It has been exactly a year now since I made my very first two cryptocurrency purchases in April of 2020. This came after over a month of a very deep dive into not only the past and potential future of crypto, but also a thorough examination of the macroeconomic impact of COVID.
Once I understood the halving cycles built into Bitcoin and the supply shock that has ensued following each of these halvings, combined with so much uncertainty surrounding other assets, I felt that taking at least a small position in crypto was a very prudent thing to do.
My conviction surrounding crypto has grown significantly over the past year, with hundreds of hours dedicated to learning and understanding the space to the best of my ability, and with it my allocation to crypto has grown massively as well. I strongly believe that for most people, an allocation in the range of 1-10% of their investment portfolio makes the most sense, and that at this point, everyone should be considering buying Bitcoin in 2021.
With that said, I want to provide an overview of my journey into the crypto world over the last year and where I’m at as of now, April 2021, with my crypto asset allocation.
My very first crypto purchases last year amounted to only 2% of my total assets, and I split that into 85% Bitcoin and 15% Ethereum. That initial investment is now up a staggering 1,000% in the past year! Gradually over the rest of 2020, due to additional purchases and appreciation, my crypto holdings grew to 20% of my total assets, with over 90% of that being allocated to Bitcoin. That was the point that I decided to write my article on Bitcoin at the end of last year to explain my reasoning and why I changed from a Bitcoin/crypto bear to a bull during 2020.
Soon after publishing that article, the crypto market really exploded! In January, I decided to start gradually taking some gains off the table to reduce risk. Despite gradual selling and no new buys, the price of crypto assets is increasing at such a rapid rate that the percentage of my total assets allocated continues to increase. So far I’ve sold enough to recover 25% of my contributions and plan to continue selling gradually as the price rises. I don’t have a set plan in place for this, but going by feel has done very well for me so far.
At the end of December when I was still accumulating new crypto, I decided to start allocating small amounts to smaller and lesser known coins. The reason behind this is not that I really believe in these coins, but because I know based on prior parabolic advances in the crypto space, some small coins massively outperform bigger coins. At the same time, many of those small coins eventually went to zero or very close to it as well. I look at these smaller coins like lottery tickets, except with odds actually skewed to the upside unlike actual lottery tickets. I expect the majority of them to do very poorly, but for a couple to do so well that the gains more than offset the losses. We’ll see how this strategy ends up working, but so far cumulatively I’m up over 100% on them in just the first quarter of this year!
With all of that said, let’s get to the numbers and the likely reason you clicked on this article in the first place.
Total Assets Allocated to Crypto
I currently have a whopping 52% of my total assets in various cryptocurrencies! Again, this is after selling enough to have already recovered about 25% of my contributions. I realize that to anyone without a pretty strong understanding of the cryptocurrency market, this seems absolutely absurd. Hell, one year ago a 5% allocation would have seemed unimaginable to me.
To be honest, 52% is much higher than I’d like. Ideally I’d like to keep my allocation to crypto in the 20-25% range for the long term, but I continue to have very high conviction surrounding returns for the rest of this year, and I’m also trying to be smart about selling too quickly due to capital gains taxes owed.
Total Return from Crypto
I’ve done my best to keep track of returns, but it has been pretty difficult. I gradually dollar cost averaged into most of my positions, so that meant a lot of small purchases over time, which makes tracking returns more time consuming. Also even though most of my purchases have been on Coinbase, I’ve made purchases at other exchanges as well. Plus, a significant portion of my holdings are through my IRA in GBTC, which adds an extra layer of complexity. Despite these issues, I’m pretty confident that my calculations, even if off slightly, are at least very close to accurate.
As I mentioned above, my initial purchases from a year ago are up slightly over 1,000% currently! If I’d allocated more at that time, I’d be a very wealthy person right now; but, alas, hindsight is 20/20. Even though I haven’t earned 1,000% on my total investment, I’m still not doing too shabby overall and am very happy with the return I’ve gotten.
Currently, my cumulative return on my crypto investments is at about 210% over the past year! This huge return has been the primary driver of my net worth growth over the past year as well. As of this writing, my total net worth is up an insane 72% in the past year! As someone who has only “worked” about 200 hours in the past year since I “retired” as a PT, a net worth growth of that amount is absolutely insane. In reality, I’ve really only worked about 200 hours total in the past two years since I didn’t work at all for most of 2019.
So of the 52% of my total assets allocated to crypto, the amount allocated to individual crypto assets has gotten progressively more complex over the past year. Below is how I’ve chosen to allocate this 52%. Keep in mind that the percentages are constantly changing as returns in various coins can be extremely volatile from day to day.
- 76.4% Bitcoin (BTC)
- 12.7% Ethereum (ETH)
- 2.1% Filecoin (FIL)
- 1.5% Cardano (ADA)
- 1.2% Chainlink (LINK)
- 1.1% Civic (CVC)
- .7% The Graph (GRT)
- .6% DistrictOx (DNT)
- .5% Basic Attention Token (BAT)
- .5% Nucypher (NU)
- .5% Uniswap (UNI)
- .4% Compound (COMP)
- .4% Yearn Finance (YFI)
- .4% Litecoin (LTC)
- .3% Decentraland (MANA)
- .3% EOS
- .3% Aave
- .1% Stellar Lumens (XLM)
Conclusion and Future Plans
As you can see above, this is a smorgasbord of coins, but about 90% of my total crypto holdings are still in BTC and ETH, with the vast majority of that 90% being BTC. Anyone considering getting into crypto should probably also have the vast majority of their holdings in Bitcoin. It may not be able to increase in price by 100% in a day like smaller coins, but the risk of going to zero is extremely low at this point which cannot be said for the majority of other coins. I look at anything outside of Bitcoin as a gamble with potentially more upside, but with the understanding that risk is much higher.
Over the coming months, I plan to continue gradually selling BTC to reduce my overall exposure to crypto. The selling will be almost exclusively from my GBTC holdings in my IRA to avoid short term capital gains taxes. Once I recover my total contributions, I’ll most likely leave the rest alone until later this year.
Near the end of 2021, I plan to take a hard look at market conditions and prices and decide whether to sell half of my total crypto holdings at that time or to continue holding. No matter what, I plan to keep at least a few Bitcoin for the long haul while potentially trying to do some market timing with the rest!
Regardless of what I do, I’ll keep you guys updated along the way!
If you’re a bit lost on everything I’ve covered here, or would like to learn more so you can consider getting into Bitcoin/cryptocurrency yourself, I’d recommend starting with my first article I wrote about Bitcoin which thoroughly covers why I chose to pursue it and why I think everyone should consider it as well:
If you’re interested in learning even more, here are some additional resources:
- Stock to Flow Cross Asset Model
- Robert Breedlove on Bitcoin Common Misconceptions
- Michael Saylor SALT Talks Interview
- Breedlove and Pompliano Open Letter to Ray Dalio
- Raoul Pal on The Bitcoin Life Raft
***Disclaimer: I am not a licensed financial advisor and nothing contained in this article is meant to be specific advice. I’m a physical therapist by trade and educational background, with a strong interest in financial independence and personal finance. I have done a significant amount of research to come to the conclusions stated above for my personal situation, but I am not offering specific financial advice. It’s important that you do your own research, and if in doubt, to consult a financial advisor about your own personal situation. Invest at your own risk!