With news of all time highs sweeping through what seems to be all markets, it’s easy to get caught up in the excitement. But it’s important to remember the sobering fact that just a few months ago, we were still in “crypto winter” and that at any time, the markets could shift again…
Whether it’s a tip from a friend, something you read, or a lesson learned the hard way…
It was 4Jan2022 and I received an urgent message from Weiss (who I was paying on an annual basis for advice on crypto). The advice was very direct. “Whatever you have invested in crypto, sell half of it and return half to fiat”. I remember thinking "that portfolio took a long time to set up, and it has done about a 4X across the board. Why would I want to sell. At that stage I did not use the fear and greed index to assess whole-of-portfolio risk. For the rest of that year, our portfolio lost about 75% of its peak value at the start of 2022.
This time around, I did not need to wait for any advice. I had been preparing to make a major adjustment since Aug23, I got my ducks in a row by Nov23 and finally sold about 40% of my portfolio back to fiat, at which time the fear and greed index was exactly 86%. I was comfortable at the time with that decision, even thought the index proceeded to 90%, but I was happy to have reconstructed my portfolio as I had planned in 2023, and it was all done before this recent up and down volatility.
Moreover, I have managed to get into a reasonable position with the two new 2024 plans for crypto. 80% of my holding will remain in BTC, ETH and another (XRP or ADA for now, but may move to SOL soon). That will be long term and will only be affected by the ratio of each of the top 3 holdings to each other. The other two components consisting of 10% each allocation, are in current flux. With over 50% still in USDT, I have not finished allocation, nor do I intend to for the next two months. These are both work in progress.
So having ignored the advice from those who probably do know better than me, I hope I have prepared the groundwork to not be disappointed twice on a row. I also accept that 2024 is most likely going to be a memorable year when it comes to crypto. I still do not rely on any of the crypto holdings for future income, and will probably not need to rely on it for the next 2 years. So it is still time to take relative risks with this component of my savings. This has been a conscious and documented decision, not much of which has changed since 2000. Either way, lucky or not, I am staying in crypto. and most likely (later this year or 2025) may even increase the % of assets assigned to this area.
Every particle attracts every other particle in the universe with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between their centers.
The market has a way of making us feel like idiots on a regular basis. Selling too soon leads to regret as stocks go higher. Holding on too long leads to regret as your money drains away. But sticking to a plan is smart, irrespective of what the market does.
Price can always go higher.