2021 Performance Review and Reflections

2021 has been a wild ride. Earlier this year, I was still investing into stocks but building more convictions in crypto over time as the asymmetric risk-reward that this asset class offers is simply out of this world and not taking a large enough allocation might prove to be an opportunity cost of a lifetime. Approaching the May 2021 Bitcoin crash, I finally decided to liquidate all of my US stocks and bought into the crypto dip, and it was one of the best decisions I made this year. More on that later.

It was definitely a year of ups and downs, as the world continues to be rampaged by the coronavirus The markets also presented itself with various pockets of buying opportunities, as uncertainty of the virus such as the Delta Variant and Omicron scares, Fed’s tapering fear spooking the markets and general bearish sentiments nearing the end of year for crypto.

In hindsight, there were many periods of good buying opportunities throughout the year, it is really up to the individual to have the foresight to see it, courage to buy it and conviction to hold it.

An important lesson of 2021: Having enough liquidity

Even with these great buying opportunities, I was constantly plagued by a problem: Not having enough liquidity to buy dips. In short, I should have stocked up at least 10% of my portfolio in Stablecoins/cash in order to buy meaningful dips and huge discount opportunities in the market. Instead, I am typically fully allocated throughout the year and the only thing I could do was to watch the dips getting bought back up or me rotating some positions over to buy into higher beta plays in the market.

Net Worth Grew 6.32x or 500+% From 2020

It might sound insane, but switching my portfolio into a 100% crypto portfolio really did wonders to my portfolio growth. I originally did a projection for my net worth for the next 10 years, and this year has already hit my personal targets set in 2024, so I will have to readjust all my calculations again. If you asked me at the beginning of 2021, I would have thought it will be crazy to think how much my portfolio would have grown.

Compared to 2020, the difference in this portfolio outperformance was due to me completely rotating from US Tech Stocks into crypto, especially so during the May crash thanks to China’s ban on Bitcoin Mining. (thanks China for the discount and entry!)

More Income Streams

Furthermore, I also kickstarted multiple streams of passive income through yield farming, Axie Infinity Scholarships and yield generating NFTs which gave me a steady stream of cashflow every week and every month. I’ll go on to reinvest those passive income into my high conviction bets and continue to compound them.

Aside from passive income, I also invested my active income from work and funnelling it back into crypto. Since I’m still a student anyway, I don’t see the need to upgrade my lifestyle now and hence would rather continue to accumulate assets over time which will pay for me in the future. In 2020, I originally aimed to double or triple my net worth by 2021 or 2022, but a combination of different income streams and rational investment decisions was able to push it even higher than I intended to. (Yay!)

As a sweet sweet bonus, my girlfriend and I also used our November Axie Scholarship payout to fund for our 8-day trip to South Korea when the VTL opened, so I’m really thankful that we took on the risk to start the Axie scholarship early with enough capital to make our passive income payout significant (It’s currently 3500 SGD/month each on average).

Letting your winners run

When I finally managed to hit $100K a few months back, I realised I did that not by actively trading in and out of my crypto positions. Instead, it was simply letting my winners run.

Crypto markets move super fast, and typically, a new narrative can spring an ecosystem or sector into “Full Send Mode” and cause a parabolic move up that will catch everyone by surprise.

We saw this in August with Axie Infinity Play-to-Earn and the NFT Bull Market, and then again with Metaverses when Facebook rebranded to Metaetc.

The Layer-1 narrative was super strong this year, which is why if you invested in any of the alt-Layer 1s this year like BNB, SOL, AVAX, FTM, MATIC, LUNA, you would have done extremely well this year.

In my case, the standouts from my portfolio that managed to outperform the market and reward me with handsome returns were these particular winners:

1. AXS (Axie Infinity Shard) – 16x (+1500%)
2. FTM (Fantom) – 12x (+1100%)
3. LUNA (Terra) – 5x (+400%)
4. EmberSword Platinum Badge – 4x (+300%)

I eventually sold all my AXS tokens at an average sell price of around $120/AXS and rotated into other crypto assets, and I am currently still holding on to the other 3 winners, although I realised some profits on FTM and LUNA to take back principal amount first.

I also tried to chase narratives and do some momentum trades to try and catch the tailwind before it takes off, such as AVAX. I bought a huge bag of AVAX (at around $40/AVAX) looking to allocate ahead of Avalanche Rush but decided to take profit early (around $60/AVAX) because I wanted to rotate back to farms on Fantom and build more Axie teams instead.

In short I’m NGMI on Avalanche 😦 But hey I did get the bridging airdrop ($GB tokens) for being an early AVAX adopter so still thankful to AVAX for free money!

