My 2021 Crypto Portfolio
I’ve been a full time crypto investor since early 2017 with a background in traditional finance via banking than at a value investing fund. While value investing and crypto investing don’t go together in most peoples mind, I see the crypto market as untapped investment wild west. Where if you dig deep there are incredibly valuable investment opportunities accessible to millions around the world, but like any wild west there are many pitfalls, dangers and scams along the way.
When buying for the long term in crypto I look for 3 things:
- Is this coin/token/investment a real use case? Does it make sense?
- Have I used it and do I know people who use it?
- Valuation based on crypto comparables and how big is their niche.
Now lets get to my portfolio and why I hold each asset
Bitcoin — BTC 45%
Is this coin/token/investment a real use case? Does it make sense?
I believe bitcoin is the best store of value and inflation hedge investment currently available.
Have I used it and do I know people who use it?
I have used Bitcoin as an investment vehicle to effectively hedge inflation and protect my wealth everyday for the last 4 years. A number of friends and people much smarter than me are doing the same thing.
Valuation based on crypto comparables and how big is their niche?
While I don’t believe Bitcoin it will become an every day currency, I do think it can match and surpass gold as the dominate store of value for current and future generations. Bitcoin has no real competitors in this niche within crypto, it has won. Depending on which numbers you use the total market cap of gold it is between $7–$10 Trillion, which implies a BTC price target of $333,333 to $476,190.
As stated I believe Bitcoin can surpass this, but depending on adoption levels I will start to look at taking profit around the $300,000 point.
Ethereum — ETH 25%
Is this coin/token/investment a real use case? Does it make sense?
Ethereum is the dominate smart contract platform with the best quality projects built on it. While the numbers may say Binance chain, Tron, Tezos, and other all have more users, you can’t trust them as it is free to wash and show fake users on them.
Have I used it and do I know people who use it?
I interact with Ethereum dapps nearly every day, at minimum 5 times a week. Typically through MetaMask or mobile wallets. A number of people I know are very active on Ethereum dapps and DeFi, I no very few people who regularly use other smart contract platforms.
Valuation based on crypto comparables and how big is their niche?
In an effort to keep this article digestible I will stay out of the weeds of EIP 1559 and layer 2s. But the most reasonable way to get a price target on Ethereum is to estimate what the final staking yield for Ethereum will be and then take a few shots at what those fees will be. Using what supply will be in 5 years, and assuming a 3% yield to stakers you can get a range of prices based on how much Ethereum fees (and usage) will grow:
ThorChain — RUNE 10%
Is this coin/token/investment a real use case? Does it make sense?THORChain is a decentralized crypto exchange that goes across blockchains. I literally cannot describe how cool this is. It is Uniswap but with Bitcoin, Ethereum and every other chain that there is demand to add. It is a broad bet on cryptocurrencies and decentralized exchanges.
Have I used it and do I know people who use it?
I currently LP in the RUNE/BTC pair on chaosnet as well as LP RUNE/Sushi on SushiSwap. Weekly dev updates and output for years with one of the most passionate communities in crypto.
Valuation based on crypto comparables and how big is their niche?
It is a touch complicated, but RUNE has a liquidation valued based on the total value locked in the network. Its trading value is a multiple of that based on future growth expectations. The current base value of Rune, with just Binance chain accessible, is $0.50. Rune is currently trading at $4.75 or a 9.5x multiple to deterministic value.
Over time the multiple will shrink, but adding Ethereum and Bitcoin alone can conservatively jump TVL to between $1B-$2B. This would be a deterministic price (price floor) of Rune between $10-$20. If the 2021 bull market continues don’t be surprised by $50 or even $100 Rune.
SushiSwap — SUSHI 10%
Is this coin/token/investment a real use case? Does it make sense?SushiSwap is an incredibly successful fork of UniSwap that has used the Sushi token to better align network participants (users, LPs, and Sushi holders). Sushi was the first AMM to introduce revenue sharing for stakers along with a sustainable farming/inflation rate to attract LPs.
