My Super-Simple Crypto Investing Strategy

ry Sunday, I send you something to THINK about, a question to ASK yourself, something to TRY and invite you to SHARE.

Want to advertise in this Newsletter?

Book HERE

THINK

“Bitcoin will do to banks what email did to the postal industry”
Rick Falkving

My ‘spider-sense’ tingles when friends and family start asking about crypto. It’s usually not a good sign, but I understand the optimism right now.

One big event recently happened, and another big event is coming…

1. A Bitcoin Spot ETF has FINALLY been approved.

2. The Bitcoin mining supply is about to half in the next couple of months.

You might only know the basics of Crypto or nothing at all. So with that in mind, in this week’s Newsletter, I’ll cover:

What the hell do these events mean for Crypto, and why should you care?
Using language a ‘Crypto-idiot’ can understand.
When you SHOULD and SHOULDN’T invest in Crypto.
My Super-Simple Crypto Investing Strategy.
How to Create your own Crypto Investing Strategy.

[DISCLAIMER: This does not constitute investment advice. This post is for entertainment purposes only. I will not tell you what to buy. Crypto is highly speculative, volatile and risky. Your capital is at risk.]

The 2 Big Crypto Events

I apologise in advance if you understand Crypto. I’m purposely going to over-simplify the events to help those new to it.

Let’s bring you up to speed by first focusing on what’s coming…

The Bitcoin Halving (Coming Soon)

Bitcoin halving is a magic event that happens in the world of digital money (Cryptocurrency).

Imagine there’s a special treasure chest that produces new gold coins, but every four years, the chest automatically shrinks its rate of producing new coins by half.

So, while gold’s still being made, it’s at a slower pace (50% slower).

This ‘halving’ makes the existing coins more valuable because there’s less new gold entering the market, making people think the gold they have is even more precious. (Less supply, more demand)

When you decrease supply, you increase scarcity and demand. It makes the item more valuable.

Remember toilet roll during COVID? 🧻

With decreased supply and increased demand, the price of an item increases.

Bitcoin’s supply chain is about to be permanently ‘halved’ in approximately 60 days.

In the previous Bitcoin halvings (supply cut in half), which occurred in 2012, 2016 and 2020, the existing Bitcoins in circulation became more valuable because there were fewer of them.

Put another way… leading up to and after the Bitcoin halving, the price went nuts! 🚀

Note the percentage increases 1 year before the halving vs. 1 year after the halving (circled in blue… badly).

Bitcoin Spot ETF (Happened)

Buying Bitcoin is complicated. It’s not as straightforward as buying stocks and shares with a broker.

You open an online account and deposit your country’s currency. (”So far so good”)
You exchange your currency into a “Stablecoin”. A Stablecoin tracks fiat currency, like the US Dollar. The price of a Stablecoin is linked (AKA pegged) to the currency, most notably, the US dollar. $1 = $1 of a particular Stablecoin. It’s not supposed to fluctuate away from the price of a dollar, but it can and does. It’s supposed to be stable. It is most of the time. (”You’re losing me Huw…”)
You exchange your Stablecoin dollars for your cryptocurrency of choice, like Bitcoin. And you now own some Bitcoin on the platform. (”That makes sense. Perhaps I do understand”)
Any coins held on an online platform are not technically yours, they are the platforms, and they can do what they want with them. Like Banks, they lend them out for profit. (”What?!”)
In order to gain full control, you’d need to follow the process above AND transfer your Cryptocurrency onto a storage Wallet (like a memory drive), which you’d keep safe along with the passcode at home. (”That sounds risky and annoying!”)
The government protects no platforms. Meaning if your Cryptocurrency, Stablecoins or normal cash are stolen from the platform or if the platform collapses, you’ve lost your money – Ask anyone who had money locked in on FTX and BlockFi. This is unlike cash and stocks, where certain amounts are protected. (”Is this even worth the hassle?”)

“I thought you were going to make this idiot proof Huw?!”

Buying Bitcoin isn’t straightforward when you’re starting out.

But it just got easier to buy and a step closer to ‘safer’.

