Today, I’m announcing some important changes to our cryptocurrency portfolio. We’ve got new portfolio allocations, with a heavy focus on bitcoin, a bit lower down.
But first, we’re going to sell cardano (ADA). Unfortunately, the project has simply not made enough progress. I’m no longer confident that leadership will deliver a decentralized, highly scalable, game-changing crypto platform.
I’m not impressed with the progress the team has made, and the coin’s market performance has been disappointing. Cardano’s community remains decent, but there doesn’t seem to be much room for constructive criticism.
On top of all this, I’ve found what I believe is a better opportunity in monero (XMR). You’ll be receiving the full recommendation on that in the next First Stage Investor issue, which will hit your inbox tomorrow morning.
New Portfolio Allocations
The overall crypto market is changing, and I believe we need to update our portfolio allocations to reflect these changes. Here’s our new portfolio allocation:
- 70% bitcoin
- 10% litecoin
- 10% ethereum
- 10% monero (full recommendation coming soon).
As you’ll notice, the new allocation is heavy on bitcoin. That’s because bitcoin is dominating the market again. “Sucking the air out of the room” is one way to describe it. Bitcoin now makes up 70% of the overall crypto market, as tracked by CoinMarketCap. This statistic is called “bitcoin dominance.” Near the peak of the crypto boom in January 2018, bitcoin dominance dropped as low as 34%, meaning altcoins made up 66% of the market at that point. But that has changed.
Altcoins are underperforming, and I expect this trend may continue for a while. Coinbase is onboarding $200 million to $400 million of institutional money into crypto per week. And I’d bet you the vast majority of that is going into bitcoin. It’s the only thing the big boys are starting to get comfortable with. Eventually, there will be a nice spillover effect into litecoin, ethereum and others, and they will make up for lost time. But it’s hard to say when that will happen.
Fidelity Digital Assets is also busy onboarding clients and has been for a while now. It’s offering only bitcoin to clients at this point. I’m pretty sure this is another reason why bitcoin is outperforming the market.
Bitcoin is also incredibly far ahead of the competition when it comes to real usage. People are actively using bitcoin as an “alternative store of value” around the world. And in places like Venezuela, where inflation runs rampant, bitcoin is being used as a “life-saving” alternative currency, as highlighted by The New York Times earlier this year:
I keep all of my money in bitcoin. Keeping it in bolívars would be financial suicide: The last time I checked, the rate of daily inflation was around 3.5 percent. That’s daily inflation; the annual inflation rate for 2018 was almost 1.7 million percent.
Right now, no other coin comes close to having the momentum, volume, usage and brand recognition that bitcoin does.
Let’s not fight the trend here, especially with the bitcoin halving coming up in May 2020. This event will cut the amount of new bitcoin being mined in half. It has been an incredible catalyst in the past. And I think it will be here too.