Exit or Escape?

ETH broke $4000 early this morning, and with gas at 250-300 gwei, it has become painfully apparent how difficult it is going to be to continue to operate on Mainnet for the coming months. Yesterday a simple ERC20 transfer was about $180 in gas, and I’m pretty much putting a hold on all ETH activities unless I carefully consider exactly what I’m doing.

Everything under $400 in value is effectively dust for now. We may see some relief briefly once Optimism launches, but I think long term, if ETH is going to $5000-10,000, it’s going to price most participants out of the market. I’m almost there myself. I’m trying to triage my positions into several buckets.

  • Dust: shitcoins I bought as a crapshoot, that have no real value to justify swapping them back to ETH. I’m not sure what I can do to deal with the tax ramifications of this. I can’t merely mark them “abandoned” unless I burn them or the private keys for the wallet. The latter is unacceptable for a variety of reasons, I’m not sure what else can be done about this loss. It will need further research.
  • AMM only coins: Coins that are worth a couple hundred bucks, but don’t have any liquidity off-chain. I’ve got a couple things I can do here. One, if I believe in the project I can just hold on, which is the most risky option, or I can swap close the trade and take ETH/stablecoin profits. Alternatively, I could bridge them to a sidechain, Polygon, BSC, or Polygon. This might not be as expensive as an AMM trade, but it also depends on liquidity as well.
  • Majors: Most of the blue chips have plenty of options for trading, so it might make most sense to move these coins to Kraken or one of the other centralized exchanges. L2s are also an option, but migration is a bit more expensive than just an ERC20 transfer. It all depends on how comfortable I am with custodial risk. There are a couple ways to reduce cross-chain transfers fees. FTX has free transfers to Solana, and Binance can do the same for BEP20 tokens. It seems kind of ironic to set up to sell ETH on Solana, but no more so than doing wBTC on Ethereum.

Then there’s the whole what to do with my yield farms. Obviously, harvesting is going to slow down a lot, and there’s a lot of yields that aren’t going to be worth the gas to claim. I’m going to be thinking very hard about what I do in the coming months. And moving into new positions… well, that’s going to be a very hard decision to make.

I think there’s probably one project that I’m even remotely considering getting into. OlympusDAO seems almost too good to be true, like Alchemix, so I’m going to wait for an opportunity for gas to come down and then throw some funds into it.

Basically I’m looking for things that I’ll be comfortable staying in for the next three months. Or longer. I don’t know how the Ethereum community is going to deal with the prospect of five-figure ETH, and what that might mean for the network. If it’s going to continue to be the type of network that can run a node on a laptop, then they’re not going to be able to increase the blocksize too much bigger than they have now. Still, I’m not able to make a prediction as to what the long term effects on gas is going to be. Optimism and the upcoming EIP may reduce short-term gas issues, but if ETH continues to climb, then Ethereum will continue to price people out of the market, forcing participants onto side chains.