Taking the leap of faith

Being the clueless undergraduate that I am, I am still conflicted earlier this year if I wanted to focus on getting more work experiences (through internships) or trying to fix my grades and do well so I can get into a good company in the future (Who doesn’t want to right?)

In September, I was presented with the opportunity to join Delphi Digital thanks to a friend, and from there on, I took the leap of faith and went all out to fight for the Full Time Role. I eventually got the job and it was one of the best decisions ever made in my life. The culture and freedom is unseen of, and the abundance of welfare and friendship along the way of a global team is also something I won’t trade for anything else.

I took an LOA (Leave of Absence) for the upcoming semester to fully focus on my Full Time Analyst Role at Delphi, and so far the amount of things I’m learning from all the super smart and talented people here is lightyears ahead of what I will be able to learn from school hands down.

It is truly an inspiration to be working among these folks and I am looking forward to learning more practical and technical skills from them. And also Delphi is the best company to work in web3 hands down!

2021 is definitely a defining year for me personally.

2021 Portfolio Performance

Honestly speaking, I haven’t been keeping track of Traditional Stock Market Indexes this year after I converted to crypto entirely. From the looks of it, the Dow Jones Industrial Average (DJIA) is up 23.7% this year while the S&P 500 Index is up 29.15% this year. NASDAQ-100 Index is up 28.94% this year. This is one of the best year for traditional equities, not too bad.

If you have however, allocated capital into crypto assets, and chose the lowest downside option in the form of Bitcoin, you would be up 79.31% this year. If you instead understood that Bitcoin is merely a store-of-value asset and wanted to invest in an entire smart contracts ecosystem with a plethora of utility and deflationary mechanics in the form of Ethereum, you would be up 467% this year.

Overall, my portfolio was up 532% this year, which means I at least managed to outperform crypto bluechips like Bitcoin and Ethereum by a slight margin. But it is an absolute outperformance if you compare it to traditional market indexes.

This outperformance will continue to remain this way as crypto continues to mature over time, but Traditional Finance folks will continue to be in denial and disbelief, wishing one day that “Mean Reversion Theory” will happen to crypto. (Have they heard of the Internet? Did it disappear? I let you answer that.)

The low interest rate environment has continued to lift risk-on assets like equities and crypto even higher, but with the Fed signalling rate hikes to take place in 2022 and tapering to happen as well.

Current Portfolio Allocation and Outlook

In terms of how my current portfolio looks like, it’s something like this:

Based on the current allocation, here are a few things that I am looking out for in 2022:

1. Crypto Gaming will continue to onboard hundreds of thousands of new gamers into crypto and become the first sector to onboard 1 billion users.
2. Gaming Guilds will be an important gear in the adoption flywheel to improve liquidity and deal flow while expanding the metaverse through co-creation and mindshare
3. Multi-chain infrastructure will start to take shape with enhancements to shared security and important bridges such as Gravity Bridge that will connect EVM chains to IBC.
4. Ethereum Layer-2 Scaling will become a popular narrative in 2022 as talented teams behind the scenes for the past few years such as Starkware, ZKSync, Celestia and many more shock the industry with mindblowing tech and scaling solutions
5. Terra will become the multi-chain Stablecoins powerhouse as it links up IBC with the Cosmos ecosystem + Money Market integrations
6. Fantom’s new virtual machine: FVM will shock the industry with its unique DAG infrastructure and Lachesis consensus offering unprecedented scaling possibilities
7. CBDC (Central Bank Digital Currencies) experiments start to emerge starting with China’s digital RMB
8. More artists and brands joining the NFT sector after seeing the success of Nike and Adidas as we see mainstream acknowledgment of this new tech
9. DeFi 2.0 to spark a new crypto renaissance in terms of innovation and DAOs to take part in the Curve Wars that will be replicated on other chains
10. Crypto to continue outperform any other asset class and potentially growing to $10 Trillion Market Cap and beyond.

These are just some of my views and predictions for 2022. But it is very difficult to imagine a Bear Market from every angle and viewpoint that I can think of.

In my view, I feel that we might see smaller pockets and sectors entering a bear market while other sectors continue to see strong tailwinds and unprecedented growth.

For example, we might continue to see NFTs being in a bear market for quite some time due to 80% of projects being poor quality, short term cash grabs, but on the other side we continue to see crypto gaming growing exponentially. You get the point.

A macro crypto bear like the one in 2018 is highly unlikely in my opinion. The market back then vs now has completely different dynamics and capital influx. I might be wrong though. So please this opinion of a random dude online with a pinch of salt.

Bitcoin and Ethereum as the Benchmark Index

From 2022 onwards, it will be unrealistic to compare crypto returns to stock market returns as it simply is too stark of a contrast to do that and will not be meaningful since crypto is a nascent sector that will continue to outperform traditional, slow growing sectors.

