Redefining Your Outlook in a Currency Diverse World

Oh no, BTC crashed again….

My portfolio is down a lot, what do I do?

Sell at a loss to preserve the rest of my wealth?  Or, perhaps sell at a gain because you think it will go lower and you can buy back?

All the news tells me BTC is dead and it’s never coming back.

My friends are laughing at me – why won’t this thing just go up?

To those who identify with the above I need to ask if you own any altcoins?  The answer to quelling your fears may be in thinking anew about your portfolio value.  I believe altcoins are the answer.

Measuring in dollars.

We were taught ever since our first allowance that the growth of wealth is achievable via gaining more US dollars.  Our lives have seemingly all pointed towards this goal.  More dollars.  Get as many as you can, keep them safe in a bank and make certain they grow in quantity as fast as they can.

There are other ways to measure wealth and I want to share how I think of it just in case it may help anyone else out.  I have seen $20k or $30k drawdowns in just a day in my portfolio value but it doesn’t concern me since I don’t ONLY measure in dollars.

All the dollars you will ever use.

Do you believe there is value in collecting all the dollars you will ever use in your lifetime in a single room for you to see at some point in your life?

That sounds absurd, right?  Then why do we need to always see numbers going up?

You get a paycheck, you spend some on food, rent, a mortgage, whatever.  That’s transient money; in one side and out the other.

Perhaps you save some and invest some too. That’s good and I won’t ever say that’s bad.  The thing that our collective cultural upbringing has taught us is to think in dollars, spend in dollars, borrow in dollars, dream in dollars.

My grandparents thought how wealthy they’d be if they had $10,000 when they raised a family in Boston.  With $10,000 they could buy a house, a car, while making a good living at $0.50 per hour.  Everything fit in well when they were raising a family I imagine, it’s just so strange because $10,000 can’t do any of that now and even earning $10 per hour in some parts of the US won’t translate into a good quality of life.

Now the bar is set at $1,000,000. We could buy a house, a car, and make a good living, while earning $15 per hour.

What will we think in the future? I believe we will still think in dollars, but also in crypto.

However, the key I believe in crypto is to be diversified, despite the volatility.

Why does it seem to be a bad thing if the USD value of something goes below what you paid for it?  Couldn’t it also go up as easily?  This happens all the time in the stock market.  Stock values relative to the USD fluctuate a lot and this isn’t an error.  This is the way the system is built.  Fluctuations and volatility aren’t necessarily your enemy.

How I have come to learn to think.

I’m not attempting to insinuate that the US Dollar is going anywhere, I am just trying to shed some insight on why I think the way I do about dollars, crypto and wealth.

Cryptocurrencies are still relatively new and there are very few exceptions where you can make crypto and spend that same crypto.  Certainly it’s possible but with most of the commerce based crypto use cases it must be sold to USD in order to facilitate the transaction.  This isn’t a problem, but it creates potential holes people could fall down if they don’t consider taxes.

The main issue at play is that a cryptocurrency’s value as a measurement in USD changes frequently.  I could have 1 BTC today and it would be worth $43,000 – but that same 1 BTC would have only been worth $20,000 one year ago and at one point this year it was worth $68,000.  This is great for an asset that is supposed to appreciate over time like a stock and hence I don’t spend my BTC anymore as I have been burnt in the past.

It takes only once to spend some BTC on something that is a depreciating asset to learn that isn’t a wise move.  Take for example a Tesla.  Exchange 1 BTC for 1 Tesla and BTC should appreciate over time, meaning that your 1 BTC will be worth more USD over time and the Tesla is a car and cars lose value as soon as they are driven off the lot.

Say BTC hits $200,000 and your Tesla is worth $20,000 – that means that when you bought the Tesla you spent an asset that had you saved it would be worth 10 Teslas.

I have adopted a new philosophy for proper balance of a portfolio.  I measure asset worth in USDT but I also measure my assets worth in BTC.  So while my USDT value of all my assets changes hour by hour, my BTC value changes less frequently and less dramatically. 

Crypto markets have unique pairs that trade in line with the stable coin pairs.  Traditional markets don’t have this interconnectivity.  Say you have 1 AAPL stock and you want to find out what it’s worth in USD, that’s easy, look at the chart, the quote or a website giving you the quote. Really anything will tell you that info on the stock market.  But, how do you know what it’s worth in Amazon stock?  Is it worth .1 AMZN or .2 AMZN?  You can’t figure that out because in order to trade AAPL for AMZN you’ll need to sell AAPL to USD and buy AMZN from USD.  In crypto, quite often you can go right from one asset to another without dipping to a stable coin or FIAT.

This adds a new element to the market.  Trading BTC for ETH, trading ETH for BNB, trading BNB for COMP, are all doable within crypto and therefore it required me to re-think what a portfolio needed to be in order to serve as my lifetime savings account.

Why do altcoins help?

Owning BTC is easy to measure in BTC.  If you have 1 BTC, you will always have 1 BTC unless you procure more or sell some.  But if you own say 100 DOT, the amount of BTC that the DOT is worth fluctuates over time.

Here’s a little secret – when the USDT value of BTC decreases I find that the BTC value of the altcoins usually increases.  So while I’d see a 20k or 30k drawdown in my portfolio I’d also see a .5 increase in my BTC portfolio valuation.  This usually soothes my feelings at the time and I can quell the fears that anything was “lost” and focus on buying the dip, or resetting my bots.  I do what I need to do at the times as a result of market action that caused such a dip.

