How Much to Invest in Bitcoin

Posted by Josh Blatchford | Bitcoin

This week, the market value for all cryptocurrencies hit $200 billion for the first time.

When we look at the value of all the cryptos, Bitcoin dominates and has the highest value. In fact, there’s a Bitcoin Domination Index that shows just what percent of overall value comes from Bitcoin compared to the others.

By market value, it’s pretty much Bitcoin, followed by Ethereum, then all the rest. We’ve seen Bitcoin grow in value and dominance while Ether has been pretty flat recently.  Here at Magnr, we generally characterize the cryptocurrencies this way:

  • Bitcoin
  • Ethereum
  • Litecoin, Ripple, Ethereum Classic, Dash
  • All the Rest

CoinMarketCap lists the market value of all the cryptos and this is the top 10.

Setting Up a Crypto Portfolio

Given that Bitcoin is the biggest, most liquid market and is the reserve currency of the crypto world, it should be the foundation of any crypto portfolio. You see from the chart above that Bitcoin is 5x larger than ETH and 12x larger than the 3rd highest crypto, Bitcoin Cash.

Wallet vulnerability notwithstanding, it makes sense to hold some Ether too, especially if you like ICOs. Ether is the reserve currency of the ICO market. If you want to participate in ICOs, then you need some ETH.

These should be the foundation of your portfolio.

Do you believe that Bitcoin and Litecoin could become the Gold and Silver of crypto? Many do and prefer LTC as a payment system especially for small dollar Visa/Mastercard style payments as compared to Bitcoin, which many are holding, trading, and transferring larger dollar value. If you think this, then it makes sense to buy some Litecoin.

These are the kinds of questions you should ask yourself.

Do you like decentralized storage? Then look at Filecoin or Storj.

Do you like bank to bank transfers to compete with the SWIFT network? Then look at Ripple

Do you like lending across the blockchain? Then look at ETHLend, Salt or WSH

Do you like gambling? Then look at Augur and their REP token

Do you care about privacy more than anything else? Then look at Monero or ZCash

There are Altcoins and tokens that have a product or service they already sell and aren’t just an idea and a white paper. The newer the token, the more homework and due diligence you must do.

Sensible Times to Rotate

There are times when it makes sense to hold Bitcoin and times you may want to trade out of it. A couple cases where to consider cryptocurrency rotation include:

  • Poor Technicals- Our Trade the Charts series is all about using technical analysis to see how healthy Bitcoin is at any given time. When technicals are not favorable like unable to break out above support or a drop below the lower Bollinger Band, that may be a good time to rotate from Bitcoin to an Altcoin.

 

  • End of Big ICO- After a large, well funded ICO closes, what do you think happens? The company that raised their money needs to convert their ETH into whatever currency (USD, Euro) they use to pay most of their expenses. This creates large selling pressure on Ethereum.

 

  • Uncertainty leading into a fork- Before Segwit2x was canceled there was lots of uncertainty about what might happen and some even called 2x a 51% attack. In the weeks leading up to a fork, Bitcoin can be very unpredictable so that could be a good time to rotate out of it into one of your favorite alts.

Conclusion

While some of you are Bitcoin maximalists, we know that most of you hold or trade in other coins. Just like with stocks and currencies, different fundamental or technical scenarios make some tokens a better buy than others at any given time. It’s important to remember that Bitcoin is the reserve currency of the crypto world and by far the largest market, but, like all assets, there are more favorable times to HODL and more favorable times to rotate into another cryptocurrency.