my view on the crypto space fairly clear in previous comments – things can always get worse vs. baseline if things go south fast!
Best,
JW
Hi JW,
Since it’s a short term goal and for easy Math, I actually disregarded the returns from the stock/cash portions.
Honestly, I am hoping “some experience” pays off. Otherwise, it is easily construed as wishful thinking to hope for a 4x when I actually made a loss of 30% in the previous cycle.
And I definitely appreciate your well-intentioned sharing of your views on crypto. As seen in my next post, I will take precautionary measures and in this instance with regards to crypto, we shall agree to disagree.
Plus no matter what the price action is, I will definitely shill crypto less as compared to a year or two ago.