Marc De Mesel: Recommended Crypto Allocation Only 30%

  • Thursday, 04 June 2020 11:54
I'm itching to buy more Bitcoin Cash as $250 is still cheap I believe, and 40% crypto allocation, of which only half, so 20%, Bitcoin Cash allocation I find low. However, updating the Trololo chart as well as checking my Crypto Investment Plan, Mr Kelly does not recommend to increase my crypto allocation as he points out there is still a 55% chance for crypto to go considerably lower to -60% Undervaluation to the Trololo Trendline and according to his formula my current 40% crypto allocation is actually perfect. I also consulted with Edward Thorp however, and he said using Full Kelly is very risky approach in world of investing as it's possible you underestimate chance for it to go lower and this may lead to over investing, causing higher volatility and lower returns, likely even leading to a bust if repeated enough. Therefore using half Kelly much better idea because if you under invest, you still get 75% of optimal returns with only half the volatility, meaning Edward Thorp recommends currently, even with generous 70% of Full Kelly, only 30% allocation to crypto. So cannot buy BCH or even replace the BCH I have been investing and donating as I am still over invested today. Much wiser to only invest more if there were to be a correction to -60% undervaluation, at which point chances for it to go lower become much smaller and recommended allocation therefore much bigger, and look for other opportunities to invest in with my remaining 5% fiat. Links: Crypto Investment Plan - Using Trololo Trendline to Set Targets With Probabilities and Kelly to Allocate Accordingly https://docs.google.com/spreadsheets/d/1WSeePxcqVyZ__99I-dAcvMBZuEzTq1DX8KzstSKoS5c/edit#gid=43 Trololo Trendline - Judging Valuation Using Historical Avg Prices & Growth https://docs.google.com/spreadsheets/d/1ujXSmxad9WrNpkPhuJv_kcNvy6TtVMNTQZQt3lwYeA0/edit#gid=465266941

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