“If you do not look at things on a large scale it will be difficult for you to master strategy” Miyamoto Musashi

There is a battle taking place on social media right now. A battle between belief factions, and it seems to be a ‘take no prisoner’ approach. It is the battle for the hearts and minds of investors. The battlefield is Cryptocurrency. And the prize is bragging rights. Oh and money.

On one side, we have the true believers. The evangelists of Crypto. Investors, large and small, whose belief in Crytpo (mostly, but not limited to Bitcoin and Ether) ranges from enthusiastic to maximalist. And a Bitcoin Maximalist is something to behold. According to the maximalist, Bitcoin is nothing less than a total and complete revolution of the Global financial system. It will disrupt every aspect of how finance works. It will revolutionize the financial world, render central banks helpless, replace the US dollar as the world’s premier world currency. In their view, investing in anything other than Bitcoin is akin to poking holes in Noah’s Ark.

On the other hand we have the naysayers. The doom prophets. The bubble theory promoters. Ranging from cautious skeptics to white horse riding knights in defence of the realm. They won’t buy bitcoin, no matter what, and dance with glee every time Bitcoin has an off day.

There is middle ground – Those who see that something evolutionary, if not revolutionary is happening and want to watch, learn and participate. The DTM5 falls into this camp.

I think participation as an investor in the advent of Crypto currencies is a meaningful bet worth taking. When I say meaningful, I mean more than the standard 5% of a portfolio for inflation protection or as a volatility hedge a la gold. As the DTM5 is a ‘best ideas’ strategy, holding only 5 positions, allocations are going to be meaningful. Its how we manage those allocations that are a challenge.

There is a battle going on in the DTM5 as well. Bitcoin’s rise has presented the DTM5 with a conundrum. Hold, trade or sell? In previous posts I waxed poetic about trading strategies that I’ve been utilizing to keep some degree of risk control in the portfolio. And lets be clear. I am long on Bitcoin specifically and the crypto ecosphere in general. BUT it will likely be a crazy ride (Wait – I’m 8 months in and it IS crazy). The emergence and adoption of any technology is volatile and unpredictable. Cryptos are no different and even if they deliver us all to the promised land it will be a wild ride and many aren’t going to make it!

Very recently, I’ve trimmed back the ‘Crypto’ exposure of the DTM5 to just over 30%. A major adjustment from a month ago when it sat close to 60%. I’ve been taking money off the table for three purposes – One, to re-allocate to other investment(s) that I am very optimistic about over the mid term (1-3 years). Two, lowering the Crypto allocation to limit the downside should the recent bitcoin pullback prove to be something more meaningful, and three, to get some cash on hand for opportunistic buying, should the situation arise.

Because of the parabolic move in Bitcoin, I’ve been trying to think in a less binary fashion than long or short. For example, in the case of bitcoin, I am strategically long. But I’m uncomfortable with the velocity of the upside move it has recently made and the recent price action has me concerned. The resolution? Profit taking and re-balancing. Strategically long, tactically defensive.

The concern, of course, is that by lightening exposure I’ll miss some of the upside should the next leg up occur. But I’ve recently come to a conclusion. I can be strategically long on an asset class and manage exposure defensively……There is plenty of time to increase (or decrease) the positions when a clearer direction emerges. I want to win. And part of winning is playing defense.

Now this may not sound revolutionary. But, understand I (and most of us) come from an investment ‘culture’ that preaches the benefits of ‘long all the time’ and ‘trading doesn’t work’ and ‘its time in the market, not timing the market’ that works. This approach is now being embraced by the bitcoin maximalists. Hey – They may be right. Or not.

Either way, I’m liking the philosophy of Strategically Long, Tactically Defensive. Protecting the advances, regrouping and pushing forward again. Its a battle out there. Plan accordingly!