What the Heck Is Metaverse?
Finally, BTC broke the strong level of resistance we’ve been looking at over the last several weeks. While it’s a bit too early to celebrate the return of the bullish trend, I’m happy to see how things unfold.
The bulls are fighting for a breakout, wishing them the best of luck!
Some would argue that the current bullish sentiment is fueled primarily by the ongoing NFT exuberance. I tend to agree with that.
As my colleague Alex said, the market is strongly reminiscent of the boom and bust during 2017-2018. People don’t care about what they buy on presales as long as they are sure that their jpegs will cost higher when they sell them on secondary markets.
That’s what happened to 99% of the ICO tokens minted in 2016-2017. That’s the time when the term ‘flip’ was coined. Back then, I flipped too.
Whether it’s because of jpeg summer or anything else, the activity in crypto grows, and more new people are introduced to the space. Some will eventually get burned big time by investing what they can’t afford to lose just before the end of the cycle, but the rest will stay and learn.
That’s how I ended up being in space in 2017, and that’s how I know the way the crypto ecosystem grows.
Right now, we see an expansion of another niche in crypto—metaverse. It’s a place where people spend their digital lives. Remember the movie ‘Ready Player One’? It’s something like that, but a bit less polished at the moment.
Me watching YouTube with a whale and his friends in Cryptovoxels.
Somewhere among the flip-style projects, there will be the ones with long-term vision and unique memes around which sustainable communities will form. These communities will stick to their NFTs and move them forward, just like Stani Kulechov stuck with Aave back in the day.
For now, however, we are at the mania stage with a lot of noise. The entire market benefits from this because the activity drives the prices up. So, don’t be hard on jpegs.
There’s a lot of money to be made and lost. Stay alert and enjoy the ride.
SIMETRI Portfolio – Portfolio Insurance
This Friday, we’ll continue to review the portfolio insurance concept I introduced to you last week. A quick recap: portfolio insurance is a technique to dynamically allocate funds to risky assets so that you don’t give up on the upside while protecting your portfolio if the market tanks.
Now, since I already know the charts that I’m going to share, let me start with more vivid examples of how portfolio insurance can help you. Let’s look at returns of a $1,000 portfolio of finance stocks since 2000.
The red line is the floor—the absolute minimum of funds you want to preserve if you want to retire or send your kid to college at some point. The blue line represents an insured portfolio, and the dotted line represents 100% allocation into risky assets.
Imagine you were to retire on that portfolio in 2009, and you didn’t implement portfolio insurance. Ouch!
Now, let’s look at a portfolio composed of steel industry stocks. Now you see how insurance can save you.
Now, let’s take a look at an insured and risky variation of an equally-weighted portfolio composed of IVV (S&P 500 ETF), BTC, and PoMs. Let me remind you that this portfolio is very close to the efficient frontier, so it’s relevant as a practical example.
Note, this chart uses a log scale.
It just so happened that the uninsured portfolio didn’t pierce through the floor. But, it was very close two times. Without insurance, you would be on a knife’s edge.
We’ve seen pretty substantial growth in stocks and crypto post-COVID because of the excessive printing by the Fed. Hence, portfolio insurance may not look that appealing. But, when the real downside comes, you’d love to be there. Remember the two charts I showed below.
Moreover, the insurance doesn’t constrain your upside too much. Let’s look at the allocations in the risky assets of our insured portfolio.
So, it started with 60% and fluctuated there until the flash crash in March 2020. Back then, the allocation into the risky assets dropped to 20%. However, as the market reversed, the allocation into risky assets went up to 100%.
I’ll stop here and let you internalize what we learned today. Let’s look at SIMETRI Portfolio.
