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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.

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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.

https://remnote-user-data.s3.amazonaws.com/cCmChWQ7Swh11-Jdo5ho8C7V8-oJYDz9KbPA3dhgB-HwpYTYdfaLnFdjsb1VMb2ivic31xlYf6k7fdnWIhl7dCvJvez7M-Sjo0E8wGDlWxepqvazPOlLD1uFLXJccRC-.png
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.

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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.

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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.

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Boom time

Today was absolutely insane. There was some good news about another COVID vaccine which set the equities markets up today, and $ETH hit $600, which set the crypto markets roaring. It was amazing. I finished the day up eight percent, for my first five digit day, (and then some.)

The news behind $DPW was that they announced some partnerships with restaurants to provide electric vehicle charging stations. I’ve had a standing trigger since September to set a trailing stop next time it pumped past five dollars, and it triggered at 5.39, which cut me out of a couple hundred dollars to the close.

Overall, I’m glad to be out of this one. I had picked it after I misinterpreted some news about their involvement with bitcoin, and got caught up in that first big pump gap a week after I opened the position. By the time I hit my value averaging targets in the grey box, I was down, so I set the trigger, hoping that it would have another big spike that I could capitalize on. Turns out it worked, so yay me. I feel a lot better about the other, pure-crypto plays in my portfolio, and would rather put my focus there than worry about these guys in the future.

Ethereum was obviously the driver in today’s rally, and again, the fact that the mining companies are up even more shows me where I need to be focusing my cash. $RIOT and $MARA and the rest are doing really good.

Strangely, BTC has been pretty flat despite a big dip over the weekend, I think the fact that it’s basically back where it was Friday has proven really bullish for the market. In fact, $BTC was down from Friday’s levels, but $GBTC was up five percent.

I have actually been anticipating a BTC dip when we get near ATH levels, and I had calculated a GBTC price of 22.40 for a sell order. Today’s close set us at 22.15, so I’m thinking I may want to reconsider that order. If the premium keeps running up like today, we may hit it without any price movement by BTC, and I may get stuck holding the cash. I’m going to sleep on it and see what happens overnight.

In spite of today’s mind-blowing rally, I still managed to get pulled into four different fires at work. And it gave me a bit of solace while dealing with the bullshit, knowing that none of it mattered and that ultimately I didn’t have to put up with any of it if I didn’t want to. I got so much done today, I even managed to take the girls to the playground for an hour this afternoon, cooked lunch and dinner and did grocery shopping.

All in all, today kicked ass in more ways that one.

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Changing strategies

Another day, another 2020 ATH. $BTC broke $18K before I went to bed last night, and despite a $1000 drop that was quickly eaten up, we’re back at $18,200, ready to continue our journey.

I’ve been seeing something interesting play out with the Bitcoin related equities like $RIOT, $MARA, and $BTBT; they’ve been running faster than BTC and $GBTC. I’m not sure why this is, I guess investors think that they’re undervalued. The main question right now is whether I’m over-allocated in GBTC right now.

It’s 43%, so yea. I figured it was the best play on a BTC run, but with the others outperforming, I may need to reallocate. But I’m almost out of cash, so I’ll need to sell some to reallocate. My last GBTC purchase was on July 15, at 13.60. Current price is over $20, so I should probably sell enough to cover a week’s worth of my value averaging protocols for the big gainers. My two percent targets have increased, so I’ll have to update my value averaging script and make sure I have enough capital allocated to allow it to run.

Done. Now to see how it plays out.

Progress continues on the Ether Auction. I figured out some problems with the Hardhat/Waffle/Chai tests that were failing, and added some functionality to allow claiming the proceeds. Writing the tests out really forces one to clarify all the possibilities. I also found a big bug with the time lock parts of the contracts that were making them end seven seconds after they started, not seven days.

I’ve got some additional tests cases that I need to write to finish the auction contract itself, then I need to figure out how to deploy it to a test network and starting working on the UI. I’ve started going through the React course on FreeCodeCamp, and will deploy a create-eth-app once I have the contract deployed.

