Joey's Investment Journey - Crypto (Nov-2021)

*Note: This is an adaption of my substack article here. I post monthly reviews on Seedly like this. Check out October's crypto portfolio review. Follow me on Twitter to connect :)

Crypto Portfolio Performance*

Multiple is expressed as: Total crypto assets / Total cost into crypto. The last time I added real-life money into crypto was in July 2020. My starting point for comparison (being conservative) hence will be start of 2020. Portfolio breakdown will be fleshed out in the *crypto section. I’ve included an index to track (assuming if I invested all my cost into BTC and hodl) my active investing performance in crypto.

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% of Net Worth (exclude fixed assets) in:

Stocks: 17%

Crypto: 78%

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Crypto Portfolio Commentary

Before I continue with this section, you should note that like equities, crypto are risk-on assets. I like this helpful graphic from Macrodesiac, a macro newsletter & service I’ve followed (& am a lifetime subscriber to) since 2019. Risk off came during March 2020. Everybody and their mother’s stock crashed to some form of local low. Bitcoin crashed to sub $5000 at its lowest point.

Central banks worldwide stepped in; FED lowered interest rates and committed to insane amounts of asset purchases; markets started to get awash with liquidity as FED was just being the buyer of last resort. A helpful thread here by Sahil Bloom to understand why that resulted in higher asset prices. Bonds became un-investible overnight. Who would want to buy a bond with 0% nominal yield? Stocks became the boomer’s TINA (there is no alternative). Guess what crypto became?

From the crash in March 2020, there were many stocks (and crypto) that appreciated a ton. Fast forward to Nov 2021. Where are we now? Inflation prices are through the roof, and media outlets have been peddling rate hikes for ages. The Fed has also announced the tapering of the QE asset purchases, which will completely end in June next year.

In a nutshell, economies seem to be recovering and governments are prepared to remove the crutches and let the economy self-repair on their own. Naturally, the environment that was there during 2020 and this part year will be less favorable, also in part to combat inflation (of asset prices & money supply) that is seemingly spiraling out of control.

Either way, I’m here to tell you that you don’t need to worry about any of what I’ve just said. To be a good crypto investor, we don’t have to have a good understanding of the macro market. We also don’t have to know what the Fed is doing. Of course, in the short-term prices fluctuate based on sentiment directly caused by Fed’s actions or retail exuberance (or lack thereof)). I’ve also just seen crypto prices tanking this past weekend as the new COVID variant (Omicron) was discovered.

Too bad Seedly doesn't allow gifs. I was supposed to have a gif of a pigeon jumping off a building!

Prices promptly shot back up as Monday opened and Omicron was way less worse in terms of health risk than feared. Bitcoin back to 100k? Kidding, but this should hammer home the point as to why its extremely difficult to time things in the short run. Long-term though, prices should roughly reflect its fundamentals. This is true in stocks and in crypto.

Simply expand your time horizon, and you’ll do pretty well as a crypto investor.

Please note that you should not be in a position where you could be liquidated in such volatile movements. I do have crypto that is borrowed but I tend to keep it well below the recommended LTV ratio (more on that later).

Positioning wise, it’s always more profitable finding the projects (with good fundamentals) early, then hodling until the narrative plays out (taking profits along the way is good practice too).

I strongly doubt the perceived trading ability of anybody that started in 2020, since as implied in the Macrodesiac graphic above, a rising tide lifts all boats. Feel free to prove me wrong in the coming bear market. ;)

So much for my opening in last month’s crypto commentary:

Over the past month, I was trying to aggressively position for the upcoming Q4 2021 / Q1 2022 play, where I anticipate to be Bitcoin heading to $100k and L1 chains being way higher than they already are now. Nobody knows what will happen though.

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Drawdowns are inevitable, especially for hyper-reflexive assets in crypto. My advice (which I haven’t been following to a T) is to have cash on the sidelines.

Always have cash on the sidelines.

For new investors wanting exposure, simply identify the projects you use actively or would like to support on a long term ( 1 year). Also, try the projects out. Join their community on Discord and mingle with the members and team. Just these simple action alone can build conviction.

