ByteFolio Update 4

ByteTree's Model Portfolio

ByteFolio brings together ATOMIC, ByteTrend and Token Takeaway to create ByteTree’s model portfolio, known as ByteFolio. This is a selection of crypto tokens, which are weighted according to their risk/reward characteristics. ByteFolio has a modest turnover and will not suit traders. It will appeal to investors who wish to diversify beyond bitcoin, with the aim to beat it.

There are no new trades today.

The elephant in the room is downward pressure on global asset prices. The tightening from the Federal Reserve is behind this, and market liquidity is waning. The simplest way to demonstrate this is with the rising dollar.

A strong dollar is a headwind for crypto – and pretty much everything else

Source: Bloomberg

I will elaborate more tomorrow in ATOMIC, where we recently downgraded bitcoin from bull market to neutral.

The question has been asked whether stablecoins should be added for protection when prices are falling. I would do that if the dial went to bear, but I hold neutral because bitcoin is no worse than general asset prices. This is my interpretation.

Bull means prices are rising, hopefully substantially.

Neutral means prices are treading water. In the case of bitcoin, that currently implies bitcoin does not fall below $30,000, which was the low of 2021.

Bear would mean I felt there was a risk of a significant fall, below $30,000.

In the 2014 and 2018 bear markets, bitcoin was substantially worse than the stockmarket. Here in 2022, it seems to be no worse, yet still stronger during the rallies. The danger of raising cash in ByteFolio is that we will miss those rallies, which can happen quickly.

I believe bitcoin has historically been better on the way up and worse on the way down than the stockmarket. In the future, my hope is that it will be better in bull markets, yet similar during bear markets. If this idea holds true, this is huge progress for crypto and will attract institutional investors en masse.

It stands to reason that ByteFolio makes sense if you think in crypto. You have to believe that in a few years from now, crypto prices will be higher than they are today, possibly much higher. This is certainly my long-term view.

If ByteFolio is overly tactical in raising cash to avoid short-term drawdowns, it will soon become transactional mayhem and end up failing to meet its objective. In which case, it makes sense to size exposure to crypto/ByteFolio accordingly. If you can’t sleep at night, exposure is too high!

Finally, there are several five-star trends in exchange tokens. Exchanges tend to be more defensive as transactions continue, even when prices fall. I do not feel a rush to buy these but be sure our analysts are hard at work investigating them on your behalf.

ByteFolio started on 6 April 2022 with 10 BTC. Prices bought or sold are recorded at the end of the day after publication. Historical ByteFolio trades have been recorded as follows:

Purchases

No action