The macro and crypto landscape is changing. I believe it’s the right time to refocus my strategy and concentrate on higher-risk plays over the coming months. Portfolio structure and the understanding of risk will be essential.
Key Takeaways
- Some good and bad calls were made, but overall it has been net positive.
- Economic conditions are detaching further from the markets, particularly with the escalation of the war.
- Having built a solid BTC and ETH portfolio, it’s time to go further out on the risk curve.
- The risk to reward is looking more attractive by the day.
Contents
The Backdrop
2023 has been a good year for my portfolio. I have had some good wins and minor losses. The top few things that I’m happy about are as follows (refer to my ‘Unfiltered Thoughts’ series):
- I expected bitcoin (BTC) to move inside a large range, so I spent less time on my long-term portfolio and more on trading than usual.
- I bought 1 Grayscale Bitcoin (GBTC) when there was roughly a 50% discount. I used some of the 50% savings to buy a put and call. Overall, I am getting close to being up 1 BTC for this trade.
- I had averaged into a reasonably heavy bag of BTC and altcoins when BTC was towards the lows.
- More recently, I hoped that BTC would get out of its trading range in September or October, but I bought some put options to hedge my position. I have since exited all the positions and will use the profits to enter positions.
- I am pretty happy that my low-bid offers for NFTs have mostly been filled. I don’t expect much from them until the back half of the bull run, but I have patience.
Areas that I have regrets about:
- I had forecasted that the Australian property market would rebound, and it increased more than I had expected. I regret not buying a property and fixing the interest rate when it was low. Under the new loan assessment policy, I have already maxed out my borrowing capacity.
- While my trades have been decent, I was using the same method as when the market was in bull territory. My rolling stop losses were quite wide because I am not a day trader, and I did not want to be out of my position before a rebound. This worked very well when the market pumped off the lows, but during the sideways movement, I should have shortened my stops because my correct calls didn’t end up making anywhere near what they should have because of the sideways market.
- I could not figure out how to place bids on Bitcoin Punks, so I bought 1 when prices dropped. However, it kept going down, so I got another. The price is now just below where I got my second.
What I’m Watching Like a Hawk
First and foremost, global liquidity is critical to my investment thesis. I had placed a greater value on the U.S. liquidity in the past. However, the economic environment has changed, and I believe global liquidity is the key thing to watch because a holistic picture is more valuable now.
I am also watching the impending Bitcoin ETF in the U.S. The SEC has recently declined to appeal the court’s decision on Grayscale’s bid to convert its Bitcoin trust into an exchange-traded fund (ETF). It could signify that the SEC is giving up its battle to stop the ETF. It is rumoured that the SEC will approve multiple ETFs simultaneously.
Additionally, I still believe that China is going through a rough economic patch. So far, the multitude of actions by the government have failed to reverse China’s trajectory. In the coming months, the Chinese government may be forced to inject significant amounts of liquidity into the economy to kick it into gear.
Lastly, it would be naive to neglect the contagion threat of war. While the initial aftermath of a major war is negative for the markets, it is reasonably positive in the longer term. As such, I am satisfied that my portfolio has a reasonable balance between safety and aggression.
The Game Plan
At this stage, I intend to be fully allocated into my long-term portfolio by Q1 2024. Bitcoin’s current price is reasonably attractive to me, so I will utilise some long-dated options strategies to minimise my outlay and maximise my potential return.
I am also reasonably satisfied with my BTC and ETH portfolio size, so my attention will be focused on altcoins for the remainder of 2023. My assessment is that most altcoins are in the depression phase, so I am happy to scale into positions, knowing there is a further downside risk. I believe the risk to reward is attractive enough to refocus my attention on this space.
The further away from Bitcoin and Ethereum, the bigger the risk, so I will diversify into a range of large caps, medium caps, small caps and micro caps. I will also focus on narratives I believe will do well in the coming bull cycle.
I will finalise my NFT purchases over the next 2 months. While the prices may continue to bleed, I need to refocus my time on the next objective. Sometimes, you need to sacrifice a pawn for a bigger play in chess. It’s not to say that NFTs will be worthless. It is merely an example to show that sometimes it is okay not to get caught up in picking bottoms for every investment.
Reasoning for My Game Plan
I have spent significant time building up my Bitcoin and Ethereum positions, and as a percentage, I have achieved the right size allocation for my portfolio. Now that I have adequately prepared the core part of my portfolio, I can chase alpha in altcoins.
Note that my risk profile is very different to most people. It is best to understand yourself to understand your risk tolerance truly. You must understand yourself before taking on increasing amounts of risk.
Recap
Keep an eye on the changing macro landscape. Things are not as bad as it seems, but it can quickly escalate. I will stop focusing on the safer side of crypto and concentrate on chasing alpha in my long-term portfolio. However, I am only doing this because I have a well-structured portfolio that allows me to take educated risks.