Best day ever

Snow day, Klondike and Metawhale launches, r/WSB and Elon #bitcoin

Yesterday was one of the best days in recent memory, as it was a snow day. I wasn’t expecting any, I had checked the weather on Wednesday and it showed rain, so I was pleasantly surprised Elder woke me up gently in the morning to tell me that it snowed. I was surprised to find that two inches had fallen overnight. She was happy, and so I told her to go ahead and run out and play. Some time later I heard Younger waking up, so I called out for her to look out her window. SNOW! I called her to the bed and told her to look out at the backyard, and the look of pure unadulterated joy on her face when she saw it was one that I never want to forget.

I checked into work, did a few things before donning my snow boots and joining the kids outside. The snow was slowly melting, perfect for snowballs, so I scooped one up and lobbed it forty feet across at Elder, who was building a snow fort with the other neighborhood kids. It hit her smack in the chest, a perfect throw. I had to run in and out to check on work, made some cocoa for the everyone, and took it easy while the girls exhausted themselves outside. We had their friends over for pizza and a show, while I drank beer and played card games with the dad from down the street. Good times.

It was a stark contrast to what was going on in the rest of the world. Twitter was aflame about /r/wallstreetbets; I’ll not go into that right now. I did manage to do some options trading for the first time, a June covered call for $MARA at $40, twice the current price. The premium was handsome, and I’m a bit ashamed that I didn’t figure this out sooner. MARA is something that I was planning on holding through June regardless, and if it does manage to double by then, I’ll have made roughly a 20x on the stock, plus a ridiculous premium. I needed some cash anyways, and I’ll be rolling over my equities positions into crypto anyways, so the sale will be a good way to exit my position.

Wednesday also saw the launch of a new defi project, Klondike. I hadn’t gotten wind of anything new before prelaunch like this, so I was very interested. It’s clone of Basis Cash, a rebasing, seigniorage token, with some iterations, but I really don’t understand the tokenomics of it to be honest. It was brought to my attention because it allows one to stake bDIGG, which is the staked token for BadgerDAO’s DIGG token. I didn’t want to risk my DIGG on an anon, unaudited project, so I put a small stake of wBTC instead. I did manage to look at the smart contract code and made sure that ownership was revoked. There’s nothing fancy from what I can tell, so I think the risk of loss on the wBTC and bDIGG pools is fairly low. I didn’t mess with any of the LPs though, even despite a ludicrous APY. There were too many whales, and divergence loss would have eaten any profits. Still now, I’m not impressed by my emissions, but I’m going to wait until the end of the five day mint before I do anything else.

Last night though, was the launch of MetaWhale. I am not ready to do a full write up on this one, cause it is bonkers. Because of my involvement with PRIA, I was eligible for a nice airdrop of this first project, based of PAX Gold. I’m also holding a nice NFT that entitles me to continuous rewards from all the projects in the ecosystem. So I’m hoping for the project to succeed, despite my skepticism around that it’s attempting to do. There was actually a moment of panic on my part, when one of the reserve management functions failed to work, and I thought the project was doomed. I actually sold my PRIA while it was happening. Turns out that the web page was failing to provide Metamask with enough gas to complete the function, so it kept reverting. Things appear to be moving smoothly at the minute, but I haven’t been following too closely today. I’ve just been reading over the docs, wrapping my head around it, and trying to clarify things with the creator.

I spent most of today looking for yield opportunities. Armor.Fi, an insurance protocol a la Nexus Mutual, looks promising, as does FuruCombo, which provides some defi building blocks. Looking at that got me going down a rabbit hole of pieces on flash loans and scheming of ways to build arbitrage bots with it. I can feel the pieces moving into place in my head, but it hasn’t quite clicked yet. I get the collateralized Maker vaults and so forth, but I really don’t want to do anything that leaves me in a leveraged position. I’d rather just find an opportunity, strike, and be done with it. We’ll see how that goes down the road.

Of course, today’s big news was Elon putting #bitcoin in his bio, causing a 10+% run up this morning. It pure pandemonium. This on top of the r/wsb exodus into crypto caused exchanges to go down left and right. It’s been a rather distracting day. Couple of days really, if I’m being honest. I’ve been redlining the past few days, and I can’t believe I’m saying this on a Friday night at 8:30, but I really just want to go to bed.

Badgers and Whales

Every time I miss a day on this blog I feel like coming back and asking penance. Monday was really crazy and decided to tie one on with the Missus last night. Spent today in Hangover City, as she likes to say. The weather has been really crappy the past few days, so we haven’t gotten outside much, the kids are going a bit crazy and are taking up a lot of my time, which is putting pressures on what I’m supposed to be doing for my day job and other projects I want to get done.

Speaking of my day job, I’ve been doing so well with my investments that I decided to try and have a talk with Missus about leaving my job to focus on crypto projects. She’s not having any of it. We still have a mortgage and I still have student loan debt, and she’s not interested in having any conversation with me until after that’s gone. And she wants to retire too she says. I became very frustrated, cause I could basically liquidate a year’s salary out of my trading portfolio if I wanted to, and basically sit on the cash, but she doesn’t want to hear it. Very frustrated.

