It’s been quite a while since I’ve posted anything on my site. 2 years, 25 days to be exact. For the last few years I’ve been actively cultivating a new interest. Some might call it an obsession, but I can stop anytime I swear. At least I think so?
As you can likely guess from the title, my latest fascination is crypto currency. Actually for me the idea of digital cash, and particular anonymous digital cash is a fairly long time interest of mine measured in decades. Though I wasn’t blessed to jump into crypto as we know it until relatively recently. I’ll save the story of almost getting into Bitcoin in 2013 at some point.
I’ve had a few friends who are interested in investing or learning more about crypto currency, so I thought I’d share what I know and what my approach is with the hope that I can help someone better understand the space. I’m not a financial advisor, nor do I play one on TV, as with everything, please do your own research!
I do most of my crypto investing through dollar cost averaging, or DCA for short. It’s an investment approach where you invest a small amount on a regular basis, it could be monthly, weekly or even daily. Given the crypto market is fairly volatile, I find the DCA approach allows me to have a greater peace of mind when investing, knowing that I’m not going to put everything in just to watch it drop 70% the next week.
I’m not a trader. While I’ve done well trading stock options in the past, I can think of 1,000 things I’d rather be doing than staring at stock charts drawing trend lines. Every investment I make will usually have a timeframe of years, even decades. In the crypto parlance I’m a HODLer. I think for most folks this is the best way to grow your wealth. It’s also the easiest and least time consuming approach.
Tiers of Crypto
When I consider my investment approach I used 4 tiers to determine how much and how frequently I’ll invest in a particular coin. I’ll invest more in tier 1, and less in tier 4. As you’ll see, my overall approach is reasonably risk averse. That is for a crypto investor where everything could reasonably go to zero at any time.
Tier 1: Coins I feel confident will do well in the long term, usually large cap coins but can also be coins that I believe have very sound underlying tokenomics, or for utility tokens associated with a business, one with robust business prospects.
Tier 2: Coins I believe have great prospects, but I have a tinge of doubt in their tokenomics or how certain they are to succeed.
Tier 3: Coins I may not fully understand tokenomics or overall prospects, but believe they serve an important market niche or have some other underlying characteristic that makes them interesting.
Tier 4: Pure speculation. I fully expect one of them to 100x, and 10 of them to go to zero. I wouldn’t put too much stock on what I choose here, is all I’m saying.
My Tier 1 Cryptos
I’ll share my tier 1 cryptos, and then a very, very brief reason why they’re at this tier.
Bitcoin: The king and OG. No portfolio is complete without a little BTC in my opinion. Most secure, widely known and institutionally recognized as a durable store of value. Least likely to go to zero.
Ethereum: The blockchain that runs all the apps (for now). I had this in tier 2 for a while given all the competitors, but with EIP-1559 burning ETH like crazy, ETH 2.0 and proof of stake coming soon it’s hard to bet against ETH. I expect ETH will be around for a good long while.
Cardano: The ghost chain that could. Slow, deliberate, research based, thoroughly tested and written in a programming language designed for security. Soon to launch smart contracts, and with massive scaling improvements and decentralized governance waiting in the wings. The technical underpinnings are excellent, and next to Bitcoin, most closely embodies the ethos of a crypto currency.
Elrond: Elrond is a one-two punch of 3rd gen blockchain with smart contracts, paired with an extremely user friendly wallet in the Maiar wallet. A lot less decentralized than Cardano or Bitcoin, but one of the few that pairs a robust blockchain platform with truly consumer class wallet.
Avalanche: Fast, 3rd gen blockchain with smart contracts and starting to bootstrap a huge defi ecosystem.
Solana: Fast, used by USDC as one option for transfers, easy to use staking infrastructure and did I mention fast? 50,000 transactions per section leaves most others in it’s dust.
Voyager: The VGX token is a utility token in the chrysalis about to bloom when they launch the Voyager Loyalty Program. I’m surprised it has done as well as it has without any real utility, but very soon VGX will have real utility, and be front and center on an app with a fast growing userbase.
Celsius: The OG of yield. The CEL token is tied quite directly to how much Celsius can grow their business (doing pretty well at $20B AUM), how many people earn in CEL (currently at 64%) and how much the CEL whales HODL. I have high confidence in the business Celsius has built, and it’s seeing tremendous growth, even if that isn’t reflected yet in the token price.
Terra: Powers UST stablecoin and the Terra crypto ecosystem includes standouts like the Anchor protocol that offers some of the most attractive yields in crypto. I’ll admit to not fully understanding all the details of how Terra works in relation to the elastic supply for stable coins. And truthfully it shouldn’t be a tier 1 without that understanding. Let’s just call it a feeling for now. My total allocation is comparatively low, so I’m comfortable buying a bit more for the next few months.
Chainlink: The oracle that most blockchains turn to. Chainlink has positioned itself to not only work on cross-chain interoperability, but is also as an oracle is critical to many transactions that power the booming DEFI ecosystem.
Polkadot: Ethereum co-founder has set out to improve upon his original creation, and brought a quite innovative solution in Polkadot, which uses parachains to allow cross-chain interoperability. It’s a play on both gen3 blockchain and cross chain interoperability. I’m a little less confident it will succeed because their founder is not as charismatic as some (like Charles Hoskinson), the community comparatively small, and it’s not setup to be well decentralized.
There used to be a lot more projects in Tier 2, but it was hard for me to keep such excellent projects like AVAX, SOL and EGLD as just a tier 2. I believe one or more gen 3 blockchains will really breakout in the next few years.
Polygon: Only really Tier 3 because I have so much of it and buying like crazy would imbalance my portfolio. MATIC is a fantastic project, and I think single handedly saved ETH from gas fee apocalypse when defi boomed. It’s an L2 solution built on top of ETH, though could also be considered a side chain. They’re working on cross chain interop, and seem to launch a new partnership every few days. This team is on fire. But watch out for optimism and ETH 2.0 scaling improvements as potential risk.
Monero: For the rebel in all of us. XMR promises a quiet, private place on the blockchain, and that’s worth an investment.
Chiliz: Primarily for diversification. Interest mode to bring tokenized governance and participation to sports teams, and have already sign a number of prominent teams. Definitely a Hail Mary, and I’m concerned about it’s strong ties to China.
Hedera Hashgraph: Can you bet against a coin the likes of Google and IBM are behind. Yes, probably, but it may be unwise. It’s more centralized, and has ties to corporations, but takes a novel approach with hashgraphs and has a thoughtful token unlock schedule. Staking is coming soon too. This is the ‘Empire’ crypto bet, will the storm troopers hit their mark?
AAVE: AAVE is fantastic, one of the strongest and most user friendly defi platforms IMO. I’m just not a fan overall of Defi tokens, since they tend to have a lot of inflation to pay liquidity provider rewards.
I’m not going to give you a fully detailed rundown, but there’s a couple buckets:
File Storage and Transfer: Filecoin (FIL), BitTorrent (BTT),
Computing: Golem (GLM), Ocean Protocol (OCEAN)
NFTs: Enjin Coin (ENJ)
Crypto Rewards: StormX (STMX)
That’s a Wrap
There you have it folks. Drop a comment below if you have any questions, or if there’s a coin you think I’ve missed.