The Cryptocurrency Trading Journal

[Daal]

Here is a investing idea that probably wont turn into anything but if it does, its almost free money. CoinGecko candies, which is these free coins that Coingecko gives out to its users daily. I have a chrome extension that claims the tokens automatically daily. I also subscribed to CoinGecko premium in order to get their NFT ($10). I'm bearish NFTs but this is a different idea here.

I dont expect it to appreciate but rather to get special treatment by CoinGecko if they ever to do a real airdrop or ICO or something. Similar to how lots of DeFi projects rewarded their users by airdropping tokens. TornadoCash also did it. If CoinGecko becomes huge, they might decide to issue a real coins and loyal users might be rewarded for their business. The candies and the NFT would be a way for they to measure that loyalty

 

[Daal]

DeFi has been sucking over the last few months, so I consider they relatively cheap. Certaintly over Exchange and NFT tokens. So I took advantage of that to buy more of the ones that I like and that have good numbers on DeFi pulse
I added to:
Compound, AAVE, Uniswap, CRV, Sushi, also some SNX and LINK

That ones that I like the most are Uniswap, AAVE and Compound but I also should say that I consider a crapshoot to try to predict winners on this

 

[johnarb]

DeFi has been sucking over the last few months, so I consider they relatively cheap. Certaintly over Exchange and NFT tokens. So I took advantage of that to buy more of the ones that I like and that have good numbers on DeFi pulse
I added to:
Compound, AAVE, Uniswap, CRV, Sushi, also some SNX and LINK

That ones that I like the most are Uniswap, AAVE and Compound but I also should say that I consider a crapshoot to try to predict winners on this

Pancake swap $cake has not been sucking I've been harvesting and re-staking every single day at over 100% APY and the price of the token is closer to ath

Tbh, I should be cashing those daily interest but I just love increasing my $cake stack every single day

The issue with those defi projects you mentioned are the Ethereum fees especially with Eth being close the ath, the fees are just ridiculous now, whilst in bsc, I can compound cake every hour if I want to, because fees are only mere pennies

 

[Daal]

Pancake swap $cake has not been sucking I've been harvesting and re-staking every single day at over 100% APY and the price of the token is closer to ath

Tbh, I should be cashing those daily interest but I just love increasing my $cake stack every single day

The issue with those defi projects you mentioned are the Ethereum fees especially with Eth being close the ath, the fees are just ridiculous now, whilst in bsc, I can compound cake every hour if I want to, because fees are only mere pennies

Cool, what is your exit strategy for BSC and CAKE?

 

[johnarb]

Cool, what is your exit strategy for BSC and CAKE?

No plans to exit any altcoin position as they are a risk mitigation for btc, otherwise, I'd be hodling 100% btc right now

I have shifted from one alt project to another, but bsc, nexo, and now cake are core alts positions

I measure pfolio valuation in btc first, then fiat. I have gained btc valuation in the past 1-1.5 months and that is more important for me than fiat gain

As I watch more and more videos and become more and more btc maximalist, I have been tempted to convert all to btc, but I have to remind myself diversification is important and I can see the results, it smooths out the btc $ fluctuations to some degree

How do you manage your risks in cryptos?

[PS: in case you read the defi thread where I mentioned I was back in celsius, no longer true, the breakout on cel did not materialize and went back to nexo

PS #2, there's plenty of liquidity on bnb and cake on dex and of course on the binance exchange, in case that was a concern in your question]

 

[Daal]

How do you manage your risks in cryptos?

I always think in terms of portfolio construction, which I have studied a lot on over the years (and a lot of that work is in my Global Macro journal). I want to maximize risk-adjusted returns, not returns. Buffett is a return maximalist guy, but that only works for certain people and you need luck as well. Most people cannot tolerate gigantic drawdowns without mental consequences or panic selling. Also, when all of your eggs are in one basket, you might just lose everything (indeed Ben Graham, Buffet's mentor, blew up in the Great Depression). Also Buffett himself said Berkishire might have gone under in 2008 if the government didnt bail everyone out.

You also seem to be a crypto return maximalist. I'm already financially free, I would never risk that in order to get richer. I dont know what your personal situation is, maybe you own your home and has high income as well, and you dont care if you lose $2M overnight. In any event, in my case I probably spend more time thinking about risk (like coin storage or bear cases for BTC) than I do about return.

I try to follow a barbell style porfolio (80% stable assets, 20% exponential assets) as my backtests do support that its the portfolio that maximizes risk adjusted returns. Crypto is changing that a bit given that my open profit is taking that 20% to much higher levels, so I'm due a rebalancing at some point. But I cringe when I see people all-in crypto, I dont think they understand the risks they are taking. A economic depression (which some credible asset managers think might happen in the next decade) could pop a crypto boom, crashing it by 80-90% at the same time they lose their job. Or they can get hacked. Then they will be asking themselves for the rest of their lifes 'why didnt I do everything I could to prevent from becoming homeless? or for going bk?', They will have to explain to their children why there is no food that day, or why he has to work 3 jobs and cant play with them, when years earlier they had everything.

