What is the right crypto allocation for your portfolio? - The Average Joe

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    What is the right crypto allocation for your portfolio?

    victorlei

    April 15, 2022

    Unless the plan is Lambo or food stamps, we’d advise against it. Figuring out the right amount can be tricky — and the answer varies depending on whom you ask and your circumstances.

    How Mr. Wonderful invests in crypto

    Investor and entrepreneur Kevin O’Leary of Shark Tank — shares his views on how he invests in the sector (Insider):

    • Limits his crypto portfolio to 20% of his entire portfolio, and no single asset takes up more than 5% of his crypto portfolio.
    • He holds 32 crypto positions — including Solana ($SOL), Bitcoin ($BTC) and Polygon ($MATIC).

    He takes a startup investment approach — where one or two positions can make up for all the losers — even if the other positions go to zero.

    His advice: Heavy diversification — “because you have no idea what’s going to work.” He looks at whether the project is solving a problem for any crypto investment and if that problem can generate economic value.

    Long-term crypto portfolio

    Ryan Allis, Managing Partner of crypto hedge fund HeartRithm — shares his top 30 long-term crypto portfolio picks in his newsletter each week.

    • 30% in Ethereum Layer 1/Layer 2s — i.e., Ethereum ($ETH) or Polygon ($MATIC)
    • 20% in Ethereum competitors — i.e., Avalanche ($AVAX), Terra ($LUNA), Polkadot ($DOT), Solana ($SOL), Cosmos ($ATOM) and Fantom ($FTM)
    • 15% in decentralized finance protocols — i.e, Uniswap ($UNI), SushiSwap ($SUSHI), Aave ($AAVE)
    • 10% in core technology — i.e., Chainlink ($LINK), THORChain ($RUNE)

    The remaining 25% is distributed 5% each in the gaming/NFT, crypto exchanges, money transfer, centralized lending and wireless tech sectors.

    Allis also recommends dollar-cost averaging into holdings — and keeping a 5-10 year time horizon.

    Investors: Long-term game

    20% of their total allocation may be too large of a percentage for many investors. But deciding on the right amount can be tricky.

    Financial advisors advise max allocations between 2-5% of the total portfolio, with younger investors able to invest a more considerable amount.

    Per Alex Doll of Anfield Wealth Management — allocations also depend on how investors react to volatile swings.

    • How would you react if your crypto portfolio fell 50%? — a common occurrence in crypto.
    • Even Bitcoin — the most blue-chip crypto of them all — has fallen nearly 50% twice in the past year.

    Crypto starter pack: How to start investing in crypto

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