May was a mixed month on the Bitcoin and cryptocurrency markets.
We saw strong volatility in the altcoin sector, with many coins seeing heavy falls, combined with firm upward price rises for Bitcoin.
It’s times like this when you appreciate the benefit of maintaining a hedge fund split between Bitcoin and altcoins.
Bitcoin and Cryptocurrency Markets Review May 2017
Bitcoin started the month of May at around 1220 Euros. By the end of the month it had risen to around 2050 Euros.
This followed two retracements in the Bitcoin price from respectively higher levels. The first in the second week, by around 15%, and the second, much greater, from a peak of over 2250 down to around 1750 Euros, a fall of some 20%.
However 31 day month on month, the overall rise in the Bitcoin/Euro price as recorded by bitcoinity.org for the Euro has been around 60%, still pretty good by any standard.
Altcoins were a very mixed bag. Some big performers, but almost all coins suffered from waves of falling prices which heavily hit overall altcoin portfolio value. Largely this seems to have been responses to the continually rising Bitcoin price.
Final hedge fund results for May are: 10.5% up on Altcoin/Bitcoin values. 87.65% up on Bitcoin/Euro values.
So my fund has beaten the Bitcoin/Euro index by around 40% in May measured in percent on percent terms
+60% BTC/Euro Bitcoinity Index
+87.65% Hedge Fund BTC/Euro growth
Thus the fund has grown by 87% in Euro value during May 2017.
May was the month I made some further structural changes to the fund. I’ve split it into 4 different portfolios:
a long-term hold base currency portfolio (LTH), consisting of Bitcoin, Ethereum, Litecoin and XRP. This fund holds base currencies for the long term and total value is maintained at between 20 and 30% of the total fund.
a medium-term hold portfolio (MTH), which is for positions which will mostly be held for 3 to 6 months or more. This will be maintained at around a third of the total fund value.
a penny coin portfolio (PENNY), which is for holding small amounts of very low-priced coins for the long-term. This represents between 5 and 10% of fund value.
and a short-term trading portfolio (STT). This is for holdings of a duration of anything from a few days to several weeks. This represents around a third of the total fund value. This is effectively a day or rather intraday trading fund, though in practice I tend to hold most positions for longer.
So we have
LTH (BASE) 20-30%
Holdings of the same coin can be found in more than one portfolio, since the different portfolios have different trading cycle horizons and goals. But generally I try to avoid maintaining holdings of the same coin in more than one of the portfolios.
I’ve also decided to create a fifth portfolio initially at least just for the coming month (June 2017). This is effectively an offshoot of the STT short-term trading portfolio, but with the aim of achieving a higher rate of performance with correspondingly higher risk.
This High Performance Fund (HPF) involves trading coins on a short-term basis purely on price swing/technical analysis data, regardless, in most cases, of the fundamentals or quality or long-term prospects for the coin. As a result, all kinds of junk can end up in this portfolio. The sole criteria for this fund is the price development in the short-term. Short term here meaning a maximum time scale of the next 4-5 weeks or so.
So this means the fund is now effectively split into five mini portfolios as follows, with actual current portfolio ratios at time of writing:
Among the strongest performers of the PENNY fund in May were the penny coins Reddcoin and BitBean. The former saw an increase in value by over 1500% at one point, before settling down at around 1000%.
BitBean also saw rises in the several hundred percent. These have since fallen somewhat but are still well above the start of the month level.
Dogecoin also saw a substantial sudden rise.
PIVX has unfortunately continued to decline, as has POSW, though there has been a 30% recovery in the latter at time of writing.
A consequence of splitting up the fund into mini portfolios has been a substantial increase in the number of different coins being held. The fund currently has holdings in some 75 different coins, which is more than double the level of holdings it had in the previous month. This is also a consequence of a diversification strategy, to try to avoid adverse movements in specific coins affecting the whole portfolio.
Apart from the LTH base currency holdings in BTC, ETH, XRP and LTC, no one coin represents more than 5% of the total fund value – and that only in a few cases. Most coin positions represent just 1-2% of total fund value. So we now have a much greater level of diversification than before.
I’m actually trying to reduce the number of coins, but this has to be done within the context and subject to the goals of the five individual portfolios and as far as they allow, and not simply as a goal in itself.
On the admin front I’ve given up trying to keep track of all my positions and investments on a day-to-day basis using spreadsheets. I had two main spreadsheets for this, which have become unwieldy and time-consuming to maintain, with data entry and the formulas to continually adapt and copy/paste.
So I’ve switched to using the mobile app Blockfolio for daily real-time transaction entry, and cryptocompare.com’s portfolio facility to track my portfolios. It took a little time to enter all the data, but once done, provided you keep it all up to date, it makes portfolio management and tracking a great deal easier.
It also means I can manage with just one simpler spreadsheet which I use to maintain a weekly and monthly overview of trading results and portfolio values.
Ideally the data for Blockfolio and cryptocompare would be fed directly from your accounts, and would also be downloadable for importation into a spreadsheet. But this kind of functionality will probably be developed later. For the time being, you need to enter the data manually yourself.
For more info, check out blockfolio.com/ and cryptocompare.com (both free services)
Bitcoin & Altcoins Outlook For June 2017
So, what’s the outlook for Bitcoin and Altcoins for June 2017?
I consider the Bitcoin retracement to be healthy. Bitcoin has surged ahead relentlessly through May and it needs time for profit taking and to take stock and recharge. It will then be in a position to rise further. More and more people are getting interested in Bitcoin.
I know this from my own personal experience as well, simply from the people who have been coming to me for advice (including my brother – who is a complete newcomer to all things Bitcoin and digital currency). The number of users on the Poloniex exchange has more than doubled over the last month or so. All this is bringing more money into the crypto markets which can only mean one thing: more price rises and value appreciation.
The way for Bitcoin to improve is now looking better following the recent agreement on blockchain block size changes and the introduction of segwit to speed up transaction times – something which is urgently needed. To what extent this can save Bitcoin in the long run remains to be seen, and the changes also still have to be actually implemented by nodes and miners.
Ethereum continues to soar ahead. Other currencies and projects too are looking very promising. There’s a great deal happening in the cryptocurrency and blockchain technology space. It’s a sector with great potential.
Japan, Russia and Australia have announced positive new regulations and changes regarding cryptocurrency adoption. Singapore has just announced it is looking to put the Singapore Dollar onto a blockchain of its own, which could mean Singapore becoming the first country to use blockchain technology to digitalize its national currency.
This is a great time to live and we are lucky to be able to take advantage of these new developments which are going to change the future of all of us – and in ways which even now we can hardly imagine.
And there’s a great deal of money to be made as well.
Check out bitcoinity.org for the latest real time Bitcoin prices and price charts.