They might protest and say 'but that's unlikely', well, they might not but I care about tail risks and non-baseline scenarios. I have been hurt in my life by unlikely events outside of investing, that lead to years of pain, PTSD and what have you. So I learned to respect risk

The lucky risk takers get all the attention but the unlucky risk taker cemitery is huge, its just not seen by most people

 

[johnarb]

You also seem to be a crypto return maximalist. I'm already financially free, I would never risk that in order to get richer. I dont know what your personal situation is, maybe you own your home and has high income as well, and you dont care if you lose $2M overnight.

I appreciate your insight and please know that just because my approach to risk and portfolio allocation vis a vis net worth is vastly different than yours, it does not mean I disagree with you and yours

I do care if I lose $2M overnight, but this is probably where we differ the most, you really think btc can go to $0 overnight or the whole cyptos sector for that matter?

I cannot even call that a black swan that is possible, if we break it down to the point that every stable coin issued has $ per $ value in fiat and those stable coins are tied to dexes liquidity pools, there will be bids over a long enough time to sell our cryptos into and that's not even going into the exchanges futures and spots where we can hedge via leveraged short position instruments

After this bull market is over, I plan to have a much different net worth allocation to crypto. I plan to sell off all non btc cryptos to fiat and stable coins, but as I hinted on a post or 2, I may hodl 10 btc's

Currently, I have income from a job, any credit card debt incurred is paid off several times a month, car insurance is paid off for the whole year, new car purchased was paid in full upon delivery a few weeks ago, and we have very conservatively enough cash in the bank for 1.5 years of expenses, and realistically, it's more than 2 years worth. We do not own our home, but plan to purchase a real estate property when cashing out at the end of this bull market. All cash purchase is the plan

When and if btc hits all time high ~$65K, the cash in the bank will probably increase to 4-5 years worth of living expenses

So, as we discuss risks and extreme dire scenarios, I am looking forward to the dark days, not because I want it to happen, but then as a relief and not feel so anxious that it's coming

I do not have stocks, or bonds or gold (other than jewelry and heirlooms which not planning to sell ever), and you are correct,

I am crypto centric when I see the whole world printing fiat at unprecedented levels with the US printing and continuing to print trillions of $ where I'm from. It is quite worrisome when I hear and read of the possibility of a financial system collapse risk. And I'm not referring to the US as a bigger risk, i.e. UK in relation

I'm not a doom and gloomer. I would prefer this stock market bull market to continue and the US keeps printing $ and the bonds to continue to crash and yields to stay at near 0 or negative because the alternative is horrible for everyone and the US will never be able to pay off its debts which means we're in a trapped situation, Japan v2

So to summarize, I do understand my risks and my worst case scenarios and I have put myself to exit cryptos when crypto bull market is over and have enough cash to ride out any cycle, and I'll ride these 10-30% volatility on btc/cryptos but the time to exit is not now, imho

If you've got an hour to waste...

 

[Daal]

I do care if I lose $2M overnight, but this is probably where we differ the most, you really think btc can go to $0 overnight or the whole cyptos sector for that matter?

I cannot even call that a black swan that is possible, if we break it down to the point that every stable coin issued has $ per $ value in fiat and those stable coins are tied to dexes liquidity pools, there will be bids over a long enough time to sell our cryptos into and that's not even going into the exchanges futures and spots where we can hedge via leveraged short position instruments

Sort of, not to literally $0 but down so much, you might as well call it a wipe out for longs. Like in the event of a G-7 ban, which would change the adoption curve in a huge way. Yes, there will be TIME to sell but I think you underestimate the degree of discipline and emotional fortitude it will require in order to ACTUALLY sell. Its one thing to say you will sell, and another to actually sell because we will be dealing with a situation where you could have sold at super neat prices, all of the sudden the market is down 50% and all the bull gurus will be saying 'this wont last, markets will find a way around it, BTC went up in Nigeria when they banned it'. Especially because the ban could happen slowly, it starts with one G, and then others G start joining over several months. It wont look completely obvious

Plus, due anchoring, it becomes really difficult to actually sell. You convince yourself of the bull case that it will come back and then you will sell at the really neat prices again. Its too low now, then well, its down another 30%. Surely, I cant sell now, its 65% bellow where I could have sold. Then its 80% or 90% or 95%

Its one thing if you had been TESTED and survived the test, that is, you faced this situation before and did the right thing many times. Its another to say you will do the right thing when you just got slapped with a big loss, in the heat of the moment. This is why people are so bad at trading and investing, when the time comes, they cant do the right thing, emotions take over

