Dash

May 25 2017

BRED Update (Or, How’s Your Bitcoin?)

Cryptocurrency traders are a special lot. They are, after all, a new breed, and the markets they trade in don’t totally act like the stock markets, nor do they totally act like the forex markets.

And the “buy and hold” folks seem to be in the minority, at least if you trust the chat rooms on places like Poloniex.

To wit, the activity the past 24 hours or so shows some serious red numbers. Dropping like flies, those “altcoins.” The sky, she’s a fallin’.

Now what? You moved your hard-earned Bitcoins into something like Ripple’s XRP token and you’ve seen it “plummet” 26 percent in the past 24 hours.

You could be like the guy on this all-too-real Reddit post from yesterday.

I have been a BTC hodler for about 3 years now. Things were good and I believe in bitcoin a lot. When the price was dropping and dropping I kept on buying and buying, for the simple reason that I believe in Bitcoin.

Enter a few days ago: Ripple was on the rise. I thought I could increase my BTC-stack a bit by following the ripple trend. I was stupid and went all in… I should never have gone all in on anything. I’m not all in on bitcoin, so why would I put all my hard earned btc in something I do know little to nothing about, right? Well… enter the greed I thought I had left behind me a long time ago.”

Let’s just say it didn’t end well. A cautionary tale for the day traders and trend riders. And those who don’t hedge. And those who don’t buy and hold. And…

Enough Already: Get to the Headline

Oh yeah, that. The headline today asks “How’s Your Bitcoin?” because that has been the dominant news this week. Yes, even above some of those other coins that seemed to come out of nowhere and jump up by 2x or 3x – I’m looking at you, ZCash – Bitcoin’s rise to above $2,500 each is rather thrilling. Cool, yes, unsettling, maybe.

The BRED Portfolio, which we started tracking on April 1 (it’s ONLY been two months? Really?), takes four of the currencies – Bitcoin, Ripple, Ethereum, Dash – and puts them in equal parts into a basket, with an initial investment of $10,000. (We went back to January 1 so we could look at this from a YTD standpoint, and we’ll give further updates on the 1st of each month.) Its growth has been staggering – but the growth has actually been mostly due to non-BTC assets.

Meaning that Bitcoin is back in the spotlight at the expense of some gains in the portfolio.

So, even with the attention on Bitcoin, the BRED Portfolio is still dominated by the growth of XRP, which is still more than half of the overall $195,821.24.

Is there a lesson here?

Maybe: diversification is good. Riding the waves isn’t. Buying and holding, probably also good – unless this entire portfolio and the crypto universe turns out to be a house of cards, in which case we’re all spinning our wheels.

A broader point, though, is one that we should make: Bitcoin is still “dominant” (this gets tracked – Bitcoin as a percentage of the overall cryptocurrency marketplace, which, according to Coinmarketcap.com, has fallen to 49.3%) AND is still the gateway currency. If you’re getting started, or if you’re trading for the first time, the odds are that you’re trading Bitcoins for whatever you end up with.

Bitcoin is the gold standard, or the world’s reserve cryptocurrency.

Whether it will remain that way for a while? That we’ll wait on.

May 07 2017

A Five-Month Buy-and-Hold Strategy to 10x Your Money

It’s been a crazy weekend on the cryptocurrency front. If you checked in on the markets on Poloniex, as we did earlier today (around 11:30 a.m. Central Time in the US), you would have seen something that looked like this:

This snapshot (from the BTC “pairs,” so the prices of, say, XRP are calculated in BTC) tells us that you could have done well on a 24-hour period taking the list of 25 of the top “altcoins” and throwing a dart at their names, buying some and then selling 24 hours later. (The obscured 93.76% gain was from STR – “Stellar,” and the 100% gain near the arrow in the picture is BCN – “Bytecoin.”)

But What About…A More “Strategic” Approach?

Oh, that. The BRED Portfolio. The one we seem to be prattle on and on about. The one that involves a $10,000 investment, spread equally between four of the biggest coins – Bitcoin, Ripple, Ethereum, and Dash – and invested on January 1, 2017.

That one.

How is it doing?

Sweet Mother of Zeus!

$10,000 invested in the BRED Portfolio on January 1, 2017 would have grown to $106,909.51 on May 7, 2017.

Okay, so there’s some hyperbole involved here. Actually, quite a bit of hyperbole: this is a hypothetical case. If anyone out there actually did this AND wants to talk about it, the floor is yours.

Because, let’s face it, investments come with inherent risks, and with that thing called “human nature.”

Story Time

I remember back in the first dot-com boom, and specifically a stock that I owned in my IRA that was poised to change the world. For a while, it did – acquiring others in its nascent space, growing like the proverbial weed. My memory is deliberately a little fuzzy on the exact numbers, and I have since shredded all records of my transactions.

