My Updated Crypto View

Occasionally I use this space for further elaboration on topics that recently garnered my attention. I spent the better part of this past week on one such beast thanks to Caleb over at Buy, Hold Long. He recently added a You Tube channel to his site and the topic on crypto diversification got my attention (as well as a few views). I can’t say my opinion was changed (it wasn’t) as a review of my original thesis reflects (by chance) I pegged the top of the crypto market (almost). His approach though had me reflecting on the similarities to DGI strategies.

The BHL analysis essentially takes the top 100 currencies by market cap to determine the most profitable investing approach. One of the two Crypto ETFs awaiting SEC approval uses a similar methodology, albeit with the top ten. Some of the questions I posed to BHL are indeed reflected in the Bitwise ETF Trust‘s S-1. For instance, an inflation adjusted formula is used and trade suspensions and hard forks are addressed. Private keys and cold storage (security) have been anticipated and rebalances are monthly. The biggest difference between BHL’s Top Ten and Bitwise is that BHL is equal weight and Bitwise is more market cap (with some constraints) weighted. Additionally, Bitwise will carry a 2-3% fee.

There are some intricacies needing to be fleshed out notably in the KYC and FASB/IFRS space which may result in crypto purists losing faith primarily due to the potential loss of any remaining anonymity. Yet some (like me) may come around thanks to the ease of negotiating multiple wallets, exchanges, and yes, diversity. Until then, I’ll keep my head in the sand waiting for the day US investors have a legitimate crypto ETF alternative.

My final concern with the BHL study (date bias) can not be proven in my cursory review, as my question also reflected date bias. I can state the broader model outperformed as it did in BHL’s although with lower gains. Second was the Top Ten. I do think BHL may be onto something and encourage you to take a look at his efforts!

2 thoughts on “My Updated Crypto View

  1. Thanks for your thoughts Drog. It has been an interesting topic to discuss. I have had a few people talk to me about this via email and in person.
    You’re correct in the date bias and it doesn’t really help when the further back you go the larger the gains will appear, i.e when Bitcoin was a dollar or less compared to now. It’s a hard one to put a blanket over and say “these are the gains to expect”.
    More so now than ever, “past performance is not a reflection of future performance” is true.
    Thanks for sharing.

    Liked by 1 person

    • It will be interesting to see the approach the SEC takes, especially now that the Libra white paper (FB) was released this morning. At my age, I’m more risk averse – but your approach does appear to have some merit for those inclined to dabble in that space. Libra has the appearance of a stable coin but I wouldn’t be surprised to see it gain traction fast – especially with all the fire power behind it.


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