I want the website up and running before I deploy the first contract. I’m debating whether I need the autodeployer setup, or whether I just want to manage the first one manually as a test.

There’s also some interesting things with the Open Zeppelin upgradable contracts that I may want to add in before all is said and done. I’ve implemented a self destruct function that can be called three days after the auction ends, but using one of the proxy contracts to hold state might allow me to reset the auctions for the subsequent rounds.

We’ll see how things develop.

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DeFi notes

This weekend was a bit rough.

The kids were on my nerves the whole time and my temper kept flaring up. The girls seem to think they can just do whatever they want and ignore what I ask them to do. It’s infuriating. Missus is stressed out from work, and has been sleeping a lot. I’m stressed out cause she’s sleeping a lot and it feels like I’m doing most of the work around here.

We did manage to have some fun around here. I had promised Younger an ice cream party if she learned her letters. She did that several weeks ago and has been waiting patiently through Halloween and her friend’s birthdays, and Saturday I took her to Cold Stone and let her pick out three different flavors. She was really distraught when I told her that her friends wouldn’t be able to come over till Sunday, and on Sunday she must have asked five or six times if it was time.

So they came over yesterday afternoon and had their ice cream in the backyard. And these kids are exhausting, man, I tell you.

We also watched Biden’s victory speech Saturday night, although I had a hard time getting Elder to pay attention to it. I told her it was important to watch cause she’s so young that she probably doesn’t remember anything about the Obama presidency, and I want her to remember this moment. Younger probably won’t remember it. Missus was more interested in Harris’s speech and making Elder watch it. She didn’t see any point in making her pay attention to another old, white dude. Still I think moving on from the Trump presidency as soon as possible is very important.

Most of my time this weekend was spent reconciling my DeFi transactions, trying to figure out how to reconcile the ycrvBUSD that I have. I owed the girls some, so I got those numbers recorded in my Notion database and moved a bunch more fiat into them. I was tempted to buy more BTC, but decided to stick with my stablecoin strategy for the time being.

I also spend some time on the Yearn Discord and reading over the smart contracts to try and figure out just what the heck is going on. I pulled my ETH out of the vault since it was inactive, and considered doing so with LINK save for the fact that I don’t know what else to do with it. I talked to someone about using it as collateral on Aave for something else, but I don’t want to risk it.

Also, it seems that there is a new test USDC vault, which there seems to be some excitement around. I was tempted to move some funds there but I’m playing with savings here. I’m already nervous enough after hearing of some US-based crypto lending firm filed for bankruptcy this week. I don’t know enough about their business model to know whether BlockFi is at risk as well, but much of CT seemed to think so.

After I deal with day job stuff I need to take a look at my altcoin lending portfolio. Several positions should have stopped out during the pre-election run up, but I’m not entirely sure I had my stops set properly. Cosmos, PolkaDot, and Serum are all well below my stops, only ChainLink has managed to hold its position. I need to calculate my losses and figured out if I’m allowed to make any November trades. I found a new degen yield farming site and am tempted to try and take a position on one or two. If I was smart I would just wrap my BTC and put it in a vault. Alternatively, I don’t have any CRV or YFI tokens, and as much as I’m relying on the vaults I should probably allocate some funds there.

But the best strategy might just be to hold my BTC for now. It seems on the verge of a breakout this morning, and I have no idea what equities will do this morning now that Biden has won. We’ll see.

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Evening update

BTC was mainly quiet today, resting while alts seem to be pumping. Bitcoin has held steady mostly today while the election results come it. Several outlets are calling it for Biden, but several states are going to recounts. It seems that Dems may be able to squeeze out a Senate majority as well, pending results in Alaska (!) and two runoff elections in Georgia early next year.

I spent some time this morning thinking about how to design the Evil Ether Auction app, and exactly how I want to make it work. Nothing solid yet, but I’m trying to figure out how I want the mechanics to work. I’m thinking that it’ll will have a series of rounds, starting at one ETH, and that the proceeds from the first auction will be used as a starting amount for round two, and so forth. I’m thinking the last round would be for 32 Eth, enough to fund a masternode. I’ll either keep the proceeds of the last round, or possibly put a bid tax at some nominal amount as a developer fee. We’ll see how that goes.

