My Passive Income Crypto Portfolio Allocation Strategy

Four months into my crypto journey and my overall strategy is finally starting to become clear.  The first few months felt like I was navigating a ship through a thick fog until it became murky at best, with just hints of land on the horizon.  It was really just about learning crypto, absorbing as much as I could and there is a lot to absorb as most of the readers will already know, before the sun started to peek through and the horizon became more visible.

I have a few advantages on my side in this new journey.  First, I'm semi-retired with a flexible schedule and quite a bit of time on my hands to devote to educating myself.  Second, I've been an investor for decades in the stock market, however, my focus there has been buy and hold with a fairly passive approach once everything was automated.  For crypto on-the-other-hand, I wanted a little more "adventure" in my approach.

My crypto portfolio consists of three main parts along with a miscellaneous portion that simply contains all those altcoins you happen to gather along the way.  This portion makes up about 1% of my crypto portfolio, so I won't really cover it but it consists of about 20 different small amounts of coins.

Overall, my focus with my crypto holdings is to build passive income.  I've built a stock portfolio that is geared towards net worth growth so my crypto holdings are geared towards providing monthly income.

Portfolio Part 1 - Staking The Major Coins (50% of Total Portfolio)

This is the building block of any crypto portfolio, the blue chip stock equivalent of my crypto holdings.  This is where any new crypto investor should focus first because it is reasonably straight forward and gives you a solid base from which to build.  In my opinion, there are three key coins to hold here and they are simply the three biggest coins out there as ranked by market cap.  If you believe strongly in other coin(s), you can mix this portion up a bit and hold more than three coins but I would strongly suggest sticking here with coins ranked in the top 25 (and really the top 10) so feel free to mix in a portion of Luna, Solano, Binance or other major coins.

My goal here is to stake the biggest coins and the ones I'm confident will be around for years to come while continuing to grow my holdings through staking.  Here is my personal breakdown

• Bitcoin (40%) - BTC started it all and by holding it you have a pretty good handle on the overall crypto market.

• Ethereum (40%) - ETH is the coin that many altcoins follow and the coin that many other crypto projects are built upon.

• Tether (20) - USDC the biggest stablecoin, pegged to the US dollar, and a coin that can limit volatility in your holdings.

You will need to pick exchanges and wallets that make sense for you and a cold wallet like Ledger or Nano is necessary if you have a decent amount tied up in crypto.  Personally, I like to go for some of the highest possible staking rewards so my largest amount of each coin is held with Midas Investments where I get 13% APY on Bitcoin, 18% on Ethereum and 20% on Tether.  Midas uses similar methods for getting a return on your crypto as other platforms but more of the return goes to its users.  The team at Midas has been around about four years and is active on Discord and YouTube while being transparent in their operations. Still, it is somewhat of a risky play so I spread out some of my coins on other platforms like Crypto.com, KuCoin and Coinbase which are all good exchanges for beginners but offer lower rewards.

Learn more about Midas in my article - Midas Investments - Highest Crypto Yields Around

Portfolio Part 2 - Master Nodes (25% of Total Portfolio)

Master nodes are the newest part of my portfolio.  I looked into many different platforms but settled on Yieldnodes for a couple of different reasons.  First, nodes can be quite technical to set up and have to be running 24/7 to support the network.  This isn't the case with Yieldnodes who house the nodes for you and I already am mining on a couple of gaming computers in my household.  Second, many of these node programs require a large amount of coins be staked putting them out of reach for smaller investors.  Yieldnodes can be set up with 500 Euros which is less than $600 in the US.  Finally, most of these platforms pay out in their native crypto token which leaves you exposed to the price action of the underlying coin.  Yieldnodes rewards are in fiat which helps offset crypto bear market downturns.

Yieldnodes averages a 10% return a month and when compounded that equates to more than 200% a year.  I will be reinvesting my holdings here for about two years before starting to take out a portion of the rewards for monthly income.  This portion of my portfolio is the most truly passive part as I just put in my capital and set it up, rewards are monthly and reinvest automatically until I set up a portion to go straight back into my bank account when ready.  That said, at some point I will look to expand into master nodes on other platforms.

Learn more about master nodes in my article - Master Nodes - My Next Passive Income Adventure?

Portfolio Part 3 - Yield Farming (25% of Total Portfolio)

Yield farms require a little more attention than the other two parts of my portfolio.  There is daily harvesting and then reinvesting rewards back into the yield farming ecosystems to gain even more rewards.  It is also the area that carries both the greatest risk and the greatest reward with very high APYs.  Yield farming also took the most research on my part and it is an area where you can lose significantly if you make poor choices.

I've started small here with a platform called The Animal Farm which is a new project that has had its share of issues since launch.  Most of the farm is currently paused and they migrate everything to version two, but I have learned quite a bit through the trials and tribulations of the project and am excited to get my hands dirty again when it is active which appears to be next week.  The Animal Farm sits on the Binance Smart Chain so I have exposure to not only the native coins (DOGS and PIGS), but also the main coin on the blockchain (BNB, the fourth largest coin ranked by marketcap) and BUSD the Binance Smart Chain stable coin.  In setting up my investments here, I also had to interact with Pancakeswap and am playing with that platform as well including staking some of its native CAKE token that I get from mining earning 60% APY in the autostake pool.

I am looking to increase my investments in yield farming to get it up to 25% of my crypto portfolio.  I will be spreading the risk out in this category to 3-4 different platforms on various blockchains.  I really enjoy learning about yield farming and because rewards are gained from earning a portion of transaction fees these investments, like master nodes, can continue to grow even in a down market.  I will be writing more about new yield farming projects in the future so stay tuned.

Learn more about yield farming in my article - Yield Farming Basics and Ten Platforms to Consider

Final Thoughts

I've learned that to be successful in life you must have a clear and well thought out strategy.  These don't necessarily have to be written out, but it usually helps especially when it comes to life's more complicated items like crypto investing.  I'm sure my strategy will develop and change over time, I am certainly not married to what is outlined above.

My strategy is heavily influenced on my past investment experiences, but more importantly by the goals I hope to achieve through crypto.  If my main goal was on pure asset growth, I would have a different strategy broken out between holdings in large crypto coins and smaller high growth potential coins and tokens.  With an emphasis on passive income and learning about various crypto projects, half of my investments are geared towards areas others might not want to touch.

I'd love to hear what you think about my strategy and what is your overall crypto portfolio allocation strategy.  Are there other types of projects I'm really missing out on?