BadgerDAO is mainly the reason that I’m considering this now. I’m on day eleven or so since I started farming through it, and am still making somewhere around five hundred percent APY on it right now. It’s insane. Between the increase in BADGER’s price, the DIGG airdrop, and the various pools that I’m in, I’ve already doubled my money. I really don’t know what to do. I’ve already been looking around at other degen projects on CoinGecko, trying to figure out what to ape into next, but I haven’t done anything other than rebalance some holding so that I could stake my DIGG airdrop.


Also yesterday, Set Protocol / Token Sets released their public UI, allowing anyone to create their own set. We’re probably going to use this as a starter pool for Homebrew.Finance’s $BREW token, but I’ve got more research to do on the Set management and how deposits and withdrawals will work. I started looking at the contract code today, but I’m not in any rush. I’m hoping it might be useful for managing my IRA funds once that’s been opened, but I’m probably looking at next week or two from now before I have funds available for that; I’m still waiting on the LLC to be formed.

And earlier today, Dr. Mantis of $PRIA fame dropped the documentation on MetaWhale, his new, very ambitious project. Going over that is going to take a post of its own, but I started putting some thoughts together in this thread.

I’m feeling pretty good about Metawhale, considering the fact that the NTF drop that I got is worth about three ETH right now, and the airdropped tokens that I’m getting with the MW launch will be a pretty nice asset to be holding. I’m more interested in the way these Whales (BTC and PaxGold funds) will be buying up and distributing PRIA via airdrops. It’ll basically amount to perpetual income for the life of the project. It’s very interesting.

Announcing Homebrew.Finance

DAO-based asset trading pool

Ethereum and DeFi are blowing up this year. And with the price of Ethereum nearing all time highs against the dollar, that means gas costs on the network cost more. Smaller entrants are quickly being priced out of more lucrative projects such as yield farms, which require high entry and exit fees which can negate ROI for smaller stakes. Currently the cost of entering a position in Uniswap or Sushiswap liquidity pools, and staking these LP tokens in a project like Yearn or Harvest is only profitable if one has a significant amount of capital to invest, and a long enough time frame. These limits, which I currently believe to be around $5,000-10,000, will only increase as the value of ETH increases.

As someone who is currently making the equivalent of a decent salary through yield farming, I would like to bring this opportunity to others, so I have decided to launch Homebrew.Finance which will allow us to pool stablecoins or other assets from a number of smaller investors. We will then deploy these funds to tokens and projects on their behalf, allowing them to save costs on gas. Profits within the fund, whether from trades or yield generation, will not be considered taxable to the user until such time as they decide to pull their liquidity.

The current plan is to develop a pool using Set Protocol. It is our intent to allow participants to deposit USDC and receive the Set’s token, $BREW, in exchange. Initially, we expect the Set’s funds to be deployed to some mix of wBTC, ETH, and the DeFi Pulse Index, $DPI, which is a market-cap weighted index of DeFi-related tokens.

Set Protocol is attractive for several reasons. We can whitelist assets to the Set, and determine the asset allocations according to our needs. There are adapters available for popular protocols such as Uniswap, Sushiswap, Aave, and Compound, which allow us to provide liquidity or gain leverage on our positions. However, staking liquidity tokens, a key component of some of the more lucrative farms, will require additional protocol adapters to be developed internally, as Set Protocol has no plans to incorporate them at this time.

As far as first steps goes, I have taken the first step off registering the domain for, and a Twitter handle, @homebrewDAO in anticipation. I’ve also initialized a group on GitLab that we will be using to track development and planning. I’m writing this first post to get the word out, and gauge interest in this project. Initially, I’ll be controller of the Set, with an aim toward decentralized governance once we get going. I anticipate some sort of governance token, which can be minted by staking $BREW tokens, can be used to determine voting rights.

I anticipate having the Set created sometime in the next week or so. I hope that by the end of the year we’ll have a solid project up and running, with hundreds of thousands of dollars in liquidity pooled across not just one, but multiple sets with different risk profiles. If you are interested in getting involved, please let me know.

Cryptoassets intro for equities traders

I came across a request last week from someone asking for help writing up an intro to crypto for traditional equities investors. I offered to help, thinking that I had already done most of the work, but it soon occured to me that I hadn’t written anything aimed directly at people new to the space. So, let this be a quick introduction to a few things that I think anyone coming over from the space needs to know. This won’t be an explanation of bitcoin or blockchain, or even DeFi, as there are numerous resources out there.