My most recent fiat funds cleared ACH on my onramp, so spent more time today thinking about strategy. The GUSD Curve pool is basically garbage, so I’m probably going to stake the bUSD pool. There are a couple degen opportunities out there, Harvest seems to be going strong, recent hack withstanding, and someone pointed me to SnowSwap, but I’m not playing around with these funds. I trust BlockFi and Yearn, but I’m not willing to take chances on any other platforms with significant sums.

I also spent a lot of time thinking about tax ramifications of lending platforms and all this DeFi activity. It’s going to be absolute nightmare. I don’t think CoinTracking has done much work in this area, so I’m probably going to have to take a look at TokenTax when the time comes. Considering that it integrates with Turbotax, I probably should.

The rest of the afternoon was spent going over CSV exports of my Ethereum transactions, trying to line up all my activities over the past few weeks, trying to match fiat to various pools. I haven’t been doing a good job with my earmarked funds, and I’ve got some cleanup to do before I make any more conversions. Trying to keep track of funds earmarked for my family members in one wallet is proving tedious, but keeping them in a separate wallet is out of the question, given gas fees for vault deposits and withdrawals.

I have to be very disciplined if I’m going to keep things straight, and I’m still not sure the best way to keep track of it. Hopefully I can keep things straight in a spreadsheet or Notion table and not have to go as far as putting together a custom database or ledger. I’m going to go back to it here shortly and shore up my calculations and see what I come up with.

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Irresponsibly long

flying plane with contrail during nighttime

Today has been crazy. I woke up this morning to find that $BTC had made a bit of a run overnight, making a nice wick up from $11.2 to $11.4. I’m sitting on some cash in my IRA, and I was very tempted to add to my $GBTC position at market open. It seems like we’re at a turning point, and that things are going to move very, very quickly. As a reminder, in 2017, the price went from $11.6 to 19.8 in two days.

Ultimately, I didn’t do anything, which is fine, even though we had some healthy price action today. I often joke about being all-in on crypto, but it’s really not a joke. I’ve got some equity in my house, along with a mortgage, but pretty much all of my liquid assets are in crypto. Most of it is in BTC, and I’ve got Eth and other alts as well. I’ve got the bulk of my savings in my IRA savings. Most of it is rolled over from my 401k from my corporate days, and it has the benefit of allowing me tax-free gains. I don’t have exact percentages, but about a third of that is in $GBTC. Over the years I’ve been adding positions in $MARA, $RIOT, and Hive Blockchain, and I’ve recently opened positions into $ETHE and $GDLC.

So I’m pretty invested in the success of BTC right now. I understand that having all this money in correlated assets like this doesn’t spread the risk at all, but it feels better than putting it all in GBTC.

Until recently, the long-term plan for the liquid assets had been to wait until they were enough to pay off my debts, mainly the mortgage and student loan debt. I actually have a whiteboard on the fridge with the break-even numbers written down. I update the debts whenever a new statement comes in, and I’ve been updating the BTC price first thing every morning.

Now though, I can’t imagine actually selling everything. I do plan on taking some profits at a certain point, I have a target. But with the recent rise of DeFi platforms for lending and interest, it seems like a better approach to try and leverage some of these platforms to generate income.

That’s the difference between being rich and having wealth. It might take me longer to get to the point where I’ll have enough to live off the interest generated by lending, but if everything goes the way I anticipate, then selling my bitcoin to pay off my debts early could well be one of the worst financial mistakes I ever make.

A lesson: about eight years ago I needed a new car. I had been driving a $1500 Ford Escort for several years that I had bought after my last car had been repossessed. It was a junker. The insulation around the doors was torn out, so every time it rained water would pour in on me from above. After several years getting my life back together after a business bankruptcy, I decided that it was time for an upgrade. I decided to get a used BMW, and set my budget at $7500. After weeks of searching, I found the perfect car, but it was $8500. I decided to sell a small stake of some Netflix stock that had done very well, and used it to buy the car.

