Recently, an interesting video appeared on YouTube analyzing the portfolios of cryptocurrency influencers such as Phil Konieczny, Mike Satoshi, Encyklopedia Kryptowalut, Crypto Stasiak, Łukasz Michałek and Kryptowaluty dla Początkących. Based on this, I would like to share a few conclusions regarding the current situation on the cryptocurrency market.
Market situation
A review of the influencers’ portfolios mentioned in the introduction shows that most altcoins are currently losing money against BTC. Only one of the analyzed portfolios is showing a profit against BTC, which suggests that investing in altcoins is currently riskier. Importantly, most of the portfolios are also losing money against USD, which should raise questions about the quality of advice from crypto influencers. For my part, I classically recommend DYOR (Do Your Own Research), because in a situation where you invest in a project “on recommendation”, it may be difficult for you to make a sensible decision when your investment ends up in a big minus.
Results of the analyzed portfolios
Losing portfolios: Most of the analyzed portfolios, which were diversified and included different altcoins, made losses compared to the BTC result. Altcoins, while potentially offering higher returns, are more susceptible to sharp drops in value, especially during periods of market uncertainty. The best time to invest in them historically was the later phase of a bull market.
Wallet up against BTC: Only one of the altcoin portfolios showed several times higher profits than BTC. Mike Satoshi was spot on with his predictions. What did his portfolio consist of? It included: TPRO, MATIC, GSWIFT, TAO, AR, RUNE, NEAR.
Wallet on par with BTC: One of the wallets, which consisted mainly of BTC, maintained its value in line with BTC. This portfolio arrangement minimizes the risk associated with larger drops in the value of other cryptocurrencies and is definitely recommended at the beginning of the cycle. It is owned by Phil Konieczny.
BTC Price Averaging
August and September are historically the worst months for the cryptocurrency market. During this period, it is worth focusing on BTC and averaging its price to USD.
What is purchasing cost averaging?
Dollar-Cost Averaging (DCA) is an investment strategy that involves regularly buying a set amount of an asset, regardless of its market price. In the context of Bitcoin, this means systematically investing the same amount of BTC at regular intervals, such as weekly or monthly.
Advantages of BTC Price Averaging
In the current market conditions, BTC to USD cost averaging is recommended primarily for two reasons:
- Risk minimization: DCA helps minimize the risk of buying BTC at inconvenient times. By investing regularly, the impact of short-term price fluctuations is reduced.
- Long term perspective: The DCA strategy encourages long-term thinking, which is key in the cryptocurrency market where prices can be very volatile in the short term but the long-term trend for BTC is bullish.
How does it work in practice?
Let’s say you decide to invest $100 in BTC every month. Whether the price of BTC rises or falls, you buy for the same amount. As a result, when the price is low, you buy more BTC, and when it’s high, you buy less. This allows you to average out the cost of your purchase over a longer period of time.
Example:
- Month 1: BTC price = 50,000 USD, you buy 0.002 BTC for 100 USD.
- Month 2: BTC price = 40,000 USD, you buy 0.0025 BTC for 100 USD.
- Month 3: BTC price = 60,000 USD, you buy 0.00167 BTC for 100 USD.
In total, after three months, you have 0.00617 BTC for $300, which gives an average purchase cost of $48.625 for 1 BTC, even though prices fluctuated between $40,000 and $60,000.
Why is now not the time for altcoins?
During cryptocurrency market declines, altcoins (cryptocurrencies other than Bitcoin) typically lose more value than BTC. This greater volatility is due to altcoins’ smaller market capitalization and lower liquidity, which makes them more susceptible to sharp price movements. Additionally, investors often panic and sell altcoins faster than BTC, which magnifies their declines.
In the face of market volatility, Bitcoin is considered a safer bet. Its larger market cap, longer history, and wider acceptance as “digital gold” make it less susceptible to sharp declines, especially now when corrections are much smaller than in previous bull markets. It used to be 40-50%, now it’s maxing out at 20%. Focusing on it in the initial phase of a bull market allows you to significantly reduce the risk.
Factors influencing the market
Investing in BTC seems to be a good idea also because the factors influencing the prices are slowly becoming irrelevant.
Sales by country
One of the main sources of selling pressure on BTC was the sell-off by countries like Germany. These actions were aimed at monetizing seized crypto assets, which increased the supply of BTC on the market and ultimately lowered its price. However, these significant sell-offs are now largely behind us.
Mt. Gox
Another factor was the process of distributing funds from Mt. Gox, a former cryptocurrency exchange that went bankrupt in 2014 after losing a huge amount of BTC. This process involved returning funds to creditors in the form of BTC, which also increased supply in the market. Most of this money has already been distributed, reducing selling pressure from this source.
United States
The biggest potential source of dumping right now is the United States. The U.S. government has a significant amount of BTC that could be sold, not least because the cryptocurrency issue seems to be dividing future U.S. presidential candidates.
Application
The main message for investors at this point should be to “play it safe.” Being cautious and strategic about your investments can help you weather tougher market periods and prepare for potential future upside. Staying calm and focused on BTC may prove to be the best approach in the coming months.