My background is in tech, and I’ve done well over the last twenty years, investing in tech companies for the long haul. I caught all the FAANG plays before it was cool, and have made some missteps over the years, either being wrong with India and China plays, or being to early, like with 3d printing or pot stocks. For of my career, I followed the advice of The Motley Fool, only buying stocks that I was interested in holding for five-plus years. I let that subscription lapse after I went down the crypto rabbit hole about six years ago, but the philosophy sticks with me. I treat crypto more as longer-term play, and find that I do better the less I try to worry about TA and swing trading, and just buy tokens and sit on them. I could brag about picking Ethereum at thirty cents, or getting in on ChainLink right after the ICO, but I’ve held numerous bags to zero over the years, and lost thousands on scams that I thought we’re going to have a big payday. And my biggest returns have been from good old-fashioned dollar cost averaging Bitcoin, every week, every month, for the last three years.

So let’s get to it. I have a couple pieces of interesting advice, and many, many warnings.

Crypto exposure outside of crypto

If you’re like me, you already have a brokerage account opened up, maybe within a tax-advantaged IRA or self-directed 401K. If so, you’ll want to read my post about checkbook LLCs, but in the meantime, there are plenty of ways to gain exposure to Bitcoin, Ethereum, or the broader crypto space inside your traditional account. The standard way to do this is through Grayscale’s Bitcoin and Ethereum trusts, which trade on the OTC markets under $GBTC and $ETHE. There are other Grayscale funds available, but as a novice, I would stay away from these until you understand the inflows to these funds and the premiums associated with them.

Alternatively, there are many companies holding Bitcoin on their balance sheet. has the most comprehensive list, let me just say that my favorites are miners like $MARA and $RIOT, which have been outperforming BTC. Voyager Digital is my personal 2020 favorite, which is an exchange play that has returned over two thousand percent in the last year.

Every crypto transaction is a taxable event

Let me repeat myself: EVERY CRYPTO TRANSACTION IS A TAXABLE EVENT. With the exception of buying spot with fiat, and some instances of wrapping Ethereum (which I won’t explain here), every sale, swap, airdrop, deposit, claim or stake will need to be tracked for cost basis and capital gains. I am also not referring to straight up withdrawals, transfers or deposits between your exchange accounts or wallets that you control.

Crypto tax guidance from the IRS is abysmal, and will hopefully get cleaned up this year, but till then it is an absolute nightmare. Most of the exchanges will prepare your tax documents for you, but once you start getting involved in DeFi, you will want something to help you prepare you tax documents. CoinTracking (reflink) is one I’ve used for years with moderate success, but the new one that I would probably recommend is called TokenTax. They both can track your Ethereum address directly, and import data from most exchanges via an API. There are alternatives, so experiment with a few and find one that works for you. You do not want to skimp on this. They should offer you a choice on how you want to calculate your gains, FIFO, FILO, or whatever, I prefer HIFO, for highest in, first out.

So no, there’s no “like for like” exception for crypto like there is in real estate. If you buy ETH with BTC that you bought on Coinbase, you have to calculate gains on the BTC and record the cost basis of the ETH in fiat terms. Same thing goes if you — god forbid — use your crypto for something useful, like actually buying something. That’s right, you’ll have to track cap gains on that proverbial cup of coffee that you bought with your bitcoin. This may change under the Biden admin with more crypto-friendly officials, but for now that’s the way it is.

The only way to legally avoid all of this is through a tax-advantaged account like an IRA or 401K. Beware though, these “crypto” retirement accounts may be custodial accounts that restrict what you can buy, don’t let you withdrawal your coins, and charge high trading fees or insurance. Again, you can read my post about checkbook LLCs to see how I’m keeping tax-advantage status and controlling my own funds.

Crypto never sleeps

For the most part, equities traders are used to standard NYSE hours, 9:30AM-4:00PM, Monday through Friday, save holidays. Not in crypto. Markets are always open, although the mood can change as traders wake and sleep from the East coast to the West, Asia to Europe. Many times I’ve caught myself getting ready for bed, only to see Bitcoin make some big move that I want to be a part of. It’s easy to lose sleep. Crypto is also immensely addictive, and if you’re like me you may need to take steps, like deleting apps off your phone, if you find yourself checking the price of Bitcoin every five minutes. If you drink or smoke, you might also want to set limits and rules so you don’t FOMO into a stupid position while you’re bent and wake up rekt the following morning.

Exchanges are not your friends

It’s easier than ever to purchase crypto these days, but one of the biggest mantras in the industry is “not your keys, not your coins”. This means you don’t use exchanges as your banks. If you’re dealing with any substantial amount of funds, you HAVE to get a hardware wallet. Trezor and Ledger are the two most common ones, but you should do your research. If you’re dealing with Ethereum you’ll probably wind up dealing with Metamask, but you’ll want to hook this to your hardware wallet as well. Same goes for any other software wallets such as MyEtherWallet, Exodus. Newer tokens might not have support for anything other than an executable that runs on your computer, or just a website that you interact with. Do your research, and never get in a position you can’t afford to lose.

Exchanges get hacked, and most don’t carry any type of insurance, so never keep more on them than you need for a trade. You can use leverage on some exchange as a way to negate this risk (not to trade more than you have!), but for the most part, you’ll want to keep things on your wallet where possible. The rise of DeFi lending and interest bearing accounts which provide yield on deposits are making it very attractive to do the opposite, but beware counterparty risk, and spread your funds if you feel compelled otherwise.