Sometimes it may bring more opportunities as you’ll see that an asset spikes against BTC and you can sell to BTC and buy back from BTC later with less BTC once the price of BTC rises back to normal.

While it may seem confusing, the takeaway is to think in terms of BTC and USDT.

But which altcoins?

During this time when BTC goes down, check out any altcoin pair versus BTC and you will see that almost all have gained against BTC.  This means that as BTC is depreciating versus USDT almost all altcoins are appreciating against BTC.

I’ve seen main network coins make a pretty good move against BTC.  I believe this is because there are many out there who are BTC rich and they wish to extend their wealth into DEFI networks directly.  Why not?  If I had 600 BTC I’d use some to buy LUNA or ATOM.

If I were to pick coins, I’d say these in no real order: LUNA, ATOM, ETH, MATIC, PRE, XMR, DOT, CRO, NEXO, LTC, LINK.  From my vantage point they tend to keep or gain on their BTC value though I am not a technical trader and didn’t look up charts on this.  The thing I needed was variety, having many coins each with their own relationship to BTC and their own movement during the “dark” times of a BTC crash.

Outlook

When you look over your investments, savings, and spending money you probably see various investment mechanisms tallied up neatly in one currency and if you have been in the market for the past decade you would have noticed the appreciation with numbers getting larger.  This is good.  Maybe your portfolio has appreciated 10% annually. That’s really good as it beats inflation which until yesterday’s report was 3% or so.

When I look over my investments, savings, and spending money, I see 400 unique assets and nearly 300 places where my crypto lives in various forms.  I have some assets in liquidity mining and earning near 400% APR while other assets are sitting on an exchange waiting for me to use them to start a bot.  I’ve quadrupled my holdings in the past year and it kills me that I didn’t start with more money.

I stake assets and earn anywhere from 2% to 30% annually but given that my portfolio is so segmented the actual gain on some of these assets is nominal.  Instead of me rolling up everything that I have into one currency I see each for what it’s worth.  Take for example my CAKE. I love CAKE, but ironically don’t like to eat it.

Pancake swap is a really cool place to go as this was the first project I saw with an automatic compounding CAKE contract that will double your cake each year.  When pancake swap started it would quadruple your CAKE each year, but hey, I’ll take double and not complain.  Now of course CAKE is going down in USDT value. In my world, I don’t care much because it still earns for me in bots.

I look over my assets and realize that at any given time I only need access to a certain amount of USD to live.  Certainly if I need to save up for something that’s one thing, but the general bills each month don’t change much.  As long as I have assets that are in the green I can sell and fund my life or use bot profits or mining revenue when I get back into that.  

I see 400 or so savings accounts that will grow and shrink. Some will disappear while others will explode in due time.  All I need to do is to monitor and sell when it makes sense.  I’ll then buy lower and roll things forwards if/when that makes sense.

The Trick

The trick when BTC crashes is to not look at the USDT value of your portfolio as much during the time of price depression and switch to looking at your portfolio measured in BTC, because I almost guarantee you it won’t change much.

You see, the shifting piles of wealth don’t get smaller as the value of BTC when those measured in USD gets smaller. The piles of wealth just get distributed differently temporarily.  Think of it as many piles of multi-colored sand shifting around.  If you are only looking at one pile your vantage point provides many blind spots.  You need at least one more vantage point to quantify your results because after all, USD is only one form of wealth in a world where now there are more than 10,000 others.  This is the way I see things.

I measure my portfolio daily in both USDT and BTC.  I will add an ETH measurement soon as those are the three assets I care the most about currently.  I don’t have a large portfolio because I don’t need one yet.  When I need a larger portfolio I can learn how to trade and grow it, but until then why fuss about earning all the USD that I’ll ever need and keeping it close at hand when I can come up with just about any money that’s needed when it’s needed.

This isn’t a life for everyone and I do have some businesses running that help my cash flow.  Once I was able to break my mindset of caring only about an upwards growth in USD and shed the fear if the number went down, I was able to free my mind to learn about wealth preservation. This is when I realized that for me, a traditional mindset is not going to promote a healthy life.

Once I realized this was the way I wanted to live I had the answer to this question: Why do we think we have to hold all savings in USD?  Can’t other assets appreciate over time?  Think of when I bought ATOM, I paid $2 each and I kept it staking for a few years.  I received more ATOM as a result of that staking.  That ATOM wasn’t worth much USDT at the time and it went down and up. Now that ATOM trades in the $30 – $40 range. My ATOM is worth much more USD.  I never worried when my ATOM went down a lot because I believed in the project and when my ATOM went down in USDT it went up in BTC. Hence, I knew that was an asset to keep.

I don’t worry as the market goes down, instead I focus on restarting my bots.  The more down it goes the better entry I get for my quoteless bots.  As others are worried with news-driven fear I’m focused on maintaining my bags, lowering my bots, collecting the newly generated QUOTE that was locked away in these bots as they did their thing, and, yes of course, buying the dip if I can.

So to me, the faster BTC falls the greater are my rewards and the longer it takes to go back up the longer my bots run giving me even more returns on the next “crash.”

It’s taken me a long time to see things this way and I believe this is the way of the future – a future where one asset doesn’t monopolize everyone’s visibility.