I loved the car, but fifteen year old BMWs need a lot of work, and I probably put another $3-5k into that car before I got rid of it three years ago. Before I did, I looked back at the price of that thousand dollars worth of Netflix stock that I sold and calculated the value.

Eighteen thousand dollars.

So yea, the next six months might see my holdings get to the point where I could liquidate them, pay half to Uncle Sam, and pay off all my debt. But now, I fully expect bitcoin to go 4x from that point, enough to generate income for the rest of my life. Enough FU money to say “no” to almost anything, and have the financial freedom and independence that most can only dream about.

My dad recently retired, my mom did so a few years ago, and my wife’s parents did so recently as well. They worked their entire lives, making a life for themselves and raising us right. And my wife and I have been fortunate beyond belief to be not only surviving during this pandemic, but thriving. We talk every day about what’s going on, and I’m more confident that ever that our plans are going to work out.

Crypto Twitter is abuzz right now, and everyone is excited. I’m trying to remain calm and prepare for the craziness that is going to happen when BTC hits another all time high. It’s going to happen fast.

Even now, at the end of the day, bitcoin is still minting new yearly highs. I only hope that the feeling I feel right now isn’t greed, it’s opportunity.

This Saturday, Halloween, is the anniversary of the Bitcoin whitepaper. Satoshi had a strike of genius timing the halvings around the US Presidential elections. I’m not sure how much of what we’re seeing is in anticipation of a Trump or a Biden win, but the divergence to the stock market, which is reacting negatively to a rise in COVID cases, could just be the start.

I’ve been packing for this rocket ship for years, during this entire bull market. The fuel is loaded, the trajectory is set, and I’m strapped into my seat listening to the countdown. Now I’m searching my mind wondering if there’s room enough for a little bit more mass, an extra oomph that will take us out of the solar system and get us to Alpha Centauri a little bit faster.

I, and you, better act fast, cause liftoff ain’t gonna wait for either of us.

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Trading notes

Today was a pretty good day for crypto markets.

Jack Dorsey, CEO of Twitter and Square, announced that Square bought $50 million of bitcoin, about one percent of Square’s treasury. Markets pumped, and my portfolio did pretty good, up 4.52%.

That puts me up 50% in $GLDC after a week! $ETHE is above water finally, after a month. I spent a good deal of time trying to refine my new trade plan calculator, to figure out how to protect my position. I need to protect my capital, but I don’t have a rule yet on how to do that. The TD Sequential was supposed to be my indicator for stepping my stops, but I’m beginning to wonder whether my strategy is sound.

My recent strategy has been a bit of knife catching, trying to open a position when it marks a ‘nine’ down on the TDSeq. I set my far enough below support lines that I don’t get taken out by some whale hunting stops, and then wait. Here’s the most perfect example of what I’m talking about.

The hypothesis is that seller exhaustion will spawn a turn around on the nine mark, and the price will move up. I got lucky here.

The question now is what to do. From a capital preservation standpoint, I should raise my stop above my entry point to make sure that I don’t lose money. This will also open up my capital for another trade, since I’ve already got six percent of my capital at risk. I could tighten the stop to just under my entry, which would have a lesser protective effect.

Or I could take profit. I’m not going to do this, however, as I’ve started noticing another trend off of these TD Sequential signals. I’ve noticed that breaking above a green sell signal can mark the start of a parabolic run. In the GDLC chart above, you’ll see the green dotted line coming from the left. We have a daily close above it, and then two days later… POW! Seven to thirty-six dollars in three days. GDLC is a bit of a bad one to use as an example though, as the pump lagged a similar movement in BTC by three days.

While I figure out my strategy, I’ve been working on my trading spreadsheet, incorporating some new tips I’ve learned with regard to some formulas. Hopefully it will make my planning process more coherent in the future.

I really feel that things are really close to popping off. The fundamentals of bitcoin are strong, and despite all the bad news that has been going on lately, the market has been holding strong. I’m trying to prepare for some crazy times coming up. We’re less than a month away from the election, and who knows how things could go at this point. The fact that BTC hasn’t taken a tumble these last few weeks is very, very bullish, and I can’t wait to see what happens next.