If your Exchange doesn’t allow you to custody or withdraw your funds, i.e. Robinhood or Paypal, then you’re not really buying crypto, you’re buying an IOU. Stay away from them. The major fiat onramps in the space if you’re in the US are be Gemini, Kraken, Voyager (reflink), BinanceUS, and I hate to say it, Coinbase. If you’re using Coinbase, or Gemini, make sure you swap to the “pro” versions with proper limit orders, not the market order only interfaces that they put up for noobs with the three percent fees. These aren’t available on the mobile apps, so use the desktop/web versions to access them.

Speaking of limit orders, no crypto exchanges that I’m aware of have implemented trailing orders, which is a shame. I have my own cynical theories as to why. A few, like Binance and Kraken, have access to leverage and OCO type orders, but for the most part you’ll be dealing only with limit and market orders.

And even after all all these years, the major exchanges haven’t figure out how to stay up during moments of high volatility and activity. In fact, one of the sure signs of a bull run is Coinbase going down.

Beware limit orders and leverage

Just stay away from leverage unless you know what you’re doing. Period. It can be tempting when BTC is posting a huge green candle and you want to go in 5x with everything you got, but you’re playing with whales, and they love to stop hunt. They routinely pump or dump the price to trigger cascading liquidations, so they can buy back up or dump on the market after the carnage has cleared. Sometimes it might even be the exchanges, countertrading against you. Beware.

On the other hand, don’t count on that stop-loss hitting. Exchanges have gone down, during these flash dumps, preventing those orders from closing, and leaving people holding a bag after the carnage has cleared.

And never short Bitcoin in a bull market. Just don’t do it.

Don’t listen to anyone

The trollbox on TradingView can be the absolute worst, most toxic place in the world sometimes, everyone’s an expert and knows exactly what the market is going to do in the next five minutes, believe me. They’ll shill their bags, pump them, and talk them up and up and up. It’s easy to get caught up in it. Same thing goes for Twitter, as well, and I say that as someone who spends an inordinate amount of time on Twitter. Just assume that anyone who is talking up a $cashtag or posting a chart is shilling their bags.

Sure, you can ape along with them, and maybe you’ll do alright, but if you read up on projects after you’ve aped into them, you’ll eventually be able to sort the cream from the crap.

And never, never buy the FOMO on a huge green candle on the five-minute chart, unless you’re prepared to exit your position at a moments notice. Like I said, I don’t trade like that, anymore. I prefer to open a small position, do some research, and scale in over time if I think the project has promise.

Hopefully this advice will be helpful to you. I know much of it seems doom and gloom, but I want you to be warned. In 2017, I saw life-changing riches come in the blink of an eye, and in 2018, I watched it drain away cause I failed to take profits. This year, we’ve seen just the beginnings of the bull market return, and I’ve already seen more than 4x returns in my cryptoequities account in the past six months. And I truly believe we haven’t even seen a tenth of what we should expect before the end of the year.

If this piece is helpful, please drop me a line with some feedback, or your question, as I know I have more to share. As they say, an expert is just one who’s made enough mistakes in a given field, and I can help you avoid the same mistakes, then my day’s work is done.

Set Protocol for defi fund management

Over the years, I’ve been setting aside a small amount of cash for my daughters’ savings. A few bucks a week that I can use to teach them about money. My wife has been contributing to their 529 college savings plans, but I feel it’s better to give them the opportunity to learn investing and have funds available for entrepreneur activities, so I’ve been building up accounts for them in the hopes that I can involve them in the money management when they turn thirteen or so, before handing over the funds entirely when they turn eighteen.

When I first started, I decided to open LendingClub accounts for them, since the rates were much better than than standard savings accounts. At some point over the last three years, I decided to stop contributing to those accounts, and started putting the money into bitcoin instead. The LendingClub loans have three year repayment terms, so most of the outstanding notes have yet to be paid back. So once a month, I’ve been withdrawing the cash from LendingClub, into my bank account, and from there into their BlockFi accounts where the USD earns interest along with the BTC that I’ve bought for them.

As I’ve gotten more comfortable with DeFi, I’ve been moving USD and BTC funds from BlockFi accounts over to various yield farms, Yearn, mostly, but for the past week I have a significant amount of BTC wrapped and staked on BadgerDAO. More on that later. The issue that I’m having is that the funds are mixed, and tracking allocations between the various earmarks, as well as gas fees, has become a huge pain. I’ve been trying to keep track within a Notion sheet, but tracking who’s got what quantity of funds deposited and staked in this, that or the other pool is an obstacle.

The main reason for the commingling of funds is that Ethereum gas prices are making contract interactions with these farms cost prohibitive, and the problem is only going to get worse after $ETH breaks price discovery and goes 2x or more. A few months ago, when ETH was trading at three or four hundred dollars, I would have told you that it’s wasn’t worth doing yield farming unless you had a thousand dollars to put in for three months. Now, three months later, with ETH at $1400, I’d say that lower bound is up to five grand, probably really twice that when it comes down to entry and exit fees. Ethereum is quickly becoming a whale’s game.

