MORE EGGS IN FEWER BASKETS

CRYPTODAY 141

1. In a 2021 paper "Bitcoin and Portfolio Diversification," researchers found that you could reduce the impact of volatility on your portfolio by as much as 50% by holding about 20 tokens. This assumed that you were mixing in heavyweights like BTC and ETH and the rest of the coins were mostly uncorrelated (e.g., you weren't holding 18 memecoins or a dozen AI agent tokens). Beyond 20 tokens, the benefits appeared to be not as pronounced. I wish I'd read this paper before putting together my 2024 portfolio, which had over 40 tokens in it. As I review the original lineup, I realize now that there were a lot of "duplicates" that fulfilled the same purpose.

2. For example, I have TIA, INJ, and ATOM, when really I could've just picked ATOM and had exposure to roughly the same Cosmos ecosystem. The allure of Celestia was that it was modularizing blockchains in a novel way, but I realize now that if it was optimizing an ecosystem that hadn't yet proven itself to be worthy of the optimization. (In software engineering, we often refer to pre-optimization as one of the biggest sins!) None of these Cosmos tokens have done well over the last year, although TIA is the one that I eventually made some money on.

3. I also had GRT, RENDER, and AGIX -- all AI-related 2024 plays -- that were all highly speculative and moved together in lock-step. Any one of them would've been fine. AGIX was the winner for me because of how low my entry price was, although many saw success with RENDER.

4. I bought all three big 2024 L1 contenders: APT, SUI, and SEI. Although they all performed well enough, SUI was the one that really broke out — even at its current low price, I’m at 300% on that. Now I'm just waiting to sell off my APT and SEI tokens so I have fewer wallets to manage.

5. Finally, I held multiple Ethereum L2 competitors: ARB, OP, and MATIC. The big irony here was that Base overtook all of them in 2024 without having its own token, so none of those bets really mattered.

6. So what were the notable wins in 2024? Apart from the ones mentioned above (SUI, AGIX, TIA), the ones that are continuing to look strong include my lone RWA bet ONDO (200% up), my next-gen stablecoin bet ENA (200% up), and my silly gold bet PAXG (50% up lol). And then of course there’s all the majors, which was really where the bulk of my 2024 gains came from: BTC (250%), SOL (400%), BNB (150%), XRP (400%), ADA (50%). You don’t have to be a believer in any of these major coins in order to understand that their network effects and cult-like communities mean they always have a shot at an unexpected rally, which is what we saw with XRP and ADA.

7. ETH was the big laggard throughout all of this, but one reason why I never thought of divesting was because its mindshare on Twitter has never dropped. Good or bad, Ethereum continues to be at the center of the crypto conversation, so we know that its slow price movement is not a result of disinterest. In a world driven by narratives, chain-death can only really occur when people no longer talk about you.

8. So yeah, the new strategy for me is to place more eggs (money) in fewer baskets (coins or sub-sectors). This will take time to execute though, because I do want to wait for better exits. Depending on how much of a one-coiner you are, you might end up doing the opposite by splitting your capital up into more areas while prices are depressed. Just keep it under 20 baskets!

   Next week, I’ll talk about how I’ve been positioning in the new Sonic ecosystem, which is feeling like a real breakout right now. Stay safe out there, cryptofam!