Have I used it and do I know people who use it?
I believe Sushi has the strongest and most talented community of any token. Since forking UniSwap their community of devs have been relentless at adding new features, UIs, and ways to interact with the AMM protocol. I use Sushi regularly in three ways; to transfer between Ethereum tokens, to LP and farm in the ETH-Sushi pool and finally I stake a balance of Sushi tokens.
Valuation based on crypto comparables and how big is their niche?
To keep things simple I am going to ignore the potential impact of promising new innovations such as bento box and franchised pools on Sushi’s token price. Although I encourage interested readers to look into both as I believe they could be massive wins for Sushi.
Purely when looking at current volume of major exchanges and AMMs like UNiswap sushi is undervalued by 2–3x. Looking at FD marketcap over average daily trade volume for 2021 shows SushiSwap is trading at a much smaller multiple then its peers.
- SushiSwap 9.1x
- UniSwap 25.3x
- Coinbase 19.3x
If Sushi was trade at the same multiple as its closest peer (UniSwap) its token price would be $40.48. Even at this price I would buy Sushi as its strong community, great token value capture and the potential of bento box and franchised pools could drive even more value. I anticipate we will see Sushi trade over $75 this year.
SportX — SX 5%
Is this coin/token/investment a real use case? Does it make sense?
SportX is the best and most used decentralized prediction market on Ethereum and is already on a layer 2 solution (Matic). Their exchange model has attracted deeper liquidity than many sports books and because of their global nature could become the most liquidity sports/event betting site in the world.
Have I used it and do I know people who use it?
I use SportX multiple times a week to bet as well as stake their governance SX token for attractive yields (currently >100%). Their tournament and in-app chat has big deals and bets made in it everyday.
Valuation based on crypto comparables and how big is their niche?
Figures are messy, but the global online betting industry is worth north of $100B annually. The SportX protocol is owned and controlled by its users as SX is distributed to bettors. The SX tokens captures and controls 100% of the fees generated (which are in ETH and stablecoins), the community fund already has millions in it.
I use the same staking yield estimate for SportX that I use for ETH (3%), only factoring in fees generated multipled by an estimate of daily volume as a proxy for fees. I think SportX has high growth potential as they are doing about a $1,500,000 a week in bets less than a month after token launch. As exposure and liquidity continue to grow I expect volume to jump to between $5M–$25M a day in volume in the next 18 months. Using estimated circulating supply in 2 years, my price target for SX is:
USDC — Cash 5%
Have about 5% of my portfolio in stable coins and am currently monitoring a watchlist of three names that I could buy.
2021 Watch List:
These are a list of coins I am following closely and may buy, but currently do not meet all of my criteria currently.
AAVE — AAVE
I have owned the AAVE token and used its dapp a number of times before, plus it passes the test of the product and token making sense.
After its recent run up I feel it is trading near a fair valuation, and I don’t think the upside at current price levels was high enough to take away capital from any of the above investments. If there is a sell off in the token greater than 20% I will likely be a buyer.
DAOstack — GEN
DAOstack is an interesting project that I feel is trading at an attractive valuation. It seems to also be attracting a number of projects launching DAOs. But I have yet to interact with DAO they launched and have doubts that the GEN token captures value or is necessary to the protocol. They have mentioned that they are redesigining the token, and depending on the new tokenomics I could be a buyer.
Quickswap — QUICK
Quickswap is a brand new UniSwap fork but on the Matic/polygon network. They have experienced rapid growth early on and seem to be working closely with AAVE, Polygon and SportX. If these partners can bring liquidity and users to the exchange it could be a great low gas alternative to mainnet AMM trading. I am in the process of researching the token model and finding out the teams long term road map, as there is currently very limited information on the token and team publicly available. This is a project to keep an eye on, but I am currently not a buyer.
