The goal of this cycle is to make life-changing profits.

You need to structure your portfolio correctly if you want to do that.

The cycle isn’t playing like we all thought it would. ETH’s a $3200 stablecoin pretty much. There hasn’t been a full-blown altseason yet like past cycles.

It feels like new metas emerge every few weeks. If you just held onto Goat / Zerebro (A.I. first movers) since October, you’d be underperforming.

You have to adapt.

I want to share with you how I’m thinking about building a portfolio. It’s new year so it’s a great opportunity for you to re-think and rebalance if needed.

What has helped me the most is to divide my portfolio into different buckets - this will help you manage your risks and goals better.

I’m not going to give exact percentages. Everyone has different goals and risk tolerance. Someone with a small portfolio will be more risk on, while someone with a larger one will want to play it safer.

I’m sharing my strategies so that you can figure out what works for you.

Bucket 1: The Multiyear Stash

Examples: Bitcoin, Ethereum, Solana

Goal: Grows your wealth over the long-term. A hedge against fiat. Ensures you win over a long enough time horizon. These are the tokens that you plan to hold over multiple cycles. The pile gets bigger each cycle.

I consider this stash to be untouchable. Money goes into this bucket each cycle and money doesn’t come out. This is where your profits go.

Listen. You’re gonna feel FOMO during the bull market. You’ll hear about a new token with a ton of potential, but you’re out of money.

You’re going to be tempted to touch this bucket.

“I’ll sell my Bitcoin and ape into this new coin. Once these coins 10x, then I can just buy my Bitcoin back!”

This rarely goes according to plan. Because if you do a 10x, you’re gonna think you’re a genius and stay risk on. Until you eventually give your money back to the Casino.

This bucket’s job is to be defensive. No matter what happens to me in life, I’m never starting over from scratch in Crypto or in life. Bitcoin will reach $1m one day. You don’t want to look back and think about how much money you lost because you sold your Bitcoin to chase after shitcoins that went to $0.

I used to weigh Bitcoin and Ethereum equally in this bucket. I’ve changed my mind on this and have re-allocated towards Bitcoin more. To keep it simple, Bitcoin is irreplaceable while Ethereum fights a multi-front war every cycle.

The large majority of this stash is held in cold storage. I do have around 30% set aside for DeFi yield and potential airdrops. With BTC I use @SolvProtocol to get some yield and earn some potential airdrops. My ETH is being used as mETH on @0xMantle and farming.

At the end of each cycle, I measure success by how large this bucket has grown. Keep stacking sats.

Bucket 2: Cycle Conviction Holds

Examples: Virtuals, Hyperliquid, Solana, Sui, Pendle, etc

Goal: Believe in something. Most people lose money due to over-rotating and overtrading. It helps to have a section of your portfolio where you’re just holding for most of the cycle.

These are the bags where you have the highest convictions. The price could fall by 25% and you don’t blink an eye. They’re usually the alpha plays of each cycle’s hottest narratives.

Stack them up early and hold them throughout the cycle. Take profits along the way. Exit these positions completely by the time the bear market’s here. You can always re-enter in the bear market.

It’s ok to change your mind. I had ai16z as one of my long-term holds this cycle. I cut my bags the other day even though it was meant to be a long-term cycle hold. I just don’t want to deal with the founder’s erratic behavior.

Strong convictions, loosely held.

Bucket 3: Short Term Trades

Goals: This is where you make most of your gains, but you’re dealing with a ton of volatility. Focus on the hottest sectors.

I don’t think we’ll have a full-blown altmarket where everything goes up at the same time. There are too many coins and not enough liquidity. This is also known as altcoin dispersion.

That’s why it’s important to be in the hottest sectors: we’ve seen this so far this cycle with memecoins and A.I. agents.

How I approach it is:

1. Identify 1-2 winning sectors
2. Find the fastest horses within those sectors
3. Take profits from these winners into BTC or stablecoins.

So, how do you find winning sectors? TBH, the more experience you have the more you can feel the vibes.

Fortunately, there are are tools now that can measure this.

The ballers can use @_kaitoai. A free one is from @_dexuai and it’s pretty badass.

You can literally see that A.I. agents started outperforming on November 11th 2024. You don’t have to be that early to make money.

The key is to act when the market is clearly telling you something.

“tHe aGeNts ArE jUsT chAtGPT wRaPpErS”

Maybe they are.

Maybe they aren’t.

But when the market is giving me money, I’m going to take it. I’m not gonna waste time on the timeline trying to be contrarian for clout.

The best way to think about sectors is surfing. I’m always on the lookout for a bigger wave.

I’ll give you a recent example.

I’ve long held the thesis of that A.I. agents would supercharge DeFi. It’s inevitable with how much of a learning curve DeFi has, and how clunky the UX/UI is.

In the past few months, I bought MODE network because they were in the best position to capitalize on this. They’ve been working on this long before DeFAI became a thing.

I’m loyal to the thesis but not to the protocols - my goal is to always find the fastest horse in each category.

As soon as @DanieleSesta started @HeyAnonai, I felt that it would be the faster horse and rotated my bags.

Why? I’ve seen him build 2 protocols to $1b in the previous cycle. There’s no one better at pumping a protocol, and there’s no one scarier than someone who’s out for blood.