Price wise, I wouldn’t recommend waiting too long for prices to dip, especially if you aren’t actively trading (we’re long-term oriented). Start an initial spot position, and determine how much more you would allocate if prices go 10/20/30% downwards or upwards. This ensures you always have exposure if the project does well.

If no dip, enjoy the ride. If dip, best to buy at key moving averages or whatever your indicator says price will retrace to. Price will likely dip beyond what you expected it to trade at in times of volatility, but it doesn’t really matter (for me anyway), since:

1. Crypto money, while a huge % of my net worth, is money I don’t strictly need for the next 5 years
2. I’m in spot exposure & not trading derivatives. Hence, my portfolio can tolerate heavy drawdowns without suffering liquidation
3. I am positioning for a future where crypto has succeeded in garnering mass adoption.

It is extremely unlikely that crypto adoption will take many steps (if any) backwards, especially since large corporations are open to incorporating crypto as payments (see Visa and here). I highly doubt countries will ban cryptocurrencies outright like China did, but will seek to regulate them like US or India to establish regulatory supervision (crypto undermines their political influence since it allows for permission-less transfer of value aka $$).

This fundamental point represents my floor in the fundamental thesis. As long as this is the case, over the longer term (3-5 years), price should be higher from where they are now. Who knows, it will go to 0. It will be devastating for sure, but I won’t have to resort to filing for bankruptcy.

😪

Life is 100% full of non-100% bets, but 0% full of 100% bets.

Stay frosty guys. See you on the other side.

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Crypto Portfolio

Not to be over-protective about my positions, I will only share those that I deem to be decent for longer-term holds (aka no degen bets or highly speculative ones), or those that I would like to have exposure to (even if it goes to 0). If you look hard enough on crypto twitter, you’ll find the degen coins quite easily.

My crypto positions

By themes (Not in order of Market value):

1. Large-caps: $BTC $SOL $FTT
2. Avalanche eco: $AVAX $XAVA $JOE
3. Luna eco: $LUNA $VKR $STT
4. Gaming plays: $PYR $YGG $MC
5. Others: $AR
6. Compass Mining (Capital Expenditure): $BTC (as miners will be used to mine bitcoin).

I will keep repeating: NOT FINANCIAL ADVICE. Please do your own research.

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Yield Farm developments

I have made some changes to my yield / degen farming activities based on alpha I consume from twitter, or just based on me chasing yields or rebalancing my portfolio. Notably, I made moves to increase my exposure towards the $LUNA and $AVAX ecosystems and had sold off all my L2 tokens in the Solana ecosystem.

A friend of mine asked if I bought any insurance for my farming activities. There’s actually insurance protocols out there covering for risks such as InsurAce and Nexus Mutual. If you’re interested, can check those out. For me, not everything has to be insured; that depends on the project, the team, and how long it’s stayed alive.

The what of the insurance cover is also important. For example, take note of 5, 7 and 9.

The predominant risk of any project are rugs, as loosely defined by an insider stealing the tokens and making a run for it (pt. 5), or an exploit done by a hacker based on bugs that were already known (which are probably disclosed on GitHub).

So what are we actually insuring? You can read that on your own, and you need to be cognizant of what they cover before you buy. I will take my chances.

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Solana

With half my FTT stack, my liquid BTC and SOL, I am still farming on Sunny (BTC), Saber (FTT). I have shifted my SOL stack to Mercurial Finance, where I also receive wLDO tokens for providing liquidity to SOL-stSOL pool. As a reminder, these are cross-chain liquidity pools. So for example, one should expect renBTC (Ren project’s BTC) to be the same price as the actual BTC itself. As such, the risk of impermanent loss (IL) is kept to a minimum. Of course, if the project fails, the price of renBTC will drop sharply, so its not like it’s risk-free. But for my risk tolerance, it is pretty close.

I have another position doing leveraged farming on $ORCA-USDC, which I had written about from last month. This marks the 2nd full month of farming, and I’m excited to share with you the results of my experiment. My total cost into this pool is $2050 USDC, just for info.

This is why its important to understand IL before you ape into any high triple-digit yielding farm. Don’t get fooled (often it’s not sustainable)! Here’s a good calculator I found for IL losses on Francium (seems to have potential in terms of better UI/UX + strategies for delta-neutral farming).

