crypto portfolio management

Crypto Portfolio Management

The Basics

The point of crypto portfolio management is to diversify risk. By diversifying your portfolio, you are inherently going to make less than going all in on something that can 40x, but if that 40x token gets hacked/exploited and then goes to zero, your account is now wiped out. The amount of diversification you run with should be influenced by how much risk are you willing to take (can you withstand losing your entire portfolio) and what are your return goals. I personally run a fairly concentrated high risk portfolio, with capital appreciation as the main goal, i will give concrete examples later.

So right when you are starting out, you need to define your trading parameters – meaning, you need to have a defined portfolio sizing and timing policy for yourself, so that you can be more organized and structured in your investing process, this will develop over time. What does this look like? You should define a few of these things for yourself as a starting point. 

  • What % of stables are you going to hold? Why would you change it?

  • What is my maximum position size?

  • When will I sell or trim positions if a token goes in my favor or against me?

Why is this important? Well, when you first start out, you have no process to find, size, time or sell ideas. Having at least some basic rules about your portfolio will keep you from going all in on some shitcoin, can keep you in the game longer and will force you to take profit on positions that work, so you don’t end up marrying your bags too long, and end up being one of the sob stories of $5k into $270k back to $5k.

A High Level Example

So you’re seeing whales move on a token that seems like a good buy using wallet lists or other soures. You do your OWN research, and find out the following.

  • The token’s market cap is low, and its tokenomics look good

  • You dig into the token’s discord / twitter alpha experts and realize its launching a product very soon that you think could be cool / innovative

  • Comparable market caps of similar products are multiples higher than your token’s

What do you do? Well, you are probably going to buy it! Ok but how much? This is where portfolio management and processes come in. If you have high conviction, maybe you allocate 80% of your desired max position size into the token (ex if max position size is 8% at cost, then you buy ~6%), and then dollar cost average the rest ahead of the catalyst you are watching (ex. buying every day or every other day until your catalyst hits). As the token appreciates, you then put into practice your take profit parameters like sell half of the position at a 2x and let the rest ride.

While seemingly simple, it can get complicated in practice as people get overly emotional about their investments, and then end up over sizing them and/or not taking profit at predetermined levels. I have done both, and it has cost me a lot of money. Lastly, its important to note that your macro view should have at least some bearing on your position sizes (crappy macro, lower concentration, less risky positions).

$5k or less Portfolio

At below $5k, I would not be LP farming, as the amount of reward typically is too low to make a difference. Similarly, I would not be holding much in stables or stable farming. If this is your risk-on money, meaning you can lose it all and your life doesn’t change, I also would not touch BTC, ETH or any of the major caps. You are fishing for low cap, 10-30x+ potential tokens/NFTs.

At this account size, the only reason to not go all-in on one token, is you don’t want your portfolio to go to zero. But you can still be very concentrated across 2 positions with limited stables to buy the dip (good entries on a 10-30x don’t really matter at this size). I also would highly advise against using leverage. The allure of levering up 30x on DOGE before SNL sounds great in theory, but 99 times out of 100 you are going to just get wiped out, given a sharp move has you liquidated.

To have the highest odds of success,  you should either focus on NFTs, low cap tokens in DeFi / GameFi, or slang meme coins. So a lot of my whale watching is on larger DeFi stuff like GMX or DPX, but you can actually manipulate it for what might be best for your portfolio. Having a bigger account, I focus more now on longer term holds, or highly unique tokens with catalysts (or both). I’m still trying to find low caps with a lot of upside, but they can take longer to play out once they get to $50m ish market caps.

I think if I were to go back into meme coin land, I would collect 2 specific types of wallets: influencers that shill low liquidity trash and guys that seem to be good at meme coins. If trying to find an influencer wallet, I would download excel files of each token they have mentioned over the last few months, and then cross reference token overlaps until I think I have them. It will take some time, but I guarantee you will be able to find a few. Once you have their address, you can front run their shills the next time you see them buy, and finally have the game rigged in your favor!

You can even run their account through a tool like Zerion, which can measure an addresses performance over time. Below is an example of a whale wallet I watch run through Zerion.

management

For take profit parameters, selling at 2x is probably too low, as you need to really get your account number up. Something like 3-4x and sell half is probably better, but you will have to learn what works best for you. At this account size, portfolio management doesn’t even really matter, outside of not going all-in. You need to find just 1 high octane 10-30x idea, and then you are in much better position.