The best solution that I’ve come across thus far has been Set Protocol. A Set is a basket of ETH and ERC tokens. The Set manager adds tokens and various strategies, and then users can buy into the Set to get access to the basket. Set Protocol is what powers TokenSets, which powers the DeFi Pulse Index ($DPI), a market-cap weighted index fund of DeFi tokens. (I’m very long on DPI). TokenSets has a limited number of funds available, as they go through a vetting process, but anyone can create their own Set using Set Protocol.

It’s a bit complicated right now, and not very user friendly as they have no UI, (yet,) but is seem like it might be an option for me to make a basic index fund. There are some margin opportunities, but unfortunately it doesn’t have any modules that support staking funds in liquidity pools, or participating in yield farms. That may change soon, and I’ll find out more when I talk with one of the co-founders tomorrow. Having my own Set will allow me to track the number of my Set’s ERC20 that belong to each family member, all I have to do is deposit USDC. Then once a quarter or so, I can reallocate the funds within whichever project I choose. And the best part, is that I can allow others to buy into the Set, permissionlessly.

Checkbook control crypto retirement accounts

man opening his arms wide open on snow covered cliff with view of mountains during daytime

TL;DR: Fund an AltoIRA Checkbook+ LLC, and buy, trade, or sell bitcoin and other cryptoassets within a tax advantaged retirement account. Reduce your taxable income AND eliminate capital gains taxes!

I am so excited I’m almost giddy.

Background: I’ve been investing in equities since the early 2000’s and had employer 401Ks that I rolled over into a IRA brokerage account in 2017, a few years after I started getting involved in crypto. In 2019 I started buying Grayscale Bitcoin Trust ($GBTC) as a way to gain exposure to bitcoin. It currently makes up the majority of my total portfolio, about forty percent, and another forty percent are in crypto mining and exchange positions, and Grayscale’s Ethereum Trust. I’ve been looking for a way to reduce exposure to Grayscale’s products which trade at a premium, and put funds in BTC directly, while retaining my tax advantaged status. One of the benefits of trading within these accounts is that I can enter and exit a position without having to pay taxes on any gains.

Alto came to my attention while reading a post about the DeFi Pulse index. Alto was just kinda dropped in there as a side note, and after after a bit of back and forth with the CEO, and I went ahead and scheduled a call with one of his associates, James O’Brien.

I was a bit deflated going into the call, because the fees that I were told given were a bit off-putting, one percent a year as a maintenance fee, plus one point five percent per trade. That might be ok for someone starting out, but there’s no way I would go for that. James explained that the crypto product that Alto offers is basically a vehicle for Coinbase custody, which is geared at institutional investors. The fees are what Coinbase charges, and covers insurance on the funds. Of course, you’re limited to what tokens Coinbase offers, and you can’t move anything off to a private wallet. Fair enough, but it’s not for me.

So what really got me excited was when O’Brien told me about the checkbook LLC which is a self-directed IRA plan. You have checkbook control over your funds.

“Checkbook Control” is the term used when a self-directed IRA owner has complete signing authority over an account that gives access to his/her retirement funds. This strategy is achieved through the establishment of a Self-Directed IRA LLC. Since the LLC established is a business entity, it can establish a checking account. The LLC is funded by using retirement assets like an IRA which then funds the LLC’s checking account. This offers greater investment freedom, allowing you the IRA holder to meet your investing goals and manage your assets with ease.

What is Checkbook Control?

These type of entities can be used to purchase practically any asset, including real estate or cryptocurrencies. And the cost that Alto charges to do the necessary paperwork is only $750 dollars, that’s five hundred to setup the LLC and necessary documents, plus two fifty a year for what I assume are the required tax documents and so forth. That’s much better. I can use whatever exchange I want, park the tokens in a cold wallet, liquidity pool or lending provider, and sell them without a care in the world. My keys, my coins.

The only real downside is that crypto assets cannot be transferred directly into the IRA. Only cash goes in. So if one has existing crypto holding that one wants to make into a tax-deductible contribution, you’ll have to liquidate to fiat, transfer the funds into the IRA’s cash account, then to your crypto on-ramp to purchase the asset again. This could lead to some slippage if one doesn’t have cash on hand, but that can probably be optimized through some dollar cost averaging process.

There’s another downside to a crypto IRA, and that’s the fact that IRA contribution limits are currently capped at $6000 a year. There are similar vehicles in the 401K space that have much higher limits. I found one company, called Solo401K, that provides this service. I chatted with one of the associates over the web. These plans are available to self-employed individuals, contract employees, but not individuals who are employed by others. The limits are closer to thirty thousand a year, and there’s other advantages, like being able to take a personal loan out against the account. Since I’m not a contract employee or self-employed, the 401K plan isn’t an option for me. Solo401K is by Naber Group, which also has an IRA option, but their setup fee is twice as much as Alto, and they charge an extra hundred a year in fees.