The US Securities and Exchange Commission (SEC) finally approved several spot bitcoin exchange-traded funds (ETFs), which offer everyday investors exposure to the price of bitcoin through a regulated product on their stocks and shares exchange.

Investors will allocate a small percentage of their portfolios to a Bitcoin ETF to gain some exposure to the potential upside.

Tim Huver, Managing Director of the private investment bank Brown Brothers Harriman, said:

“We’ve been saying to clients one of the most important things is understanding the value of getting off zero. I think in the conversations with analysts right now, that idea of going from zero to 1 per cent is palatable.”

Investment banks and financial advisors are now starting to ‘recommend’ Bitcoin as part of an overall asset allocation.

Here’s an example of how a financial advisor might suggest investing in Bitcoin:

Prior to Bitcoin ETF – 80% Stocks, 20% Bonds
After Bitcoin ETF – 79% Stocks, 20% Bonds, 1% Bitcoin

That might not seem a big deal, but it is…

If investment banks, sovereign wealth funds, pension funds and retail investors (like you and me) decide to allocate just 1% of our Stocks allocation into Bitcoin, that’s a sh*tton of money going into Bitcoin.

The result… 🚀🚀🚀

My Crypto Investing Guidelines

After reading that, you’re likely thinking, “I’d better get me some Bitcoin then?!”

Hold your horses Cowboy! (When I say Cowboy, I mean Cowboy and Cowgirl, right?).

Bitcoin is NOT for everyone.

Crypto is highly volatile, unregulated, unprotected and not tax-efficient.

If you choose to never invest in it, I’d understand.

DO NOT INVEST IN CRYPTO IF YOU HAVE:

Consumer debt
No emergency fund
No cash savings
No stock investments

Stop reading this post and make progress on the above points.

DON’T BE A MUPPET:

Despite what some online muppets will tell you, Crypto is NOT a get-rich-quick scheme.

I know that SOME people have got very wealthy from Crypto, very quickly.

But everyone seems to ‘forget’ about the MAJORITY of people that have lost money from it.

Like stocks and property, it’s an asset and should be treated as wealth storage, not wealth generation.

By following some basic guidelines, it can expand your wealth over time.

It won’t make you rich overnight in the majority of cases.

MY CRYPTO INVESTING GUIDELINES:

If you’re not in debt, have an emergency fund in place, with cash savings and money in stocks, you’re in a prime position to expose yourself to Crypto, if you wish.

These are the Crypto Investing Guidelines that I follow to ensure I am exposed to the upside of Crypto without overexposing myself to the potential downside of losing it all.

1. I only invest money I’m prepared NEVER to see again (because I might not).

I’ve lost around £20,000 in crypto overall. I’m not saying I’m ‘down’ £20,000 in value, and it could go up. I’VE LOST THAT MONEY FOREVER!
Invest only what you can afford to lose.
Annoying as it was, it didn’t impact my wealth significantly because of the next rule.

2. I limit my total crypto exposure to 5% of my total investment portfolio.

Eg. If I have £10,000 invested in Stocks and Cash, my Crypto limit is £500.
If the value of my Crypto portfolio goes above 5% of my total investment portfolio, I will sell enough of it to bring me back below that number, which I’ll reinvest into stocks or cash.
My target is to have approximately 2.5% of my money in Crypto, with an upper limit of 5%.

My Simple Crypto Investing Strategy

I like to keep things simple.

I don’t want to waste loads of time and energy tracking the price of Bitcoin or other Cryptocurrencies.

This strategy is for me. I’m not suggesting you or anyone else follow it.

By sharing it, I hope it’ll help you to consider how to create your own strategy, which will remove emotional decision-making and obsessive (and pointless) chart tracking.

Here’s my allocation:

Bitcoin (BTC) = 40%
Ethereum (ETH) = 40%
Stablecoins (USDC and USDT) = 20%

Bitcoin

Bitcoin is the daddy of Crypto. It’s been around the longest and has the most trust in the industry.

Trust is paramount in regard to currency/money.

