Thursday, November 10, 2022

Market Deployment #2 : The second crypto Cataclysm.

I consider the First Crypto Cataclysm as the fall of the Terra Blockchain. I lost about $15,000 in that disaster and considered myself fairly lucky, but my crypto course that is focused on passive income folded as stablecoins were found to not to be as stable as presumed. The loss of the course really hurt due to all the man-hours put into coming up with the lab notes.

Thereafter, I thought that the safest strategy would be to buy coins that have already crashed and got some LUNA  and some UST at a fraction of a cent. For the rest of the time, I treated my tokens as amusement park tokens and farmed it on Mirror and Apollo DAO at ridiculous yields of between 200% to 300%. Even today I make about $8 to $10 USD every day from liquidity pools, especially the VIXY-UST pool in Mirror. Every 2-3 days, I put 1000 USTC into a new liquidity pool I find on Apollo / Mirror / Astroport. 

Mirror protocol had its own disaster as of late as the entire developer team stopped supporting the project, Amazingly, someone else compiled the open sourced code found on GitHub and the website was brought back form the dead in multiple addresses. I tried to continue farming some MIAU-UST and, thankfully, avoided getting fleeced so far. 

Instead I continue to make stupid mistakes which cost me $20+ when I tried to use SimpleSwap to convert my LUNA to LUNC but omitted the text in the memo field. 

Even after retreating from a leveraged account for my equities portfolio, I decided to pour in more collateral for my leveraged ETH on Compound, the idea was initially to take advantage of the Merge, but even the merge turned out underwhelming for ETH investors. 

Today ETH is my last leveraged position.

Two days ago, my now tiny position in crypto dropped a further $3,000 USD and I found out quite late that FTX is in trouble. 

To me, this crash is more unexpected than the one that occured on the Terra blockchain. FTX’s SBF is a nice guy and there was nothing to suggest that FTX can become insolvent. It’s easy to talk about hindsight, but even the really smart guys in Temasek did not see this coming. 

I think just like the collapse of LUNA, the collapse of FTX will create ripple effects that will hit other parts of crypto ecosystem, so folks should at least try to move your coins to a decentralised wallet in case your exchange starts to halt withdrawals. 

The question is whether in the grander scheme of things, should investors ditch crypto completely as an asset class?

I don’t think so.

Investors who are sitting on a property and already have a nice equity portfolio, you should continue to put up 1% of their net worth into crypto. If you are risk averse, just put it in BTC and ETH. As volatility is really high, the time difference between An All time Low and All Time High would not be too far apart and we could be talking about a totally different market in 2025. 

Lastly, I think we can learn to enjoy this moment. I’ve always despised the crypto and tech stock pumpsters who were at the top of the world last year telling everybody else to “Have fun staying poor”. If they win, no one would respect prudent risk management anymore. Now that they are silent, I hope they would stay that way. 

Update on my DBS position. I should be expecting some decent dividends from DBS this month end and regardless of the outcome, i have a nice counter-weight to the rest of my REIT position. I’m sceptical of the recent recovery in local stocks as I expect inflation to remain high and herald a more sustained effort to raise interest rates by the Fed. This means more pain for REITs but also a longer time to get some bargain hunting done. 

In fact my DBS position is a bet that folks will underestimate the conviction of the Fed and we will see a battery of 50 basis point raises all the way until June 2023.  

Week after next, I expect to invest funds into student portfolios without leverage, so money has been earmarked beforehand. 

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