But suffice it to say I may have bought into this stock at around 3 bucks a share, and it went to around 78 a share.

And I held – “HODL” is the acronym that could have best described what I was doing with this one – until the last possible moment.

PSINet was the company. Yeah, that was a learning experience for me.

It Comes Down to ONE WORD:

Fundamentals.

You can certainly believe that Bitcoin, Ripple, Ethereum, and Dash all have the potential to change the world. It is quite possible that they could. It is quite possible that we’ll watch them grow by another order of magnitude. It is quite possible that they’ll continue growing like this, and the ramifications for the global economy could, indeed, be huge.

On the other hand, it is quite possible that we’re watching a bubble that’s about to pop. That Bitcoin is as overpriced as some say, or that there’s too much XRP being circulated.

Our advice: check the fundamentals. Spread your investments around – which is why we say “BRED Portfolio” and not just Bitcoin. Consider the Hedge Fund approach we talk about here.

Due your due diligence, too. Seek advice from places beyond just this site – you’re doing that, right? – and talk to investment advisors and professionals.

Could the trend continue? Could these coins come back to earth? We’ll all find out soon enough.

May 02 2017

Your Own Bitcoin Hedge Fund

If you look around the internet, you can find quite a few investment funds that aim to capitalize on Bitcoin and emerging blockchain technologies. However, it’s awfully tough to get into them: you’ve either got VC (venture capital) funds that rely on high-net worth investors for their capital, or you have hedge funds that are out of the reach of most mere mortals. (And they don’t really invest in Bitcoin and altcoins yet; thanks in part to the US SEC requirements around funds.)

Then there are the ETFs that we keep waiting for the SEC to approve, as well as the mutual fund industry: do you think they’ll jump into the pool yet? Probably not.

So, what’s an investor to do?

Easy: start your own Bitcoin Hedge Fund.

Okay, a few caveats first: we’re not investment advisors, we’re not registered with the SEC or FINRA. This is not individual investment advice. Use and follow at your own risk. Seek legal, accounting, and other individualized assistance before investing.

Now that that’s out of the way, let’s begin.

It’s not REALLY a “Hedge Fund”

That’s right…we’re not actually advocating starting your own “Hedge Fund.” We are advocating starting a fund that “hedges” against ebbs and flows in the overall markets.

This is akin to the precious metals people – the “gold bugs” – who claim that you should have somewhere between 90 and 100% of your money in gold. (That’s a joke: some experts, though, will tell you that you’ll miss out on the potential for explosive growth unless you have 10-20% of your money in gold, silver, and other tangible assets.)

AND the other important part of this equation, which the gold bugs will tell you over and over again, is that you want something outside of the US Dollar in case things hit the fan.

Bitcoin and cryptocurrencies might help you there, too: since they’re outside the US Dollar, they’re also a tremendous way to avoid having to worry about whether the dollar fares well against the Japanese Yen or the Euro.

Your Own Hedge – Gold, Crypto, Whatever – How Much?

Now we get into your own soul searching. You need to figure out what makes you comfortable. (We realize that a good chunk of this is counterculture stuff – if you walk into your investment advisor’s office and say “I want to put 10% of my retirement in Bitcoin,” they may look at you as if you have three heads.)

So we’re going to create a hypothetical character – “Herbie Hedge,” who, though conjured out of thin air, does not have three heads – and we’ll manage a hypothetical fund on Herbie’s behalf.

Hypothetical Investments

To make it easy, we’re going to say Herbie has $100,000 to invest, and the OLD Herbie – as of twenty minutes ago, before he read this post and decided to create his hedge fund – had his liquid-ish investments (stocks, bonds, mutual funds and cash – since they’re between ordinary investment accounts and IRAs, 401(k)s and the like, we’re calling them “liquid-ish”) distributed like this:

50% S&P 500, DJIA Index funds (or, 50% in an overall stock portfolio that looks like the overall market)
20% Growth, international, value, and the like
20% Bonds
5% Gold, silver, precious metals
5% Cash and cash equivalents.

Pretty simple, right? And he was planning on leaving it there. But now that he’s taken a look around this site, and maybe he’s learned a little bit about the “BRED Portfolio” and the “Coins that May Quadruple,” he’s ready to re-consider what he’s doing long-term. Plus, there’s FOMO to worry about: what if this Bitcoin or these other altcoins or cryptocurrencies really do take off?

Speaking of FOMO, didja see what the BRED Portfolio did over the first four months of the year? Whoa.

Herbie’s Hedge Fund

First up, let’s re-distribute his portfolio, the $100,000 he has to invest.