Think of Bitcoin as a digital treasure chest that stores value and keeps track of who owns what, but instead of being guarded by pirates, it’s protected by computer code.

When someone wants to send Bitcoin to someone else, they broadcast a message to the Bitcoin network saying, “Hey, I’m giving this amount of Bitcoin to this person.” Miners, who are like digital bookkeepers, then verify and record this transaction in a digital ledger called the blockchain.

This ledger is public and transparent so that everyone can see all the transactions.

Bitcoin is not likely to replace money. The transactions take too long in comparison to our current credit system.

But it could replace Gold.

It’s labelled as ‘Digital Gold’. And just like gold, Bitcoin is scarce, meaning there’s only a limited amount of it, which makes it valuable.

The advantage of Bitcoin is it’s cheap and easy to transfer anywhere in the world.

Gold isn’t.

The Market Capitalisation of Gold (total value invested in Gold) is $13.7 Trillion. Bitcoin’s Market Cap is currently $1 Trillion. If Bitcoin (BIG if) were to replace Gold, there’s just over a 10x price potential at the time of writing.

Ethereum

Ethereum is not like Bitcoin.

It’s like a big digital playground where people can build all sorts of cool stuff, kind of like how you can build anything with LEGO blocks.

Instead of just being used for buying and selling things, like Bitcoin, Ethereum lets people create smart contracts and decentralized applications, which are like computer programs that run on the Ethereum network.

These smart contracts are super-smart because they automatically execute actions when certain conditions are met without needing a middleman like a bank.

Smart contracts will change the world!

So, it can be used to buy and sell, but like Bitcoin, it’s not great at this. Its real advantage is being able to create new coins and technology.

There are many other competitors to Ethereum (which claim to be cheaper and faster), but Ethereum has beaten them all so far.

Like Bitcoin, it has the most trust in the industry as a smart contract creator.

USDC (Stablecoin)

Stablecoins are like digital money that attempts to keep the same value, kind of like having a coin that never changes its worth.

While regular Cryptos like Bitcoin can have prices that go up and down a lot, stablecoins aim to stay stable, usually by being tied to something stable like the US dollar.

So, if you have one Stablecoin today, it should be worth the same tomorrow, making it more reliable for buying coins or saving money.

It adds some stability to a highly volatile asset class.

The two biggest Stablecoins are Tether (USDt) and USD Coin (USDC).

USDT is roughly 3-4x bigger than USDC.

USDC (USD Coin) is backed by real US dollars, which means there’s actually money in a bank account somewhere to support each USDC token.

USDT (Tether) is also supposed to be backed by US dollars, but there have been some concerns and controversies about whether Tether actually has enough dollars to back up all the USDT tokens in circulation.

While USDC is backed by real dollars, USDT’s backing is a bit more uncertain.

For these reasons, most of my Stablecoin allocation is in USDC, but I hold both.

Why hold ANY Stablecoins?

There are several advantages to making Stablecoins part of your Crypto strategy:

Stablecoins allow me to buy Crypto quickly.
I still get to ‘win’ by investing Stablecoins into Crypto when I have no ‘new’ money to invest.
The ‘price’ of Stablecoins is fixed (or they’re meant to be), and they’re uncorrelated to the price of any other Crypto. Investors seek uncorrelated assets across their portfolios.
They accrue interest higher than cash (typically around 10%).
They reduce the volatility of my overall Crypto portfolio.

Before you start putting your Emergency fund into Stablecoins, REMEMBER…. the interest is taxed, it’s not protected like cash, the price isn’t permanently secured to the dollar, and you could lose it all.

When the price of Bitcoin and Ethereum dart up and down (which happens a lot!), the price of Stablecoins remains the same.

This super-simple asset allocation also helps me decide when to buy and sell WITHOUT worrying about price fluctuations.

Let’s take a closer look at 1) How I add new money and 2) How I buy and sell Crypto without adding new money.

How I Add New Money to Crypto

Let’s say I have £1,000 to invest in Crypto, and my current portfolio is worth £10,000. My new portfolio value will soon be £11,000.