I went ahead and setup my Alto account this morning, the process took about five minutes. The main thing you need to think about is what type of IRA you want to open, whether traditional, Roth, or, if you’re a business owner, a SEP IRA. Other than that, there’s several forms to fill out, and it appears that it will take up to two weeks for the paperwork to come back on the LLC, which is created in Arizona.
Best part of the LLC contract.

Once this is all done, and I’ve opened new bank and exchange accounts, I will begin liquidating my IRA positions in GBTC, rolling over the cash, and buying spot BTC. I’ll probably do the same with my ETHE holdings as well. I’ll also need to liquidate enough of my existing crypto holdings to max my 2020 annual contribution before April 15th, unless I can come up with that kind of cash in the meantime. It might be a wash with capital gains on any crypto sales, but I’ll figure that out.

I’ll also be converting my employment to contractor status. I’ve already had a talk with the bossman, and I should be able to make that happen before the end of the year, and switch my IRA to a SEP or 401k to take advantage of the higher contribution limits. (Alto plans on releasing their 401k product sometime later this year.

Lastly, a warning. There are rules about how you handle funds in these checkbook accounts that you have to be aware of, like no commingling of funds, no double dealing, and nothing that enriches yourself or other family members, like buying real estate or businesses that you or they have a stake in. The IRS also prohibits purchases of collectibles, which may be a problem with NFTs, but other than that, you have complete freedom to buy any token, using lending platforms and leverage, or ape into whatever yield farm you want. As long as all the gains stay within the confines of the LLC, you are golden.

If you’re interested in opening a Checkbook+ IRA, use my referral link to get $75 off the first year’s fees.

The little degen that could

I’ve been thinking a lot about self-directed IRAs and solo 401Ks today, trying to scheme some way for me to take advantage of these instruments to preserve some of my crypto gains. I wrote a bit about IRAs yesterday, but the solo 401K seems like it might be a better option. Basically the advantage is that the solo 401K has a higher annual contribution limit, somewhere northward of $50 thou compared to $6500 for an IRA. Also, it seems that you can take out a loan against it, which you can’t do with an IRA. The interest, which has to be the prime rate plus one percent, gets paid to yourself, which isn’t really a downside to me.

So basically I could take crypto that I already have and deposit it into either of these account and consider it a deduction on my taxable income, then take a loan against that deposit, stake it in BlockFi or elsewhere and earn a higher interest rate than I’m paying on the loan. This strategy would net about four thousand dollars.

It’s not great, and assumes that BlockFi doesn’t go under, but coverage on the deposits could be purchased for about 2.5% of the capital amount. Not great from a risk/reward standpoint, that’s for sure.

Speaking of RR, I’ve already pulled the remainder of my wBTC holdings out of the Yearn vault in anticipation of putting it into the BadgerDAO LP pools, at 400%. It’s going to be a short-term play, very high risk, but 400% APY can’t be ignored. I’m spending a good deal of time in the Discord and looking over the docs to figure out exactly what’s going on. They’re aiming to be nothing less than the one-stop shop for everything related to Bitcoin on Ethereum, and what I’ve seen so far has been very promising. And it seems like the closest thing to going back in time to get involved with Yearn or Sushiswap in the first few weeks. The interest rate is already dropping, and there’s a threat that the token price might collapse when the airdrop for the DIGG product happens, so I’m keeping a close eye on it and will be prepared to exit early if need be. Right now I’m just waiting on gas to drop so I can enter into the pool.

I’ve also become aware of a token called ibETH, or interest bearing Ethereum, from a project called AlphaFinance. I’m not sure how it works yet, but there’s a large amount held by a DeFi whale, and it’s yielding 20% returns. That’s better than what I was getting in my Yearn bUSD vault, which I already exchanged for ETH, so it seems like it might be a good place to park it. As usual, I’ll probably buy some first then figure out how the hell it works after. Alpha has a mind-numbing 43 liquidity pools which seem to range between 40-150% interest.

So I’m going to wait for gas to drop, then stake an insane amount of capital into Badger and pray that I can make it through the next month without a contract failure or rug-pull, and then I have two calls scheduled with people from the IRA and 401K firms. If all goes well, I may have discovered a line of business to be explored by the newly formed Skunkwerks project that is forming. We may have a possible niche, helping people open these accounts so they can take care of these DeFi opportunities. As more people come onboard with Bitcoin — like my neighbor — we’ll stay on the bleeding edge of yield and help guide people through varying levels of risk and leverage in the space.

It might just be the perfect opportunity, if I can earn enough income for my wife to provide a steady income for myself, I may be able to help others along as well. Not that I’ll need it for myself, of course, but because I want to bring as many people along with me as possible.

