Hedge Fund

Aug 07 2017

Crypto Hedge Fund Update

One note before we dive in: we’ve actually made one minor tweak to the “Hedge Fund,” which you’ll see below. We’ll also explain why, but suffice it to say that this is a space that’s always shifting, and we thought this shift was important.

Hi! How was your weekend in Cryptoland? Oh, you didn’t visit?

Wait, you don’t know how to find Cryptoland? You must be new here.

Anyway, sit back and relax. Let’s take you on a little journey to the small corner of Cryptoland we call the DIY Hedge Fund.

***DISCLOSURE: As always, do your own research. This is not investment advice or financial advice. We aren’t responsible for gains or losses. Don’t invest more than you can afford to lose.***

Why We Invested In What We Invested In

The main reason behind the hedge fund was…well, to act as a hedge against other things happening in the world economy. As we mentioned back when we launched this fund, this was (1) hypothetical and (2) based on an assumption that someone has net investment funds of $100,000. That’s how we arrived at the $10,000 figure – 10% of the overall funds.

We gave it variety – didn’t want it all in Bitcoin, and we needed to have a couple emerging coins, too.

Plus, we wanted at least one recent ICO, leading us to WeTrust – which we’re actually getting out of in this hypothetical fund.

So we’ll have to change that fun graphic. But that’s not as important as telling you about the results…

First, where we started

Here’s how the initial investment, made on May 1, broke down.

Simple enough, right? 30% in BTC, and the rest split between those categories – “Established,” “Growth,” and “Emerging”) we talked about above.

(You could argue whether Litecoin should move into the second category of “Established” altcoins – it’s not a Growth coin anymore, and it’s one of the Crytpo Unicorns now, with greater than $2B in market cap – but let’s keep these categories as is for now.)

Now that we see where we started, let’s see what it looks like today, August 7, with the prices from this morning (as close to midnight as we could find, GMT, pulled from CoinMarketCap.com).

Not too shabby, right?

Actually, if you could get those sorts of returns from any asset, you should probably take them; any time you take $10,000 and turn it into nearly $40,000 inside of three months, it’s nothing short of staggering.

But We Had to Make a Tweak

That’s right, we ditched WeTrust, since we didn’t like the fact that it was our only negative return. We replaced it with Tierion, which is an ICO that – full disclosure – Dave personally invested in.

We simply swapped the dollar value of the WeTrust coin for an equal amount of Tierion, which was priced at $0.071 by the coin’s management team.

And we are now off to the races…again.

We’ll keep tracking this fund – as we do our BRED Portfolio – and we’ll let you know what happens as we continue our journey through Cryptoland.

BTW…

We’ve also been telling you about Bitconnect – the lending platform backed by the Bitconnect coin. Click on the banner ad below to get started; it’s our affiliate link but, if you join and get others on board, you can share in referral fees, too.

Jul 13 2017

DIY: Your Bitcoin Hedge Fund

It’s time to update our Bitcoin Hedge Fund, which we told you about back in May. Before we do that, though, this reminder: we DO have a Facebook page, we ARE on Twitter, and we’ve been spending a ton of time over on Steemit. We’d love to have you join in on the conversation in any or all of the three.

And away we go…

Hedge Fund Background

First of all, the typical standard disclaimer: do your own research. We’re not responsible for gains or losses. Get legal, tax, and accounting advice. Don’t invest more than you can lose. These are volatile-as-f markets, y’all. Really volatile, especially the past several days, where there was at least a little bloodletting and panic.

Anyway, our original post said we’d park a small amount – in our hypothetical fund, we chose a guy named “Herbie” and his hedge fund (“Herbie’s Hedge Fund”) had $10,000 to invest. We chose this amount as ten percent of his investment capital. Is that a good amount? A bad amount? Too high? Too low?

Heck, that’s for you to decide. If you’re Wences Cesares, you’d put 1% of your net worth in Bitcoin and leave it there for several years. That may turn out to be good advice, or it may turn out to completely fizzle.

What We Started With

Our hedge fund had a nice mix of established coins – the BRED portfolio, of course – as well as some emerging coins and a recent ICO. Here’s what it looked like then:

If you have more than a passing understanding of the markets we’re in, you might think every one of those coins has gone up since May 1. And you’d be almost 100% right: using today’s prices, grabbed from CoinMarketCap.com, here’s what you’d have:

Some notes on what we see here:

Bitcoin: Holding Steady

Bitcoin is doing well enough, and it started as 30% of the portfolio – for reasons detailed in May, but, if it’s becoming the reserve cryptocurrency, then yeah, you want a good chunk of it.

What will be interesting, though, is where it goes in the next 20 days or so. Hard Fork, Soft Fork, stuff that even we admit we’re paying attention to but not studying THAT closely – the August 1 deadline date for Segwit-related movement on the part of the BTC-hemoth will mean movement in price not only of BTC, but perhaps of others in the BRED portfolio…and LTC, too.