$50k Account Size

Maybe it seems like too far of a jump, but realistically the game doesn’t change much from $5k to ~$50k (assuming its play money for you). Once you start getting to $50k, I think you can start taken max position sizes down (aka lower concentration) as you want to have a little more capital preservation, but if you want to run it to 7 figures, you will still need to keep the gas on. Also at this size, some farms (100%+ APR) can be worth it, because if you drop in $18k of your portfolio into a 150% APR LP farm, you are spitting out ~$2k/month, that you can be throwing at more NFTs, low caps and meme coins. If it were me, You should still not touch ETH, BTC, BNB (kek) at this size, and you should be focused on appreciation. Run a barbell approach of ~40% longer term low cap holds (or things with a catalyst) + 30% into LP farms of tokens you think won’t go straight to zero + 15% meme coins / NFTs and the rest cash. And then roll the LP rewards into your NFT / Meme coin bucket, and use your cash to buy the dip on long term holds.You sh

account holdings

Again, it is more art than science, and you need to play to your strengths, but these are roughly how you should at least think about it. But, where do I find good farms? Your whale wallets will most likely have a few high APR farms that they like for you to check out.

The point here is that you are still focusing on high risk stuff with massive multiple upside – but $50k gives you a lot more shots on goal than $5k, so you are using diversification to increase the number of shots on goal to hit a 30x on $5k. The basic idea is that if you try ~10 times to hit a 30x with ~$5k, you only need to hit 1 to triple your portfolio vs. betting on just 2 tokens where you could get wiped out, and then having to start the $5k to $50k process again.

$100k - $500k Account Size

Once you start getting into the 6 figures, a core holding of ETH/BTC starts probably making sense from a lower risk, but still decent reward view (if you are more risk averse). At this size, I would again take down max position sizes as you are starting to work with “meaningful” amounts of money, and if you get multiple 6 figures of crypto from nothing, Take ~$100k and take your chips off the table (if it is life changing money). If you are still running with max risk, I would mimic the allocations from the $50k account, just with lower individual position sizes (at $50k a 33% position size is a potential max, while at $200k, maybe 20-25% is your max). Once you clear 6 figures, you are playing both capital preservation and appreciation games, so bringing down position sizes makes sense. The beauty of getting to this level is that its much easier than running with $5k. Why? Now smaller multiple returns 2-3x can still make a measurable impact on your portfolio, and LP farms can turn into a second income, $50k @ 150% APR is $75k per year!

You can either take this second income, sell it and cash out, or roll the rewards into your established system of NFTs / meme coins / small caps. Having all of your processes built from day 1 will give you a bigger advantage.

$500k+ Account Sizes

You should have at least 50% in lower risk stable farms across things like STG, GLP, Convex, SYN, PTP, etc – with the goal to hit ~10% blended returns. This is obviously risk averse, but once you start getting to really life changing levels of capital, the name of the game is to keep it! You could live off this money a year, and use the rest of the capital to keep the foot on the gas.

Your goals are very different at a $2-3m portfolio size, as you only need to 4x your portfolio to be at 8 figures. At this level you can be much more patient on almost everything you do, as the entries / exits matter more (10% of a $1m position is $100k) vs. the smaller account sizes it doesn’t move the needle as much. Let’s wrap up by looking at a few whales to follow to see how they approach things – but please note they usually have many wallets, so the amount of position concentration you see in 1 wallet, does not necessarily mean they are taking such a big position as a % of their total crypto portfolio.

Arthur Hayes

Obviously this is not his main wallet, but its one that I’ve come across. Currently he is running a $4.8mm account, with major allocations of:

  • 42% FXS
  • 32% GM
  • 8% FODL
haseportfolio

Obviously a risk-on portfolio, with high position concentration but still not all in. You can see that he has numerous other smaller moonshot style positions as well, something you see a lot in bigger wallets.

DegenKing

I’ve followed this wallet for awhile, as this person is early to a lot of cool degen stuff (like GMX). Still not very diversified right now, with a 40% position to Metis, 31% to USDT and 26% to DPX.

degenkingwallet

If you watch enough wallets, you will end up noticing that individuals run with a lot more concentration than funds, as they aren’t risking other people’s money.

Wrapping Up: Hopefully this intro to portfolio management was helpful to you, and kind of rounds out the basics of the process of active on chain investing. You should now be able to find, research, time, size and sell a token with at least a more established framework than you had before!

Share this post

1 thought on “Crypto Portfolio Management”

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Cart
Scroll to Top