I measure the percentage breakdown of BTC, ETH and the Stablecoins to my ‘soon to be’ valuation (eg. £11,000 in this case).

I invest the £1,000 to bring me closer to my desired percentage allocation.

EXAMPLE 1: Crypto Prices are High

Current Crypto Portfolio Value = £10,000:
- Bitcoin (BTC) = £4,500 (45%)
- Ethereum (ETH) = £4,500 (45%)
- Stablecoins (USDC and USDT) = £1,000 (10%)

Easy, I’d invest all of the £1,000 into Stablecoins and it would look like this:

New Crypto Portfolio Value = £11,000:
- Bitcoin (BTC) = £4,500 (41%)
- Ethereum (ETH) = £4,500 (41%)
- Stablecoins (USDC and USDT) = £2,000 (18%)

As an investor, we ALWAYS want to:

Buy low and Sell High

The percentage allocation strategy makes life so much easier.

It MAKES ME invest in Stablecoins when Crypto prices are high. Meaning WHEN Crypto prices inevtiabely drop at some point, I have extra money to invest in a lower price. (Perfect! 👌)

EXAMPLE 2: Crypto Prices are Low

Current Crypto Portfolio Value = £4,000:
- Bitcoin (BTC) = £1,500 (37.5%)
- Ethereum (ETH) = £1,500 (37.%)
- Stablecoins (USDC and USDT) = £1,000 (25%)

Easy, I’d invest 50% of the £1,000 into BTC and ETH and it would look like this:

New Crypto Portfolio Value = £5,000:
- Bitcoin (BTC) = £2,000 (40%)
- Ethereum (ETH) = £2,000 (40%)
- Stablecoins (USDC and USDT) = £1,000 (20%)

The percentage allocation strategy works really well when prices are low.

It MAKES ME invest in Crypto when the prices are low. This means that WHEN Crypto prices inevitably spike at some point, I have a greater margin of safety by reducing my cost, or I can cash in on my profits.

How I Buy & Sell Crypto Without New Money

If I didn’t have new cash to invest with, I could sell an allocation that was ‘too high’ and invest that money into an allocation that is low.

Let’s look at Example 2 once again as it highlights why I include Stablecoins as part of my strategy:

Current Crypto Portfolio Value = £4,000:
- Bitcoin (BTC) = £1,500 (37.5%)
- Ethereum (ETH) = £1,500 (37.%)
- Stablecoins (USDC and USDT) = £1,000 (25%)

If I didn’t have new money to invest, I could sell £200 of my Stablecoins and add £100 to BTC and ETH, and it would look like this:

New Crypto Portfolio Value = £4,000:
- Bitcoin (BTC) = £1,600 (40%)
- Ethereum (ETH) = £1,600 (40%)
- Stablecoins (USDC and USDT) = £800 (20%)

The main reason I like this strategy is that it forces you to BUY LOW and SELL HIGH, with or without new cash.

Adding a percentage of Stablecoins to your Crypto allocation allows you to ‘win’ when Crypto prices are low.

You don’t have to agree with my 20%. You could be more conservative and go higher (30-40%) or be more adventurous and reduce it to (5-10%).

But decide now, in advance, before GREED or FEAR take over.

Don’t Obsess Over Percentages

I don’t obsess about having a perfect allocation all the time. I tend to fix it by adding new money to whatever allocation is down.

I might only readjust my allocation once or twice a year. I do it if the percentage allocations are significantly off or if my total Crypto allocation is considerably higher than my 5% goal.

I don’t obsess over it; in fact, it’s better when you leave it alone.

Creating Your Own Crypto Investing Strategy

The asset allocation I shared above might be too much for some of you and it might be too basic for others.

That’s OK. It’s for me, not you.

It’s important to create a strategy that works for you. One that meets your circumstances and goals.

Here are some options to make it Super-Duper-Simple or more nuanced:

Super-Duper-Simple Options

SDS 1:

Bitcoin (BTC) = 100%

Screw the percentages! Invest when you can, with what you can, into Bitcoin and get on with your life.

