Crypto Portfolio Allocation

Please make sure you are following all of the guidelines laid out in the previous sections, especially those around Managing Risks and avoiding the traps of how people frequently lose money. There are no guarantees in investing, and you should prepare for downside risk accordingly!

Broadly speaking, Portfolio Allocation is just as much an art as a science, and is very dependent on the individual, their risk tolerance, and the circumstances.

Here is a rough way to think about the risk curve for major projects in crypto:

Risk Curve:  

Bitcoin → Ethereum → Cardano → Polkadot → Solana

        Less Risk   →   More Risk

Now, this is my own personal assessment. Since no one truly knows what is going to succeed or fail, everything is a judgement call. I might rank Solana further out on the risk curve than Cardano and Polkadot, because I have a few concerns about the VC backers’ commitment to the long term vision, and some shady behavior has taken place by their core team on numerous occasions (there is none of this shady behavior in projects like Cardano or Polkadot for example, and this behavior is usually a disqualifier for me to invest in a project).

Someone else might look at Solana, see the ecosystem development, technology, and Sam Bankman-Fried’s incredible track record, and think that anything connected to him is likely to turn to solid gold (which isn’t a terrible conclusion to be honest, and I do personally think Solana has a very bright future, despite my concerns).

The point is, no one knows for sure until it’s happened, and while there are certainly risks ahead, I think there is room for all these platforms, and more, to be highly successful. It’s all about matching your risk tolerance, and what you personally understand and have confidence in.

Crypto Portfolio Examples:

Bitcoin is the only clear “own for 10 years” digital asset at the moment, it is the safest because it is established and no one is even trying to compete with it directly anymore. If you want a true “set and forget” crypto, you can go 100% Bitcoin. The remaining assets below look like strong “hold for 3-5 years while re-evaluating” investments at the current time. Ethereum has the second lowest risk profile currently in the coming years, but the longer term (5+ years) future is unclear on the technological front with the growth of 3rd Gen projects like Cardano, Polkadot, and Solana. 

Personal note: My personal highest conviction bet has been on Charles Hoskinson and Cardano since 2017, and that remains true today. My second highest conviction long term bet is on Gavin Wood and Polkadot. If I were personally building a portfolio, I would own all five assets below, but would skew more heavily towards Cardano and Polkadot. I have kept the portfolio allocations below more objective and balanced rather than skewing towards my personal views. Again, please do your own research, match your own risk tolerance, and only buy assets you personally understand and have confidence in.

Conservative: Only the Majors

Bitcoin 60%

Ethereum 40%

Moderate: 70% on Majors, 30% on 3rd Gen

Bitcoin: 35%

Ethereum: 35%

Cardano: 10%

Polkadot: 10%

Solana: 10%

Aggressive: 40% on Majors, 60% on 3rd Gen

Bitcoin: 20%

Ethereum: 20%

Cardano: 20%

Polkadot: 20%

Solana: 20%

Very Aggressive: Evenly between Ethereum & 3rd Gen

Ethereum: 25%

Cardano: 25%

Polkadot: 25%

Solana: 25%

Again, there are a million permutations here, and these are just examples to help you think about your risk tolerance and what makes the most sense for you. As I’m constantly reiterating when talking with people about their portfolios and asset mixes… do whatever helps you sleep well at night! Don’t do anything that you aren’t comfortable with, and that doesn’t make sense to YOU.