RV Blog Investing The Game of Investing, Vol. 31

The Game of Investing, Vol. 31

A Bitcoin exchange-traded fund (ETF) is an investment vehicle that tracks the price of BTC or assets associated with bitcoin’s price, like futures. It’s traded on traditional stock market exchanges rather than on crypto exchanges. A Bitcoin ETF gives investors exposure to BTC without the need to actually own and hold the crypto asset.
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This Week…

We’re diving deeper into the world of crypto with a lesson on how to trade the major coins: bitcoin (BTC) and ether (ETH).

Our expert today is Michael “Mando” Anderson, a former high-yield credit trader at Barclays in London turned professional crypto trader and co-host of our 5-part educational series in the Crypto Academy.

  • “The major coins will outperform almost everything else over the medium- to long-term,” says Mando. “For most investors, this is where to focus.”

In this issue, we’ll cover 2 things:

  • Constructing a crypto portfolio around the majors.
  • Risk management tips and the factors that affect price.

Let’s get to it.

Welcome to the Game

Welcome to The Game of Investing, a bi-weekly newsletter bringing you “aha” moments and actionable lessons from Real Vision experts. No matter your level of expertise, markets are tough — which is why we all have to put in the work. Ultimately, the game of investing is a competition with yourself. Our mission is to help you navigate the path to success. Prepare to level up.

LEVEL 1  — Anchor Your Portfolio 

There are only 2 major coins in crypto (according to market cap): BTC and ETH. Bitcoin and ether have outperformed every altcoin through successive cycles, and that is generally expected to continue.

That’s why Mando recommends focusing most of your asset allocation on BTC and ETH when constructing a crypto portfolio.

  • “At least 50% of your crypto exposure should be in bitcoin and ether,” says Mando. “Now, you can switch back and forth between them — and that’s actually one of the best trades in crypto.”

Understanding how to trade BTC and ETH — and how to balance your allocation at optimal times — will help protect your portfolio and allow you the freedom to trade some of the riskier altcoins or memecoins with your large-cap profits.

Start with the BTC-to-ETH ratio.

This ratio is one of the most important dynamics to understand in crypto. Depending on macro factors, the dominant narratives that drive investor sentiment and price action often shift between favoring BTC or ETH.

  • Over the last year, bitcoin outperformed ether as the idea of BTC as a “digital gold” was attractive in a high interest rate environment.
  • But during the bull cycle of 2020 and 2021, ETH’s strong correlation with the technology sector led to massive outperformance.

“If you have a strong macro understanding, you’ll be able to catch the trends that drive price over the medium and long term,” says Mando.

Intermission — Sponsored by Kraken

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Join the thousands of seasoned traders who trust Kraken Pro.  

Visit realvision.com/krakenpro. Not investment advice, crypto trading involves risk of loss. 

LEVEL 2 — Fundamentals and Risk Management

For many investors, focusing on fundamental drivers provides a safer, more lucrative way to catch long-term trends in BTC and ETH.

“It’s very seductive for retail traders to want to be chartists trading purely on technical analysis,” says Mando. “But that style is loaded with paralysis by over-analysis, and technical indicators can often be diverging in views… I use TA to complement my process, not as a process itself.”

Along with the macro landscape, Mando studies crypto fundamentals like on-chain metrics, daily active users, and NFT use cases to gauge market sentiment and forecast narrative shifts that will drive intermediate and long-term trends.

When it comes to position sizing, try using the Rule of 3.

Not only does Mando use the Rule of 3 for asset allocation (60% in major coins; 20% in altcoins; 20% in stablecoins), he also follows a consistent, rules-based system of position-sizing using the Rule of 3:

  • “I sell one-third of my position when the trade has increased 40%,” he says. “I sell another third when the position is up 100%. And I generally keep the final third always invested… That becomes the moon bag if things get crazy.”

And get crazy they will…

There’s no way around it — crypto investors must prepare for volatility.

Even in a bullish year, it’s common to see multiple selloffs of 20, 30, or even 40% in BTC and ETH.

  • “I only invest money in crypto that I’m willing to lose,” says Mando. “You have to accept the volatility, but you never want to be fully invested… Keep reserve capital ready to buy the dip,”

🔑 After all, surviving a full crypto cycle is the key to long-term success.

Next Time

Thanks for reading. In our next issue, we’re expanding our crypto reach with a lesson on how to trade altcoins and memecoins.

See you then.

Have feedback on The Game of Investing? We’d love to hear it. Just email us at essential@realvision.com to share your thoughts. 

The Game of Investing Newsletter…

…a bi-weekly newsletter where you learn from investing pros about how this game actually works.

Because learning about finance shouldn’t be boring.