The 5 Pillars of Cryptocurrency Investment

Today, we have something special for you. Our Altcoin Buzz Alpha is making some great calls lately. And we want to show you why.

The 5 Main Pillars For Investment In Our Crypto Portfolio

Today, we have something special for you. Our Altcoin Buzz Alpha is making some great calls lately.

And we want to show you why. Today’s article is one of 2 parts where we talk all about our 5 main pillars for investment of our crypto portfolio.

Pillar #1: Where to Invest

In this pillar, we are talking about coin selection. And while this is the most important of all the pillars, we cannot get great ROI without following the other pillars.

The foundation of this pillar is in large caps. As I’ve said here many times before, if you don’t hold at least some Bitcoin in your portfolio, then you are doing this wrong. And our Alpha Team believes the same about Ethereum. The Ethereum story, even though many are down on it right now, is especially true if DeFi grows again and the RWA sector hits the way we think it will.

So you have BTC and ETH. Now what? Now we look for high-performing coins in narratives we like. Narratives are part of Pillar 5 on Why We Invest. So that’s coming up later. Some examples we’ve hit on hard in AB Alpha and here in the channel include:

Spread Risk via Market Cap Size

And large caps are important, as you can see. They are or become the leaders in the industry. They should be the foundation of your portfolio. But we can catch big moves if we diversify by market cap and also buy quality mid-caps and small-cap projects.

The further down you go in market cap, the higher risk and reward potential there is. And it makes sense, right? A 10x on Bitcoin takes it from $1.3 trillion to $13 trillion. That’s hard to do when it’s so big already. And almost no one is predicting a 10x in this market cycle for Bitcoin.

On the other hand, dydx at a market cap of ~$700 million or Oasis Protocol at ~$450 million both have a better chance to 10x. That would take them up to $7 billion and $4.5 billion, respectively. If they continue to run their projects well and catch a bull trend, then this absolutely could happen. And the probability is higher than with Bitcoin just due to size alone.

Add Strategic small-caps

Then going one step further, it’s both a little riskier and even more 10x potential among the small caps. The small caps at under $100 million market cap are currently starting at #435 in market cap. Two of the small-cap gems on our list that you’ve seen us talking about here on the channel include Polytrade and GraphLinq.

Polytrade’s coverage of prediction markets for the US election has generated a TON of interest from the public. It will be fascinating to see if that continues after November or once the US election is settled. Polytrade’s current market cap is only $14 million. A 10x should be easy from here if betting interest continues after November. GraphLinq’s market cap is $28 million.

Again, another good chance for a 10x. But there are more risks that small caps can go to zero, too. One big, wrong move and all that market value disappears. If you don’t remember that can happen, ask LUNA holders. So you need exposure to large caps, midcaps, and small caps. We go over this in much more detail so you get the percentages right for your risk level in our AB Alpha group.

Pillar #2: What to Invest

Our next pillar gets into this on investment percentages a little bit more. Pillar #2 is What to Invest. Or how much of our portfolio do we risk on each investment?

This is an area where crypto often differs from TradFi. A TradFi trader would tell you that the most popular risk management technique is to follow the 2% rule. That’s where you never risk more than 2% of your total account on any one trade.

Now this is for trading. If you are holding long-term, then the numbers are very different. Many of us across the industry use Bitcoin as our general savings to save and earn outside of fiat currency. So of course, that type of savings and investment will be way more than 2%. But if you trade actively, this is a good rule of thumb.

In Altcoin Buzz Alpha, we recommend a mix. You should have at least some of your accounts invested long-term. Projects you expect will be around and making money a year or two from now. And then you should also have some cash set aside for great trading opportunities. For example, we recommended $TAO in late August at $200 and now it’s trading at $550 for a