ByteFolio Update 9

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.

Today, ByteFolio is reducing DeFiChain (DFI).

Another tough week for altcoins, where there was nowhere to hide except for Tron (TRX) and Binance (BNB). The others took a beating.

ByteFolio has gone backwards, but when you think about it, it is impossible to go forwards when alts slump, so things could have been much worse. It is only in bull markets that an alt portfolio can surge further and faster in a meaningful way.

Reducing DFI

This is falling, and the position is too big. It is as simple as that. Generally speaking, as the market strengthens, the early movers are likely to lead the next cycle. We are in a choppy phase, however, and there will be changes in ByteTrend that influence ByteFolio weightings. DeFiChain has failed to maintain the momentum we saw until mid-May, and we are scaling back accordingly.

Monitoring the trends

The important thing in any bear market is to have a plan and be patient. The plan with ByteFolio is to monitor trends extremely closely and react when we have clear investment signals. Until we get them, activity in the portfolio will be subdued.

This week we will look at ByteFolio and ByteTrend to see how they work together.

First, we need to keep our eye on the overall state of the crypto market. That’s done by looking under ByteTrend, clicking on “Scores”, and putting “All Tokens” in US$. As if you didn’t know already, even a cursory glance will tell you the market is very unhappy, with only two coins (Tron and DEAPcoin) with a score of 3 or more out of 5. Tron is already in ByteFolio. In a healthy market, there will be a lot of stars, but there are very few at the moment.

Source: ByteTree. ByteTrend scores in USD.

If we start to see trends improve against the US$, then we know that the sector is staging a recovery.

The second phase will be to discover relative winners in the space. That’s done by measuring tokens relative to either BTC or ETH.

Bitcoin is clearly in the ascendant at the moment, which we know because there are relatively few coins outperforming it. While there are a healthy few, as shown below, if you visit the page, you will see a long tail of zero stars relative to BTC (including ETH). Binance Coin, which is at the top of the list, is also in ByteFolio. At the moment, there are quite a lot of coins doing well relative to ETH, which is a reflection of ETH’s weakness at the moment.

Source: ByteTree. ByteTrend scores in BTC.

You can also visualise this through the “Breadth” charts, where the scores are all shown together. A big red sky shows that the denominator asset (US$, BTC or ETH) is doing well versus everything else.

The beauty of this approach is that bear markets sort the sheep from the goats. We are in the process of discovering which coins and tokens will survive into the next stage of crypto’s evolution. By seeing which coins outperform first the US$, then BTC, then ETH (all of which is now possible on ByteTrend), we can get a proper handle on the long-term winners.

Source: ByteTree. ByteTrend Breadth chart in USD.

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

Action: ByteFolio is reducing DFI by 50%