Topic: Let's talk Asset Allocation [Cap -> Adoption] (Read 336 times)

My Asset Allocation

Classes [coins listed are not my holding just listed to help define the class]:
Large Adopt (BTC, ETH only)
Middle Adopt (Litecoin, Dash, Ripple, Nem, Monero, etc)
Small Adopt (Pivx, Sia, Storj, Grid, Melon, etc)
Tiny Adopt (ICOs, etc)

• 60% Large Adopt
• 25% Middle Adopt
• 10-12% Small Adopt
• 3-5% Tiny Adopt

Reasoning:

85% of my crytoassets are in the Large & Middle adopt classes. Not only do I classify these holding as relatively safe (I mean we are talking about crypto here), but I also think they will grow substantially over the next 10-15 years.

[For those not familiar with asset allocations, once you set a target allocation you move around your holdings to always try and stay near your target. For example, if I am holding a lot of Monero and then after analysis, news, etc I feel it has become more risky, I can move those holding to Litecoin and not mess up my allocation. Similarly, if ETH crashes down 20%, my Large Adopt percentage will be below my target. So, I will either sell other classes to increase my Large Adopt class or direct all new investing to the Large Adopt class.]

I have the remaining 15% of my portfolio available for small and tiny adopt assets. This will allow me to participate in any ICO that seem very promising (and not overpriced if there will be any more of these) and also allow me to hold higher risk, higher reward assets with 10-12% of my total portfolio. This is quite high but because of my long-term goal for my investments, I can afford the risk.

Post your thoughts and your asset allocations below.

Asset Allocation

For those of us with experience trading, asset allocation is something that we are always tweaking to try and find the best balance between Risk & Reward.

Usually, assets are grouped into classes based on market cap (large cap, small cap, etc) or location (US, Japan, etc). For cryptoassets however, I propose we set the classes based on adoption. So what is adoption? Adoption is a subjective measurement of how well adopted a certain cryptoasset is relative to the adoption of other cryptoassets. Setting the classes based on a subjective measurement is just asking for trouble. Well yes, it would be better if we had a truly objective measurement to use, but it is the best way for us to group these assets at this early time in cryptoasset history. Furthermore, let's remind ourselves why market cap is not a measurement we want to use:

• A coin like ripple can have a very high market cap (currently #2) even though the majority of coins are held by a single organization. A situation where price has increased much faster than adoption.
• With an influx of ICOs and people willing to invest in ICOs, we are creating a marketplace where coins instantly reach a high market cap before achieving any adoption at all, and in some cases before even being developed fully.
• With the cryptoasset group as a whole gaining 5x market cap, the individual market caps become much more volatile and it does not offer the best way to compare assets within the group.

Now, none of the above points are bad things concerning specific coins, etc. They just show that there needs to be another metric to compare assets against each other. I am sure no investor who holds BTC and XRP thinks that they should be grouped together as an asset class even though they are #1 & #2 in market cap. While with the recent adoption of ETH, one could argue (and I would) that ether be grouped with BTC to form a Large Adoption class group.

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So, who should think about their asset allocation?

The long-term investor. This is not for the person who is going to put $200 into ethereum or ripple or tezos and hope to turn that into $10,000 one day. This is for those of us who are investing and will continue to invest in cryptoassets. For those of us who will want to ensure they have the best Risk vs. Reward setup. For those of us who want to invest in the big guys, but also make room for the next ether.

Let's start discussing asset allocation so we can continue to improve our portfolios!