The Selloff

My oldest daughter Jessica send me a message last night “what’s going on with Ethereum?”. I told her it was a selloff. I said that people who had made a ton of money in the run up over the last six months were taking profits and I thought it could go on for a while. She said she was going to buy some more. I told her that was fine, but if I was going to buy, I would buy a little bit every week and not a whole bunch right now. As I have said on this blog so many times, I am a fan of dollar cost averaging and building a position over time, sometimes a long time.

I have been buying Bitcoin since early 2013 and Ethereum since last year. I keep buying but never that much at one time. Just a little bit every week. You can build a pretty big position that way, but you have to be patient and you have to keep at it.

Doing it that way takes a lot of the ups and downs out of the equation. I don’t try to time market bottoms and market tops, even though I can sense when they are happening. I don’t try to predict where these assets are going in the near term and I just believe they will be a lot more valuable in five or ten years than they are now. That’s good enough for me.

The other thing I believe in is asset allocation. I’ve told a lot of young people, including my children, that having 10-20% of your net worth in crypto might make sense. But not 100%. The category is too volatile and you could lose a lot if you aren’t careful. Having a reasonable asset allocation across all asset categories; cash, stocks, bonds, real estate, venture capital, crypto, etc is what I recommend and what we do. It might not be as exciting but it lets you sleep at night.

So, my gut says we are headed for a selloff in the crypto sector. But of course, I could be wrong about that. I am wrong a lot. But honestly, I don’t really care. I will keep buying into this correction or rally, whatever it turns out to be. Because the more important question is where these assets will be in five or ten years. And I have a lot more conviction about that one.