2020 is a wrap! It’s time to review the performance of each cryptocurrency portfolio and make any necessary adjustments or rebalances. Let’s start with our best performer by far, the Diversified Digital Assets portfolio.
The diversified digital assets portfolio was created Jan 1, 2020 with an assumed initial investment of $10,000 with no additional contributions. This same portfolio will carry over for 2021, with some slight modifications and rebalancing to reflect the current market.
Diversified Digital Assets Portfolio
Holdings:
| Asset | Price | Tokens | Value | % of Holding | Initial Balance | % Return YTD |
| Bitcoin | 29300 | 0.56 | 16408 | 34.26% | 40.00% | 308.42% |
| Cardano | 0.19 | 14925 | 2835.75 | 5.92% | 5.00% | 467.16% |
| Ethereum | 760 | 11.54 | 8770.4 | 18.31% | 15.00% | 484.62% |
| XRP | 0.23 | 5203 | 1196.69 | 2.50% | 10.00% | 19.67% |
| Maker | 595 | 0.231 | 137.445 | 0.29% | 1.00% | 37.20% |
| Chainlink | 11.5 | 277.78 | 3194.47 | 6.67% | 5.00% | 538.89% |
| Tezos | 2.05 | 364 | 746.2 | 1.56% | 5.00% | 49.64% |
| Augur | 17 | 11.5 | 195.5 | 0.41% | 1.00% | 97.90% |
| Stellar | 0.13 | 4454.3 | 579.059 | 1.21% | 2.00% | 188.25% |
| VeChain | 0.019 | 92592.59 | 1759.2592 | 3.67% | 5.00% | 251.85% |
| Theta | 1.96 | 4597.7 | 9011.492 | 18.82% | 4.00% | 2152.87% |
| Binance | 33 | 14.6 | 481.8 | 1.01% | 2.00% | 140.88% |
| Polkadot | 9.14 | 216.19 | 1975.9766 | 4.13% | 2.00% | 888.00% |
| Litecoin | 135 | 2.02 | 272.7 | 0.57% | 1.00% | 225.38% |
| Algorand | 0.36 | 912.8 | 328.608 | 0.69% | 2.00% | 64.31% |
| Total | 47,893.35 | |||||
| 100.00% | ||||||
| Total Return | 378.93% |
With an initial investment of 10k, the Diversified digital assets portfolio performed extremely well, with a total return of 373.98%, netting a profit of $37,893.35 while outperforming a bitcoin-only portfolio. The SEC lawsuit against Ripple effectively reduced our relative XRP position size form 10% to 2% of the overall portfolio while only minimally affecting returns. This is the strength of a diversified portfolio.
Adjustments
- Increased allocation of THETA to 8%
- Increased allocation of Cardano to 8.5%
- Increased allocation of Polkadot to 4%
- Increased allocation of VeChain to 5%
- Decreased allocation of Algorand to 1%
- Decreased allocation of XRP to 1%
- Decreased allocation of Maker to 0.5%
- Decreased allocation of Stellar to 1%
- Removed Augur
- Added Zilliqa with 2% allocation
- Added AAVE with 1% allocation
- Added Uniswap with 1% allocation
- Spark token has been added via airdrop (value unknown) and will be simulated in this model
- Rebalanced all positions to baseline allocation %
Large Cap Cryptos
The Large Cap Crypto portfolio, which simply held the top 3 cryptos by market cap also performed well, returning 297%. Ethereum was the best performer. It was hampered, however, by poor performance from XRP in December. Holdings will be rebalanced to hold the top 5 by market cap, with smaller position sizes for #3-5.
| Asset | Price | Tokens | Value | % of Holding | Initial Balance | % Return YTD |
| Bitcoin | 29300 | 1.115138 | 32673.543 | 82.27% | 80.00% | 308.42% |
| Ethereum | 760 | 7.6923 | 5846.148 | 14.72% | 10.00% | 484.62% |
| XRP | 0.23 | 5203 | 1196.69 | 3.01% | 10.00% | 19.67% |
| Total | 39,716.38 | |||||
| 100.00% | ||||||
| Total Return | 297.16% |
Bitcoin-Hedged Traditional Portfolio
For those interested in crypto, but not quite ready to take the dive, the bitcoin-hedged traditional portfolio returned 30% YTD. Bitcoin was the clear outperformer, with a 308% return. It grew from a 5% initial balance to 15% of the holdings in 1 year.
In contrast, the SP500 returned 15%. A 5% allocation to Bitcoin and 10% allocation to gold essentially doubled traditional market returns while limiting the extreme volatility associated with crypto.
| Asset | Price | Units | Value | % of Holding | Initial Balance | % Return YTD |
| Bitcoin | 29300 | 0.06969612 | 2042.0963 | 15.66% | 5.00% | 308.42% |
| Gold | 1900 | 0.641 | 1217.9 | 9.34% | 10.00% | 21.79% |
| S&P 500 (SPY) | 373.88 | 26.16 | 9780.7008 | 75.00% | 85.00% | 15.07% |
| Total | 13,040.70 | |||||
| 100.00% | ||||||
| Total Return | 30.41% |
This portfolio will not rebalance for the start of 2021.
Considering the overall investment landscape, Bitcoin remains the most stable crypto market leader, and is gaining adoption as an institutional asset. I expect this cycle to continue as higher prices lead to a higher market cap, which produces the of liquidity that large investors require. I don’t see regulation as an immediate threat, as the number of tech, crypto, and blockchain-saavy people in influential positions continues to grow. Smart contract platforms continue to hold promise for a number of industries, with defi being the most obvious and popular current use case. 3rd Generation blockchains such as Cardano may continue outpacing Ethereum’s growth due to advantages in speed, scalability and security. However, Ethereum will remain the market leader in 2021 due to name brand recognition and number of existing applications. While XRP holds promise as a highly functional and practical platform, the SEC lawsuit against Ripple is likely to dampen prices and discourage further adoption until resolved. Ultimately, regulatory clarity will be a net positive for all altcoins, and may pave the way for further institutional use of XRP within the US. In the meantime, XRP is unlikely to benefit from the flow of money into bitcoin and other leading cryptos. Theta is the clear outperformer of our group and is likely to continue performing well as gains in popularity create demand for listing on conventional exchanges. Continued easing monetary policy will likely create tailwinds for interest in crypto and assets in general for the coming year.
Happy Trading!