(Please note that I’m not fudding Mode Network in any way. I think they’re further ahead in development than most DeFAI and could outperform from here. I just need to share some stories so this isn’t an article with just theory)

Crypto’s not about what you think will go up. Making money in Crypto is about what you think others will think will go up (keynesian beauty theory).

You can see in the chart below that DeFAI is gaining mindshare, so I believe this narrative has legs.

A few things I look for in short-term trades:

Obsessed with new categories. This is why A.I. agents shine so much. There’s so many new use cases that it’s hard to place a value on them. A.I. Agent x Metaverse. An A.I. agent that hunts down exploits.

• So right now in January 15th 2025, DeFAI is a completely new category. If there’s a bigger wave in a few months then I’m jumping ship.
• Fast shipping. How fast is the team shipping updates? The space has the attention of a gold fish. Fast updates is how a protocol keeps mindshare.

Conviction or chasing momentum? To keep it simple, there are 2 styles of trading.

The first is where you position yourself ahead of time. You do your research, build conviction, and hope the rest of the market sees what you see. This is what I did with GAME. I bought it early and had to hold it for a few weeks before it broke out.

The problem is when the price was flat, I didn’t really know if I was a genius or if I was a dumbass.

• The other style is to chase momentum. Something breaks out and you ride along with it. Both are good. This is where trading logs are useful. You can look for patterns overtime and see where you have success.

And finally, you have to figure out what you’re good at. I’m not interested in being in the “trenches” and trying to find sub $1m shitters.

I’ve personally had the most success finding protocols around $5m-25m and riding them up to $100m+ marketcap. But that’s me. Maybe you have an edge in the more degen plays.

I cut losses early.

I take profits around 3x.

If something’s an obvious winner, I’ll add size to it.

Bucket 4: Stablecoins

Where do Stablecoins fit into the picture? They serve a few purposes:

• Reduces volatility in a portfolio. Judging by the timeline, everyone should hold more stablecoins. If you’re completely in high risk coins, then it’s tough to weather the storm if your portfolio is down by 40% in a day. Stablecoins help keep you sane and in the game.
• Ammo to buy the dips. Look at the patterns of previous bull markets. We don’t go straight up.
• Some yield. Stablecoin yields are now roughly 15-20% APY. It adds up. I like @0xfluid for yields.

I categorize my stablecoins into two categories.

1. Permanent Profits. These are stablecoins that I’m taking out of the market for good this cycle. You can farm with them, or cash them out into fiat. This ensures that you’re not going to completely roundtrip the cycle.

2. Temporary Profits. You take some profits on a bag, but you want to redeploy them. They’re sitting there until you find a place to deploy them.

It’s important to find a system to easily separate them. For example, USDC for one and USDT for another. Or all permanent profits get funneled into Fluid.

Make sure you stay diversified. We all saw what happened with some stablecoins last cycle. Spread out the type of stablecoins you have (USDC, USDT, sUSD, maybe some RWA based ones), and spread out where you’re farming them.

Other Quick Thoughts:

“Keep all your eggs in one basket, but watch that basket closely.” There are different ways to interpret this quote. I’m not all in on one protocol. Rather I’m heavily focused on the a.i. agent sector now.

Also, it always makes me laugh when I see people talk about buying the dip and it’s like 25+ protocols. Believe in something. Even if you hit, it’s not going to make a meaningful difference.

I think 5-7 tokens is the sweet spot. When I’m in a token, I become obsessed. I’m hanging out in the discord / telegram. I have the protocol, founder, and team on notifications. I listen to all the podcasts.

• I can’t do that with 15+ different protocols. If you have too many tokens, it means you don’t have enough confidence in your bags.

Don’t fade momentum. My biggest wins were when I top blasted into coins. Winners keep winning. How do you know if you’re being exit liquidity or not? It’s simple.

• Are you buying because of FOMO and because KOLs are shilling it? Or did you take the time to research and build your own conviction? Are there enough developments and catalysts to keep attention on the protocol?

Rotations happen fast. I don’t think the first mover advantage is as strong as it once was. GOAT and Zerebro had early advantages and lost their lead. If a protocol has a first mover advantage, you have to think about how “sticky” the lead is. How strong is the moat?

• AIXBT had a first mover advantage, but their distribution and mindshare is far away from every other alpha bot. I love how they developed most of their tech in house. This makes it tougher for someone else to fork them and steal their thunder.
• Design a Bear Market Portfolio. Figure out what it is and “reverse engineer” your way to it. For example, it could be 30% BTC and 70% Stablecoins. You have to take profits on the way up.

Start your portfolio from scratch. You have a lot of bullshit in your portfolio. Moonbags or tokens you have too much emotional attachment to. Ask yourself, if you had to build a portfolio from scratch, what would it look like?

Because holding onto a position is the same as buying it each day.

• “When do you cash the Crypto out to fiat?” When you need to. I don’t cash my Crypto out often. Mainly when I need to pay taxes, or when it has become too large relative to my TradFi holdings.

• My goal is to let my Crypto keep working for me. I keep my living expenses low, and my company (The DeFi Edge) pays me a monthly salary. I don’t interrupt compounding.

Alright, that’s it. I have a lot more to say but think I’ve been yapping too much. If there’s any area you want me to go deeper on lemme know and I can write more articles.

I worked pretty hard on this article so please give me a like or a retweet if you want more.

Thanks,

Edgy

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