Timing on LTC, DGB, XRP: Not Bad!

From the “blind squirrel” department, all three have done well. Litecoin was, indeed, a defensive play – you could argue that it belonged in our BRED portfolio – some folks have told us so – but it’s (in our eyes) a bit like Bitcoin and a bit like Dash. But it’s also seen as a Bitcoin alternative, so that’s why it’s here. And it has nearly doubled in the past five weeks.

And some of our success is a little bit of luck – we thought we could be too late to get into Ripple’s XRP token, but it turns out that quadrupled for us.

Digibyte went on a tear, then pulled back and is now back down to Earth – if Earth is an 11x growth in its price.

And, About Our Laggard

Win some, lose some. WeTrust is still a good product/coin/token/system/platform. And we’ll keep it here because we do think that it has tremendous potential.

But two things do jump out at us here at Metacoin HQ:

We picked the wrong ICO.
We are also missing out on a number of these ICOs because we’re in the USA.

A Word on ICOs

Initial Coin Offerings used to be all the rage a couple weeks ago. Then Ethereum pulled back and cries of bubble were everywhere.

THEY’RE BACK.

Tezos $XTZ pic.twitter.com/zswITrHUiY

— BambouClub (@BambouClub) July 13, 2017

That’s one we missed out on entirely because we’re in the USA and these will not let Americans get involved. You have to wait until they are traded on an exchange…

That could actually be a good thing – if an ICO is oversold, overblown, and overhyped, it will more than likely fizzle once it hits the markets, creating a buying opportunity for mere mortals, er, Americans.

But, and this is a message for Congress as they look at tax reform, and maybe, too, a message for the SEC: as long as there’s a ton of caveat emptor attached, what really *IS* the problem with these ICOs being open to American investors? How are they any different from, say, my deciding that Blue Apron is awesome and I want to bet my IRA on the Blue Apron IPO?

Food for thought.

Two More Things

One – our hedge fund actually looks a bit different today than it did on July 1.

Yeah, $7,000 down since July 1. This is why we updated the numbers on July 13 – it’s a more accurate picture of what’s happened over the past 12 days.

Two – your own hedge fund. We told you before that this is a hypothetical experiment and you can use this as a guide for creating your own. However, we like the basic principles here: some big coins, some smaller coins, maybe an ICO or post-ICO coin or token or two. The general idea, as always, with a hedge fund is that you want to hedge your bets.

Overall markets – stocks, bonds, mutual funds, precious metals, pork bellies – those could tank tomorrow, or explode tomorrow, or trudge along. If you have all of your eggs in one basket, you’re likely going to have trouble someday. And if you have all of eggs in the wrong basket, that could spell trouble, too.

Love to hear your ideas! Tell us on Twitter, or in the comments below.

Oh, if you HAVEN’T gotten some coins to get started, pop on over to Coinbase, use this Affiliate Link, and you’ll get a Bitcoin Bonus with a qualifying purchase.

Jun 02 2017

How’s Your Bitcoin Hedge Fund Doing?

We like the concept of diversification here – so we’re never going to say to put all your eggs in one basket. In that spirit, we launched our own “Bitcoin Hedge Fund,” which aims to provide a combination of established and emerging cryptocurrencies that can act at least a little like your own index fund.

You can read more about our Hedge Fund here – it’s hypothetical, of course, and you should certainly get professional advice and counsel when coming up with something of your own.

Yesterday, we shared the June 1 update of our BRED Portfolio, which is on fire this year. It had a four-month head start, so of course its results – up 19 times – will be better than our one-month-old Hedge Fund.

Hedge Fund Investment Recap

Here’s what the numbers looked like on May 1.

Now, here are the numbers from June 1, with Coinmarketcap.com‘s prices at around midnight GMT.

The fund tripled – and then some – in just a month!

This leaves us with a few questions:

Can Digibyte keep rolling? Obviously, a 16x multiple is not really sustainable, is it? (If you compare it to, say, Ripple, whose YTD multiple is 36, it looks paltry by comparison. However, Ripple has kept chugging along.)
Ripple, Dogecoin, and Ethereum – not bad one-month performance for each, right? The worst of the three tripled. Can those continue, too, or are we in a bubble?
If even the laggards like WeTrust and Dash are up 30-plus percent, ARE WE IN A BUBBLE?

And that’s the point behind this “Hedge Fund”

The idea is that it’s NOT your entire investment portfolio. Is it 1%? 10% 25% or more? That’s up to you…but, really, the point of any hedge fund is to hedge your bets. One asset class goes up, another goes down, and your overall portfolio weathers the storm.

We’ll keep tracking this, and our BRED Portfolio, and there’s much more coming. For now, though, if you haven’t gotten some Bitcoin, what are you waiting for? Visit our Coinbase AFFILIATE LINK and you’ll get a bonus with a qualifying purchase (and you can buy Bitcoin, Ethereum, and Litecoin there).

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.