I think you are doing the right thing by cashing out as things go up, but at the same time, you are cashing out into stablecoins. If these coins are used to earn interest, I'm afraid that the risk of the earning of interest is correlated with a blow up in the markets. Who is to say how Aave, Venus or Compound will behave if there are massive volatility and people are blowing up left right and center. Exchanges could also blowup given their exposure to futures, options, etc. If I were you, id be cashing out to the extreme opposite of crypto. OLD stuff like land, real estate and cash in the bank. Stuff that is very unlikely to be correlated to crypto

There is so much unregulated leverage and finance in these markets that it makes a 1987 type blow up a certainty one day. If someone explained what is going on in these markets to George Soros, the man would have a heart attack. Free markets are great but they can also generate huge instability due greed and fear. Crypto is a free market on steroids due the leverage and lack of ability of goverments to control it. It also drives greed and fear like nothing I have seen before

If you look at things like Smoot–Hawley, it did not look obvious in real time. In the book The Midas Paradox, the author goes through the newspaper headlines and market action in the year prior to it. There was a lot of back and forth and uncertainty. A G-7 ban is not my baseline scenario, but its a risk factor and if it happens, this market is going to have a huge crash

 

[Daal]

As far as money printing goes, in one hand I can see why that drives lot of people into bitcoin and crypto. But I have studied monetary policy quite a bit in the past. I know full well that most people sitting in the Fed right now idolitize people like Milton Friedman, and Paul Volcker. They know that when things start to get out of hand they have to raise rates dramatically and I believe they will. Its central banking 101.

A bitcoiner enthusiast might say 'so far, all these people have done is to print money' but he needs to consider all that has happened in the last 13 years is that money velocity has GONE DOWN, they HAD to print money to prevent a depression. So they are following the Friedman playbook of monetary stimulus . If inflation were to get out of hand in the US, I dont think they would have much difficulty raising rates

This is where I disgree with Raoul Pal. Yellen raised rates by 225 basis points, and she was supposed to be a money printer. She did that with resonable inflation. If inflation were to get out of hand, I dont think Powell would be shy about hikes. Pal thinks because debt levels are high, people can't support a hike in rates. I think he is wrong, if Powell were to embark of a hiking path it will be because inflation is high and the economy is doing well, that means Nominal GDP growth is high (say, 8-10%). So income growth is high and incomes are what supports debt. The hike in rates would only bring NGDP down to a level that is still positive but more resonable (say, 4-5%)

I dont worry about the USD having a death spiral of inflation. Its going to be devalued, but it will be gradual. Its not even a devaluation but more like a Rogoff style financial repression

But Fed funds rate going up a lot in the next 5 years is another risk factor to Bitcoin. Novogratz alluded to that the other day

 

[johnarb]

Like in the event of a G-7 ban, ...

Plus, due anchoring, it becomes really difficult to actually sell.

Its one thing if you had been TESTED and survived the test, that is, you faced this situation before and did the right thing

I think you are doing the right thing by cashing out as things go up, but at the same time, you are cashing out into stablecoins. If these coins are used to earn interest,

I'm enjoying this exchange of viewpoints on a Sunday. Btw, a mistake on the reference to bonds crashing, it's an inverse relationship on yields, I meant for bonds hitting all time high (and risk of crash, increase in yields, could pose a problem to all bull markets). Novogratz on CNBC a few days ago, said every crypto investor holding significant amount should be short the 5yr treasury, I'm looking at how to do that or even buy puts on TLT and the likes but not sure it's for me, not my area of knowledge or experience

The bitcoin ban is always a risk, but in this regard, we have to look at how the US is approaching it and insofar as I can see, the US lawmakers have been very supportive of this industry. It's one thing when Ray Dalio or Peter Thiel give out their opinions of a bitcoin ban, but it's another thing when the head of SEC Gensler has a background in the field and the state of Wyoming is passing laws in support of crypto banking and crypto protections, and the state of Texas is encouraging bitcoin mining and giving out incentives, and Miami and so forth and so forth

Watch what they do not what others say wrt to US regulators and officials

I am aware of difficulty selling when it's off the ath price, but I'm wired differently than most traders. I get scared as the price goes down and want to preserve profits

VGX, went to $3.5, my position was 20,000 coins, and when it was on the way down for a few days, I traded out at range of $2.80-$3.00. It then proceeded to go to over $7, I never reentered. Price of entry was $1.1'sh

Badger went to over $95, I had 1,300 coins, when it started to go down for a few weeks, started trading out at $75/badger, and last coins traded out at $45/badger. Price of original entry was $15sh

I can go on and on, but I'm not like noob trader, I want to be around for the long game and not get wiped out, and the only way to do that is to preserve trading capital or simply all capital, period

When I'm convinced that bitcoin is in a bear market, I have no problems exiting to fiat and stable coins and on stable coins reference, the goal is not to earn interest but once it's a prolonged and stable bear market and no systemic risk in cryptos world, then will look at yields when things are stable, pun intended

I do not have leverage positions. If btc crashes and I'm only able to sell at $500K to fiat and stable coins, I will be content