Let’s say Herbie is still a believer in the overall market, might think he can lessen his reliance on bonds, and wants to keep a little in gold and precious metals. BUT he’s also ready to jump in with both feet – to a certain extent – and invest in Bitcoin and its ilk.

We’ll redistribute his (hypothetical) portfolio like so:

40% S&P 500, etc.
20% Growth, etc.
20% Bonds
10% Herbie’s Hedge Fund
5% Gold, etc.
5% Cash, etc.

Voila, Herbie is ready to invest $10,000 in his very own hedge fund.

A Visual “Map” of Herbie’s Hedge Fund

The way we’d propose setting up this “hedge” fund shouldn’t be a surprise to readers of this space.

Bitcoin is there because, well, duh. It is the centerpiece of this new economy. It’s the one that started it all. And, not only do we recommend it in our BRED Portfolio, we also recommend it as one of those four coins that could quadruple. (Yes, we like linking to our own content multiple times in the same post.)

The next 30% is comprised of the other three coins in the BRED portfolio: Ripple (XRP), Ethereum (ETH) and Dash (DASH). To keep it simple, let’s do 10% of our 10K in each.

Following along, let’s aim for the mid-tier: semi-established coins with semi-large market caps. 10% each in Litecoin and Dogecoin.

Finally, there needs to be at least a little that aims to take part in the explosive growth of (some) ICOs and brand-new or new-ish coins. We’re setting aside 10% for two of those: Digibyte and Trustcoin.

Here’s the result:

We grabbed the values from Coinmarketcap, it’s denominated in US Dollars, and of course its value will fluctuate. Heck, as of this writing, Bitcoin was on a mini-tear and was trading – depending upon the market – between $1450 and $1600.

What if I don’t like these individual coins?

Here’s where we go back to the old saw that we don’t provide individual investment advice, trust the professionals in your circle, and past performance isn’t indicative of future results.

But again, let’s go back to why hedge funds were created: the market ebbs, and your hedge fund flows. And vice versa. You’re going to see results that run counter to the results in the overall market – within reason – and that’s okay. Also, within the individual fund, you will see some altcoins do well and others not so much. So if you don’t want to hedge your bets with Digibyte (which I’ll admit didn’t pop like I thought it would after the Segwit rumors and Segwit news), research another coin.

The goal is to spread your risk overall – remember, only 10% of our liquid-ish portfolio is in this fund – and to spread your risk within the fund itself.

What if I don’t have $10,000?

No problem – actually, the beauty of Bitcoin and cryptocurrency investment is that you can get started with very little. (This is a great time to remind you that you can get started over at Coinbase, and if you use this link and make a qualifying purchase, you get extra Bitcoin…and so do we. So yes, that’s an ADVERTISEMENT.)

So you can borrow liberally from our approach with whatever amount you think makes sense. $1000? $100? Test it out over time, see what happens.

What we’ll do here…

We plan on tracking the results of Herbie’s Hedge Fund over time. We’re curious to see how it does against our BRED Portfolio, and we’re also interested in how it does against the overall stock market.

Apr 26 2017

BRED or ICO – Which Path?

We’re tooting our own horn…just a little.

If you have followed this site for the past month (and THANK YOU for doing so), you know that we have been talking about two sides of the “coin” when it comes to cryptocurrency. One the one side, the big behemoths, led by Bitcoin, which soared to north of $1400 US this morning. (NOTE: we realize there are some…issues? questions? with Tether and the USDT price on some sites. We’re going with Poloniex’s numbers from a little before noon Central time today.) On side two: the little guys, be they altcoins or ICOs.

AND YES…there are three sides to every coin, o wise one. Side three is the edge of the coin, where many of you might currently be. Reminder to get started with Coinbase, buy some Bitcoin or Ethereum, and get rolling! They’ll give you a bonus and we’ll get a bonus for referring you.

Back to the tooting of our horn: we believe we’re onto something with the BRED portfolio.

BRED is on a TEAR

When we first came up with the concept, we picked four of the coins with the highest market cap, but also four that could fall into different buckets. The same way that Facebook, Amazon, Netflix, and Google make up FANG – with each bringing a different dish to the table – Bitcoin, Ripple, Ethereum, and Dash all have something a little different about them:

Bitcoin – “first-mover advantage”
Ripple – “banks are using it”
Ethereum – “smart contract” (banks also using it)
Dash – “most consumer-friendly”

Simple enough, can fit this on a napkin. So we thought, let’s create a portfolio of just these four, give them 1/4 each of our investment, and leave it alone.

Here’s what it would look like right now:

Yes, you read that correctly. A $10,000 investment, spread equally between these four coins, made on January 1, would be worth more than $51,995.12 today.