Let’s build something

Exploring fintech business ideas

So today was a pretty good day. I got woke up very early and managed to get a workout in while I listened to Willy Woo make the case for $100k BTC. It was very convincing, despite the fact that they recorded it friday before the dump from $42K. There was a bit of recovery in the markets which made back about half of what I lost on the Monday dump, but beyond that, I did little work altogether and got to spend some extra time with the girls today. They’ve been really starving for my attention lately and I was glad to be able to fill that cup. I taught them how to play checkers, and I let them tag team wrestle me on the the trampoline. Beating me up seems to be their favorite activity.

I’m keeping an close eye on my new investment in BadgerDAO. It’s netting about fifty dollars a day, and I’ve probably got a few weeks while the insane APY continues, so I’ll continue to monitor and scale in further as I assess the risk/reward. I pulled all my USDC out of the Yearn vault last night and bought ETH, as I figure we’re at the bottom and likely to hit all time highs and price discovery very soon. I had a minor mistake calculating gas costs which almost cost me; by the time all was said and done I paid a hundred dollars for the withdrawal. I only made a hundred dollars interest in the vault over the last two or three months, and by the time you calculate the entry fees, I ended up net negative.

At the risk of repeating myself, with DeFi it seems like it’s better to ape in first and figure it out later. A few months ago, I told my friends that Yield Farming wasn’t worth the trouble unless you were operating with more than a thousand dollars. That’s when ETH was trading at three hundred dollars. Now that we’re at a grand, that number has increased as well. I think my original estimation was off by a lot, and I’m wondering if the current figure isn’t closer to ten thou. It seems apparent that if ETH continues to climb to all time highs, that small players (minnows) are going to be priced out of participating. Transferring Eth or ERC tokens will be expensive in real dollar terms.

This may be mitigated somewhat by scaling advancements as ETH2 gets rolled out, but it seems we’re going to be dealing with some very high network congestion on ETH during the next few months, and it remains to be seen whether Cosmos, Polkadot, or Avalanche will be able to fill the need in time.

Some of you may know that the majority of my active investments and assets are in my IRA. I have a significant portion in Grayscale products and crypto-adjacent equities as opposed to BTC directly. It would be nice to have access to actual cryptoassets in my IRA, but I’ve yet to find a decent offering that didn’t have what seems to be outrageous fees.

One percent on trades on top of a one percent annual management fee seems outrageous on it’s face. To his credit, the CEO, Eric Satz, did respond to address the concerns, and I have a meeting scheduled with one of the associates later this week to discuss some of the options. Apparently the end goal is to have unrestricted access to DeFi through IRA dollars, but they currently have insurance and custody expenses that they have to deal with. More to come.

Something else I ran across to day was this post from a Bombay entrepreneur about a new crypto-bank that they’re spinning up. I had a chat and signed up to take a look. I really like the way they present it when you go to the app.

Letting people choose their risk level in this way is really striking. And as if the universe wasn’t trying to send me a signal already…

So to synthesize the problem a bit more explicitly: the DeFi industry is just at the early stages of really taking off. This success is going to price most smaller participants out of the markets, leaving most of the gains to those who are already starting with large capital investments. I’m thinking there needs to be a way to pool assets and distribute the costs in such a way that it’s more efficient for small lenders. Personally, I’ve been having problems keeping track of my own DeFi holdings, an issue which is complicated by the fact that I’m using funds earmarked for several family members. There has to be a better way, in fact, Andre Cronje, the lead developer of Yearn Finance, created the vault system for this very reason.

So can we build a ‘self-driving bank’ or DAO that makes easy to pool resources from lots of small players, and takes steps to minimize gas costs even further? Or one that can bring in large IRA funds from the less crypto-savvy investors and use those to bring in these 20%+ yields. I think it is possible, but recognize there are going to be numerous regulatory hurdles. That’s not my forte, but when one considers the opportunity in non-profit and municipal treasuries, it’s clear that there is a very large opportunity in this space.

It’s clear to me that I’ve found an issue that is near and dear to me, and I’m going to be spending some time brainstorming with others and figuring out how I can make this transition into a role in fintech this year. Whether that means becoming involved with an existing project or bringing one together from the ground up remains to be seen.

Ape, meet BadgerDAO

So I knew today was going to be a bloodbath, as Bitcoin and Ethereum continued a twenty percent pullback that started two days ago. Everything was a sea of red across the board, and I’m actually pretty pleased with myself for not panicking. I threw all my cash at it, and ran out of dry powder yesterday, so I wound up making a trade on Missus’s BlockFi account, out of her DCA funds. Gotta BTFD, man. The price has already started recovering.

Friday night I was made aware of a newer DeFi project called BadgerDAO. It’s similar to other yield farm pools, such as SushiSwap or Harvest, but its focus is on wBTC. I spent about two hundred dollars in ETH gas fees, wrapping BTC, pulling funds out of Yearn’s wBTC vault and aping them into Badger.

My Ether Wallets, about half the size of my total BTC holdings.