I recommend tracking how much you put in AND the current value. That way, you know your ‘Cost Base’. If the price drops below the price you bought it, you can take comfort in lowering your ‘Cost Base’ when buying low.

In any case, make sure you cap the percentage to no more than 5% of your total investable portfolio including stocks and cash savings.

If it exceeds 5%, sell enough BTC to bring you below 5% again.

SDS 2:

Bitcoin (BTC) = 50%
Ethereum (ETH) = 50%

Similarly as above, you can split the allocation between the main two coins. Whenever you get new cash to invest, you can either split the allocation evenly or invest appropriately to achieve a 50:50 value balance.

SDS 3:

Bitcoin (BTC) = 80%
Stablecoins (USDC or USDt) = 20%

A stripped-back version of my strategy. The Stablecoin allocation will reduce the overall volatility, earn around 10% /year and can be deployed when the price of BTC drops, allowing you to ‘win’ in downmarkets.

Smart-Arse Options

SA 1:

Bitcoin (BTC) = 40%
Ethereum (ETH) = 40%
Altcoins (any other coin) = 10%
Stablecoins (USDC or USDt) = 10%

This adds a layer on top of my Strategy. Perhaps you’re keen to expand your portfolio and invest in different coins. I’d warn you against going crazy here. Like investing in individual Stocks, you might be setting yourself up for failure.

But by limiting your ‘risky’ selections to 10% total, you get to scratch that itch without taking down your entire portfolio if it all goes to crap.

SA 2:

Bitcoin (BTC) = 20%
Ethereum (ETH) = 20%
Altcoin 1 = 20%
Altcoin 2 = 20%
Altcoin 3 = 20%

Screw BTC and ETH, they’re too boring for you. You keep an allocation of each to balance the portfolio, but you’re really more interested in the newer, faster tech.

“To the Moooon!“ 🧑‍🚀🌔

Whichever strategy you decide to deploy, just remember to cap the total value of your Crypto portfolio below 5% of your total investment portfolio to prevent going broke.

Crypto is not the fast path to wealth.

There are LOADS of safer and easier ways to make money that you control.

Reflect and share this with someone.

ASK

“Are you investing in Crypto to get rich, diversify or because you believe in the technology?”

“Are you prepared to lose EVERY penny investing in Crypto?”

“Which example allocation most resonates with you?”

Write down what comes to mind.

TRY

Before you pull the trigger on Crypto, make sure you pass Phase 1:

PHASE 1:

✅ No Consumer debt

✅ Emergency fund

✅ Cash savings

✅ Stock investments

If you don’t tick all 4, focus on fixing the gaps before moving on.

PHASE 2:

✅ Only invest money you’re prepared NEVER to see again (because you might not).

How would you feel if that money went to £0 or got stolen?

The answer should be, “Annoyed but not derailed.”

If losing that money puts you and your family in jeopardy, you’re investing too much.

PHASE 3:

✅ Limit your total Crypto exposure to less than 5% of your total investment portfolio.

You should have 20x more money in Stocks, Investment Property (your house doesn’t count), Bonds or Cash.

By ensuring you have no more than 5% in Crypto, you prevent catestrophic loss.

Warren Buffett’s quote on Investing should be ringing in your ears:

“Rule number 1: never lose money. Rule number 2: never forget rule number 1.”
Warren Buffett

Investors prioritise protecting the downsize over big potential upsides.

PHASE 4:

✅ Select an appropriate asset allocation for your Cryptocurrencies, with set percentages.

Create a strategy that meets your individual goals and circumstances. I provided multiple examples to help you design your own.

Asset allocation reduces risk, emotional decision making and allows you to ‘win’ when prices drop.

The actual startegy itself matters less than the benefit you get from creating one and keeping to it.

HIT REPLY and let me know your Crypto strategy, if anything that stood out to you or if you have any specific Crypto/Investing based questions.

I read and reply to every email, and remember, I’m rooting for you!

Remember: Little by little, a little becomes a lot.

Reply to this email and share how it went for you. Let me know if you’d prefer to remain anonymous.