Interesting platform for yield farms…

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Avalanche

Over the past month Avalanche went from $65 to $135 then back to $110. Seems like a Solana like euphoria, and credits due to Olympus DAO forks $TIME promising 87k% APY and a 8-hourly yield of 0.6%. Obviously, TVL migrated to where the yields are, which are on $TIME. Highly volatile though with these projects, do take care.

Elsewhere, I got really bullish on TraderJOE ($JOE) seeing how they’re by far the leading DEX on Avalanche and a portion of trading fees goes into burning $JOE, thus rewarding xJOE hodlers. See here for more info. With the xJOE, you can also farm it for additional JOE tokens. I am also loaning some USDT via their lending page, which I converted to xJOE.

Safe to say, I have high conviction. Beeg revenue.

Needless to say, I have also staked $XAVA since forever (just got reminded I actually started staking since Early Sept as I was eligible for this reward), so will just let it sit there for a 5%+ APY, and an allocation for the upcoming IDOs. I will assume this play will work until it doesn’t.

Alpha will seem like noise to the regular investor who don’t wish to put in the effort to understand things.

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Terra/Luna

As mentioned above, I’ve started to be more involved in the various projects within the LUNA ecosystem.

I have staked some LUNA with Stader Labs, which rewards me in their SD tokens (APR of 10-11%). For native staking on L1 chains, the rewards for staking was quite surprising. Other chains like ETH or SOL provide about 5-8% for helping to secure the network. I also get small amounts of airdrops from the main protocols.

Beyond that, I’ve also gone with the popular anchor protocol, doing the farming play everyone is familiar with:

1. Bond LUNA for bLUNA as collateral
2. Loan UST from the collateral (I’m at 31% LTV, playing it safe).
3. Deposit UST into the savings to earn ~20% APY

This allows you to capture the price movements in LUNA (as well as the downside risk). Crypto prices can fluctuate a lot, hence I like to keep my LTV (aka margin of safety) conservative.

Next, I’ve bought a small sum of $VKR on the Valkyrie protocol to stake for a weirdly high 175% APR, with rewards automatically re-staked. I like the concept behind this protocol as its sort of a growth hacking engine for the Terra ecosystem (all on the blockchain). See this thread here.

Lastly, I have also staked some StarTerra (~11% APY), which is launchpad for IDOs with gamification embedded in the interface. This allows me to participate in IDOs via a lottery system. If I get it, great. If not, I will simply stake and hodl. Notable that they also allow non-Terra projects to raise money there (e.g. SolChicks which is on Solana).

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Compass Mining

I’ve bought my miners on the 24th and 27th July. They were supposed to start mining in Sept 30 and Oct 30 respectively. They got delayed as the facility that was supposed to host them (a super large one) fell through. This is not new information as I talked about in my previous articles (see the similarly titled section). The USD stuck inside the miners hurts though.

On November 30th, Compass Mining gave us an update regarding the delayed miners, and said that the next earliest date will likely be from Dec 10 onwards to end of Q1. While definitely not ideal, at least it represents progress.

I kid. Thankfully, it wasn’t a big portion of my crypto portfolio, and hence I will be able to financially recover from this. Whilst delays are par for the course for any shipments, Compass Mining did compensate the affected miners for a total of $500 per affected machine. They’ve done this twice, so I’ve got $2000 in credits to use, so its not that bad. I paid ~7.8k for each machine, so the $2000 in credits can help offset future utility costs.

For that latest update above, they’ve also said that if I’m willing to wait (for the next available facility from Dec to Q1 end (which I am), they will waive 12 months of facility hosting. That’s about $150 per month per miner. So that’s another 3.6k in subsidies. Not all that bad.

Let’s pray that December will _finally__ _be the month I start hashing and stacking dem precious sats…

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Conclusion

Thank you for reading thus far. October’s portfolio review got me 100 viewers, which I will be forever grateful for. I really appreciate each and every reader for this article. My hope is that through this article, I improve my thought process & clarity, whereas you join me on this journey of life where I pursue the _finer _things in life: financial freedom & my passions (investing + crypto).

Rich or poor, I will be writing every month. I don’t need 1000 readers, but as long as 1 reader benefits from reading these articles, I will keep writing.

Have a great December, and Merry Christmas!

Cheers,

Joey