🧱 Crypto and Diversification: Building Blocks, Not Centerpieces
If you’ve read any of my early posts, you know one theme comes up often: diversification. It’s the heartbeat of my strategy, and while crypto isn’t a headline position in my portfolio, it is part of the landscape.
My largest allocations lean more traditional—cash, gold, government and corporate bonds, S&P 500, QQQ, REITs, and a variety of thematic ETFs. But I do hold some Bitcoin and Ethereum, applying the same risk-based allocation rules I use across the board.
- Bitcoin sits in my medium-risk tier
- Ethereum is classified as high-risk, though I’m warming up to its utility and considering bumping it up a tier
My total crypto allocation cap for now is 1%—and I’m nowhere near that yet. As with all categories in my pyramid framework, reaching the maximum allocation isn’t the goal overnight. It’s about dollar-cost averaging into ideas until you have reached your maximum allocation, not chasing hype. My Bitcoin is currently sitting at my current mid-risk-tier maximum of $5,000 but fortunately I have been trimming it regularly of late with a handsome return on the remaining balance. Ballooning my overall crypto exposure to 1% is still a way off and will likely occur as I raise Ethereum’s maximum allocation and perhaps take on a few other coins that have yet to be pinned down.
As a sidenote, I just found PAXG on Coinbase which is a coin based upon Ethereum that represents physical gold sitting in vaults in London overseen by Brinks which is a name I trust. I just started a small position, but I have put it into my Gold allocation cap and not my Crypto allocation cap. Within my overall gold allocation, it’s not exactly the same as having Gold Eagles buried in the back yard, but I’m considering it as safe as the GLD and safer than my gold miners ETF. Some think physical gold is the only way to go, but I’ll share a post on that subject one day as it has issues.
🧱 My Crypto Origin Story
Back in Bitcoin’s early days, I dabbled—sold some when I needed cash, treated it as mad money. And yes, there’s a digital wallet out there with some Ethereum I forgot the password to. That’s just part of the ride.
🧱 Why Crypto? Why Not Crypto?
Bitcoin has gone from fringe concept to something approaching mainstream, but I still view it with cautious optimism. Inflation, institutional adoption, and supply scarcity make it worth considering—especially as talk surfaces about potential reserve roles.
Ethereum interests me more lately for its utility and its potential in smart contracts. Big names like Coinbase and American Express partnering on a crypto-backed card? That gets my attention. I’m watching Coinbase, but it’s not a reason (yet) to load up on Amex.
🧱 Applying the Pyramid Framework to Crypto
Just like any other sector, I apply my allocation disciplines:
- Both Bitcoin and Ethereum sit within my IRA, where I can trade without taxes
- I hold a small position in Coinbase, letting it simmer and grow to not pay taxes other than on staking fees
- Any crypto investment follows my broader principle: never overextend, and always trim when possible
This isn’t about betting on moonshots—it’s about quietly building blocks, even in volatile spaces.