As usual, I purchased first and tried to learn after. I put a small percentage into the pool before I pulled funds out of Yearn. Besides having to get my hands on wBTC, I had to add liquidity to the wBTC/BADGER Uniswap pool (via Zapper,) then stake the LP tokens in the Badger pool. Then I had to stake the Badger LP tokens to start earning BADGER itself. The APY is close to 500%. Once I saw that everything was working as planned, I went ahead and pulled a quarter of my Yearn position out and went in on the wBTC/BADGER Sushiswap pool. The APY is a bit less, but there seem to be some advantages to the Sushi pool that will come in handy later.

There’s a couple more things to mention about the Badger project. The LP mining pools, called Setts, are only about five weeks old. There’s a new product, called DIGG, that is some sort of rebasing token tied to the value of BTC. There’s only going to be a few hundred of them apparently, and they’re going to be issued based on a number of factors around BADGER staking.

I almosted aped my entire Yearn balance into Badger Saturday. The interest would be enough to replace my work salary, and I was very tempted to hop in. I managed to temper myself a bit before I did so, and this quarter position is a bit of a conservative position, if one can call degen yield farming “conservative”. If all goes well, I’ll probably liquidate my Yearn wBTC position completely and go all in.

The Badger contracts have been audited, they also have a $500,000 dev bounty as well. They’ve already got $600m AUM, and the devs aren’t anon, which is good. What I’ve seen so far is very positive. Still, there are black swans, and one thing that the Badger team has done is established an insurance fund with Nexus Mutual. Now one of the big concerns I’ve had with any third party service in crypto, such as BlockFi, is the risk of black swan events. What Nexus Mutual does is provides insurance policies. One takes out a policy, specifying the amount of ETH one needs coverage for, as well as the amount of time one needs the policy for. The policies are funded using Nexus’s token, with holders staking the other side of the cover. It’s pretty ingenious. One can buy policies for various defi projects including Badger, BlockFi, Celcius, and others.

Gas costs have been completely insane lately, especially last night when prices were plummeting. It’s put the brakes on some of what I wanted to do. Sixty dollars on a vault withdrawal is enough to make me pause, one-twenty is a hard no. Still, it probably would have been worth it to cash out from the bUSD vault into ETH when it was $900, but I just couldn’t bear to do it. I may reconsider if gas drops down to forty again. There’s going to be slippage issues if I don’t do it right.

Forty-one thousand

Well the big news yesterday was that Trump got deplatformed, and was suspended or banned from several Twitter accounts, Facebook, TikTok, and about everything else including Pinterest. People went nuts. There were the usual concerns about the First Amendment — Twitter is a corporation, dimwits — but my main concern is that the historical record of Trump’s tweets have been erased. It’s similar to the concerns some have about most digital media, like the loss of most early internet media. The death of Flash, for example, has erased a huge swath of media from the late ’90s and on.

I’ve been staring at charts, but haven’t really been doing anything other than buying some BTC and ETH while I try to fix some problems with my bank and exchanges. Binance flagged my account as US based, so I had to move everything off of there. Two more wallets on my phone now, one for ROSE and RUNE each. Then two more for DOT and ATOM. I’m spreading myself thin here. I’ve got too many bags to manage. Altseason seems to be running through the 2017 bags that I dumped. DNT pumped 2x after I sold them late last month, today ZRX is pumping. PRIA is back up at $40, even though it’s flat on the ETH chart. It’s currently my number three holding, with UNI and IDEX behind it. Not sure what to do about that one, to be honest.

I’ve been buying up every DeFi blue chip I can get my hands on, YFI is my favorite, but I’ve got, SNX, AAVE, BAL and MKR scattered around three different exchanges. I’ve got some DeFi Pulse Index (DPI) as well. It’s a bit of a mess. My Ethereum wallet is even worse, scattered with a dozen or two different projects, half of which aren’t even listed on Zapper. I’ve definitely gone a bit mad.

I’ve gotten fed up with my bank. They don’t integrate with Plaid for some stupid reason and so I’ve been searching for a new, primarily-online bank that I can do business with. I decided to open a new SoFi account after reading that they’re going public through a SPAC. Not sure if I’ll invest quite yet, but it seems like they have their stuff together. I opened an account in a few minutes, and they’ve got crypto trading available right there as well. We’ll see how that works after I get my direct deposit transferred over and close out my other account. I’m also taking a look at refinancing the house. It really depends on closing costs. I don’t want to wait seven years to ROI on a twenty year mortgage if we are going to sell in one or two. We’ll see.

I’ve got enough bitcoin at this point that I should be able to pay our mortgage principal and interest using a lending platform. The problem is I just don’t trust any of them enough to deposit my entire stack with them. BlockFi could go kaput, and then what? I’ve got to explore alternatives. I feel like I’m missing out with it just sitting in my hardwallet, and I’m getting nervous about the whole self-custody aspect of it.

I think what I’m going to do is pull the BTC I have off of the exchanges and wrap it on Ethereum, then ape it into BadgerDAO. I want to wait till later tonight when gas fees should be lower, then make a couple moves. This is going to be very aggressive.

Famous last words.