Oh, and if you sat on the edge of the coin and waited until April 1 to buy, you’d still be up 22% THIS MONTH.

But what if you’re waiting for an ICO?

Some ICOs Had INSANE Weeks

While some of this could be the start of a bubble – and our pal Roger Aitken talks about that in this post on GNO – ICOs are on a tear, too. Well, some of them…

GNO set records, rising to a valuation of $300m
TaaS has raised $6.1m US, all of it outside of the US
MobileGo has raised more than $6m in its first week
Exscudo* stumbled a little on day one, but is nearing the $1m mark in only its second day.

* We are participating in Exscudo’s “bounty program” and have purchased a small stake. Also, we wrote about it in more detail over here.

What’s the Takeaway?

If you think things are just getting going, you may very well be right. Bitcoin’s market cap is above $20b, but, with fixed supply and companies still scrambling to get involved in blockchain technology, the four members of the BRED portfolio seem to be hitting the gas pedal.

And these four ICOs, each with their own different angle and spin, could also be poised to make serious news of their own – I mean, in addition to the news they’ve made already.

BRED or ICO?

What about both?

Apr 07 2017

Quadruple Your Money with the BRED Portfolio

When we stumbled upon this idea this morning, our first instinct was to play it rather cool with the headline. Something like “Introducing the BRED Portfolio: A Buy-and-Hold Bitcoin and Altcoin Investment Strategy.” And that sounds very straightforward, by the book. It’s also boring.

So we went with the clickbait headline.

Read on:

Why “BRED”?

There are a couple reasons behind this one – and it’s not just because these four letters fit together nicely. (They do, though. Props to us.)

Think about one of the best business and investment acronyms out there: FANG. Jim Cramer claims to have created the acronym several years ago, used to put four “new economy” stocks into one nice bucket. Facebook. Amazon. Netflix. Google.

It’s easy to remember, but it also includes four really solid tech stocks – and four companies that are, you could argue, doing quite a bit differently while still being in the same category.

We thought the same thing when creating this portfolio strategy: let’s get four of the biggest cryptocurrencies out there and put them in one bucket.

BUT, let’s do this with an eye toward the ones that have the best chance of long-term staying power.

While “BRED” works nicely as an acronym, these are also four coins that have managed to stick around in the crypto space.

We’re not just rationalizing…

B is for Bitcoin, and you couldn’t have a portfolio like this without Bitcoin, since it started this whole shebang, right?

R is for Ripple – which, for some reason, doesn’t have a ticker symbol that starts with “R” – and Ripple’s USDT price developments of late don’t tell the whole story; consider it the best chance of becoming the backbone of all crypto transactions throughout the world.

E is for Ethereum, whose “smart contracts” were, you could argue, the first yin to Bitcoin’s yang.

D is for Dash – “digital cash” is a very easy and consumer-friendly value proposition. We will argue that this one could win out based on the strength of its community alone.

Look at the rankings, though – if you visit Smith and Crown this morning, you’ll see that these are four of the five largest cryptocurrencies – in terms of market capitalization – in the world. In fact, going back to January 1, you would still have been picking four of the 7 largest cryptos, as shown in this chart from CoinMarketCap.com.

Argue with us if you’d like, but we’re going with this acronym. You’ll see why in a second.

Structuring the BRED Portfolio

To keep it simple, we used January 1, 2017 as our starting point. And, as opposed to weighting the portfolio by market cap – which would have had Bitcoin at about 92% of the portfolio, defeating the purpose – we went with a straight 25% invested in each.

To get the prices, we grabbed a chart from TradingView.com – our first-ever visit to the site, which is bloody easy to use, we might add – and use their figures for open price on January 1.

TradingView BRED Chart — Thanks, http://tradingview.com

So there we are, a simple portfolio with four of the biggest crypto assets. But…how did it perform?

Quadruple. Your. Money.

What will remain to be seen here is whether or not this is an aberration – past performance not indicative of future results and all that.

But holy buckets this thing is on fire.

$10,000 invested equally on January 1 in four cryptocurrencies – Bitcoin, Ripple, Ethereum, and Dash – would have grown to $42,567.69 on April 1.

So…Now What, Smart Guy?

Yes, hindsight is 20/20. Looking back, the woulda-shoulda-coulda factor with the coins that aren’t named Bitcoin is pretty huge. And the volatility is such that today’s number on the BRED portfolio is more like $44,000 – and that’s due in part to the Ripple developments over the weekend.

But here’s our take – and we’re not investment professionals, nor do we provide legal advice – on what to do with this information:

Buy and hold. It doesn’t have to be these four cryptocurrencies, but you should consider having a few coins or tokens that you simply leave alone. Don’t trade them, keep them in cold storage, and worry about them only a little.