Bitcoin and Ethereum will thus become the benchmark index thanks to their Blue Chip status.

I’ll just port over this paragraph I wrote in 2020’s Review:

“If everyone is looking for the same spot for gold, what chances will there be for you? Do you think you will get higher returns than the market manipulators or big investment bank with thousands of analyst doing research every single second? Probably not. Instead, be a contrarian and look elsewhere where no one is looking, because that is where you will find multi-baggers that can deliver returns such as Peter Lynch. You can read up more about this in “One Up On Wall Street” by legendary investor Peter Lynch.”

Investment Objective

Starting 2022, my goals will be dead set on the following:

Long-Term Outperformance over Bitcoin and Ethereum

While the past year’s gauge does not determine long term performance, it is a good starting point to set up a long term track record and set the foundation for me to achieve my goal.

While I managed to beat the market this time round, it does not mean I will continue to beat the market because my portfolio is after all concentrated so any pullback will hurt my portfolio more than the market itself. The reverse is also true that when markets goes uptrend, my portfolio should outperform the broad market theoretically speaking.

Regardless of what the market does, I will continue to be a net buyer of quality crypto and selling to rotate to a better horse or taking profit to enjoy in the real world.

Below are some thoughts taken from last year and this year:

General Thoughts

Timing the market is not my game, I rather focus on taking a business owner mindset when I invest in a project. My philosophy is for a good quality company that is growing, I should consider holding on even if it is overvalued. Attractive investments are extremely rare, so get in when its fairly priced, and just ride the wave, ignore the noise and keep investing consistently.

On Market Crashes

This is the one thing that investors and layman alike fear the most. The market will always swing between being overvalued to undervalued, which at the extremes will lead to bull run (like right now) or market crash, and it is all due to market sentiments of greed and fear in play.

Looking back on history, the stock market experienced a severe (40%) crash every 10-15 years or so on the average. All times, it has recovered and exceeded the previous high within a few years. The same goes for crypto as well, while there are currently only 3 distinct market cycles within crypto that we can refer to, each cycle the market cap trends higher as the asset class continues to mature.

Timing the market may work short-term but not long-term

Some may think a good profit can be made if we sell our investment when the market is overvalued and then buy back in when it crashes. I think this is very difficult to execute successfully. Miss one cycle and you may need to wait out many years or miss out completely because narratives are changing every single day.

Each major market correction can offer opportunity to greatly magnify our portfolio performance. Many fails to realise that a lower price, in fact, reduces and not increases the risk.

The importance of a war chest

Keeping a sizeable warchest is important. A war chest of 5% in cash will not have that much impact. But keeping too much cash (50%), will mean you are only enjoying half of the earning growth of your investment during the in-between years. I personally think a good ratio will be in the 10%-20%.

Lastly, we have to be mentally prepared. Just imagine that your portfolio is cut by 40-50%, what is the impact to you financially, do you still have other incomes to cover the expenses? I always ask myself that if my portfolio is reduced by half, will my life be any different and will I panic. Stress test our financials to such scenario will help to prepare our mindset when it happens.

Because it will happen, the only question is when. (Already happened multiple times this year if you are in crypto)

Writing Journey

Insane how far this blog has came. From start of the year to now, I wrote a total of 47 blog post (including this post) with an average of 2295 words per post. Insane stuff looking back, I can technically write a book like that haha. 105,573 words written this year excluding this post!

I hope you enjoyed the content written this year as much as I enjoyed writing them and penning some of my thoughts down, and the evolution of me going from stocks into crypto. I hope to continue value-adding for beginners, intermediate and advanced investors alike and bridging the gap of financial literacy even further. Crypto is a complicated topic, and it will take time. But I am sure one day everyone will understand it well enough to protect their wealth from inflation.

While I didn’t manage to write an E-Book like I set out my goal at the start of the year due to different reasons and circumstances, I hope that my blog posts were able to inspire you to take on the risk if you are young and strive for financial freedom at an earlier age.

Also, if you really learnt a lot from my blog posts, a shoutout or sharing of my blog post with your friends and family really mean a lot to me, because all these time and effort spent into crafting and writing out a blog post are purely out of my own passion and I will ensure that posts will remain absolutely free for all to read in the future.

This blog is also here as a reflection for my own thought process and tracking my own journey towards financial freedom, just like many other financial blogs out there.

As 2021 comes to an end, I wish each and everyone all the best in your journey towards financial freedom, good health and peaceful family ties and of course, happy new year in advance! To those who read all the way till the end, I sincerely thank you for the bottom of my heart for the unwavering support thus far.

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Disclaimer:

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.