Its 2021, and Bitcoin has reached 32k USD. Either one of these might have spurred me to write my first post. Just sharing my thoughts, Not Financial Advice.
I have been in Crypto since 2016, but I did not make it rich. I bought bitcoin, traded altcoins, bought more bitcoin with cash along the way up, and crashed spectacularly down in 2018 where I eventually sold everything, bloodied and defeated. (another story for another time, perhaps?)
This time, it will be different?
So with Bitcoin hitting new All-time-highs in Dec 2020, I got very interested in Crypto again. I do note that Crypto can be very volatile and I need a plan which will help me control my FOMO and FUD.
In the past, I was not able to HODL as my portfolio was too volatile for me. Even when the portfolio rises it is too much excitement for me. This time, I hope to instill some stability into the portfolio, using stablecoin savings accounts or DEFI lending. Back in 2016-2018, I think there were limited options for savings using stable coins. There was lending on Poloniex and Bitfinex, but at that time I though that traditional markets probably offered similar gains. DEFI was definitely not present back then.
What is Savings/Lending + HODL?
Now, imagine 99% of my crypto portfolio is in stablecoins, put on CEFI platforms (such as Celsius, Nexo, Blockfi and many more) or DEFI protocols (AAVE, YEARN and others), earning say 10% interest. The remaining 1% of my portfolio is put in BTC. If BTC crashes 50%, that is 0.5% of my portfolio, and it would take 2 to 3 week to recover that amount due to the savings/lending. In theory, my upside is still unlimited (as BTC can go to the "moon") while my downside is limited (read the cautionary note at the end of the article). For the non-stable crypto, it can be BTC, ETH or any other coin. Not judging :p.
I will also use the interest earned from savings/lending to DCA into BTC. And HODL it (repeats to myself 3 times).
If I am willing to take more risk, I can put 95%, 90%, 80%, as stablecoins. It depends on how much volatility you can tolerate.
As I always say, "Its good to have dreams, but more importantly, we should be able to fall asleep"
A word of caution...
I do have some concerns with this method though, where you can lose everything
- Stablecoins are issued by companies (maybe except DAI) and have a risk of collapse.
- The CEFI savings platforms also have a risk of collapse.
- DEFI lending platforms have smart contract risk too.
Are the risk/rewards worth it?
I hope this post ages well.
