Blockchain Believers are Still Ahead. Way Ahead.
John Hargrave
Founder/CEO at Media Shower. Builder. Investor. Author. Creator. Connector.
Summary: I talk about the mental game of investing, particularly as it applies to crypto markets. Subscribe here and follow me to get weekly updates.
It’s been a gloomy few months for crypto investors, but today I come bearing good news.
Our Blockchain Believers Portfolio, started back in 2018 with the publication of my crypto investing book, is still delivering eye-popping returns.
If you’re just joining us, the idea behind the portfolio is simple (full instructions here):
Someday this approach will just be common sense, especially as we continue to report outstanding results, quarter after quarter after quarter. Which brings us to our good news.
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The Good News
Here are the results as of Q1 2023: our approach has generated incredible returns without adding incredible risk:
Remember that the “Non Believer” portfolio is stocks and bonds only (no crypto), the “Baby Believer” has just 2.5% in bitcoin, and the “Big Believer” has just 5% in bitcoin and 5% in Ethereum.
Even if crypto collapses, you’re only down a maximum of 10%.
So far, of course, crypto has not collapsed over the long term – it has thrived. What’s remarkable is how much Ethereum has thrived.
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Ethereum is the Secret Sauce
Imagine you invested $10,000 in both bitcoin and Ethereum in 2018, when my book was released. Here’s how both those investments would have grown, using the S&P 500 as a benchmark:
Your investment in bitcoin would have quadrupled, but your investment in Ethereum would have increased sixfold, in less than five years:
If we dig into the fundamentals, it's even more striking. A few weeks ago I showed you How to Read Crypto Financial Statements, using Token Terminal’s new financial reporting feature. Here's a side-by-side comparison:
Still, there are reasons to keep the faith on bitcoin. It’s the OG crypto. It’s got the most users, the most history, and the most market cap. It’s still got the biggest global brand recognition.
And in the midst of our slow-motion banking crisis, there are signs that our investing philosophy is finally beginning to sink in. In a recent New York Times article, the CEO of the technology startup Bounce said:
“Having a couple percent in Bitcoin feels like a really great insurance policy on the U.S. dollar, on the banking system, on the Fed, on the whole infrastructure.” (Emphasis ours.)
This is Bitcoin Narrative 5.0: it’s an insurance policy on the traditional financial system. And the idea is to have a couple percent in Bitcoin.
From Bitcoin Market Journal to the New York Times. It’s finally sinking in.
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The Bad News
In the interest of transparency, I must also report on the results of our Future Winners portfolio, the all-crypto portfolio that we launched in July 2021:
Remember, we started our Future Winners portfolio for people who wanted to invest beyond bitcoin and Ethereum. This is an all-crypto portfolio of just four tokens, weighted 25% each.
The biggest difference, however, is that we launched it in July 2021, just as a great bull run was beginning. (In fairness, the S&P 500 is also down 6% from July 2021, so we've all lost money.)
Our view: give it time. We’ve had five years on the Blockchain Believers Portfolio, but less than two years on the Future Winners Portfolio. We still believe in the long-term potential of these four picks: keep calm and HODL on.
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It’s All Risky Business
It’s always risky to be a crypto investor, but especially now. As the U.S. government tries to sue, tax, and cut off crypto companies from the traditional financial system, many investors are asking whether it's all worth the risk.
But isn’t the traditional financial system feeling progressively riskier as well?
Our Blockchain Believer Portfolios, remember, are at least 90% invested in stocks and bonds. We have just a tiny slice of the pie allocated toward crypto, to share in the reward without taking on all of the risk.
Or, to quote the CEO in the New York Times, “a couple of percent in Bitcoin.”
The question today is not, “What is the risk of investing in crypto?” It’s, “What is the risk of not investing in crypto?”
Life is risky. You take a risk every time you fly a plane, drive your car, or eat prepared food. We risk everything, everywhere, all the time. The only reason we’re not paralyzed with agoraphobia is that we push the risk out of our minds.
With financial risk, we can’t afford to push it out of our minds, but we can mitigate risk with a well-diversified portfolio. Ideally we invest in non-correlated assets (i.e., when some go down, others go up, and vice versa).
That’s the idea behind the Believers Portfolio: stocks, bonds, and crypto, each on their own track. And within stocks and bonds, you’ve got the entire stock market and the entire bond market, so you’re even more well-diversified.
"A couple of percent in crypto" diversifies us further still, giving us some peace of mind, no matter what happens to the current financial system.
As I said in last week’s column, investing in quality crypto projects is investing in a new global financial system, one that’s more equitable and accessible by anyone, anywhere in the world. Your investments are powering that change.
Investor Takeaway
Today, investors must ask themselves which is the riskier investment: betting that the financial system will stay exactly the same, or putting “a couple of percent” in crypto, just in case things change.
You only have to look outside at the weather to know that the only thing constant is change. Blockchain believers have been betting on that change for five years, and they’ve been handsomely rewarded.
The good news is, it’s never too late to join us.
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