What To Hold Through Crypto Winter

Current Performance of the Moby.co Crypto Winter Portfolio:  

Bitcoin: -21%

Ethereum: -31%

Polygon: -12%

Solana: -24%

ICP: -24%

Total Change: -22.2%

Now that crypto winter has fully set in since our narratives post (read it here), let's look into how we're making adjustments to maximize our long-term gains and take advantage of this constantly shifting market.

If you look at the start of this post -- we're showing you that our bear market portfolio is down a collective 22% since we published it in August. 

Since we're long on all those coins over a multi-year period, we really don't mind that we didn't hit the exact bottom of crypto winter. If the market keeps hurting due to inflation, this portfolio stands to go down even further in which case we'd only add to our existing positions and cost average down further. 

That said, there have been some updates in the market that give us a little more confidence about hedging this portfolio for the long term. Specifically: a successful Ethereum merge is giving us the confidence to stake 50% of our assets while a growing derivatives market has catalyzed the addition of one more speculative asset to the portfolio. 

The crypto winter may be cold--but we sure love all the developments happening in the industry now that the scammers are being frozen out! 

Let's nerd out a bit 👇 

Why Winter is Deepening:

Real quick before we start out though--take a look at the charts above. We're deep in a nearly year-long downturn for the crypto industry. Bitcoin is down nearly 70% from it's highs in Q4 of last year. Why did the portfolio keep slipping after going down even further? 

The answer is simple: we deployed this portfolio right as a bear market rally started falling apart before the Ethereum merge. Crypto as a whole is down for the exact same reason the rest of the market is: inflation and Fed policy.

If we get good CPI data this week, we anticipate a few days of heavy bull sentiment before earnings season potentially injects a little more volatility. Until the market feels really confident that the Fed can stop pumping the brakes on the economy, money is going to flee speculative and high-growth spaces like crypto. 

Ethereum is down a little more simply because a lot of folks were staking extra ETH before the merge and are simply taking profits. We're still committed to dollar-cost-average on our positions throughout the remainder of this bear period. 

Remember this game is played in years -- not months. If you can't handle the heat (e.g. price volatility) then stay out of the kitchen (e.g. crypto markets).

But anyway, here's how we're "shifting" our allocation: 

Staking Through Winter:

So far, the Ethereum merge has gone well. I mean, it hasn't gone well for prices, but it also hasn't caused the catastrophic collapse of the Ethereum ecosystem. And that's all that really matters to us.

Now ETH is a proof-of-stake system and its blockchain can scale without emitting enough carbon to boil the Atlantic Ocean.

More importantly, the continued success of the merge has given our analysts confidence about holding our Ethereum, Polygon, and Solana assets for the long term. We are therefore converting half of each of these lines into staked ETH, MATIC, and SOL. 

But of course, what the heck does that mean? 

There are a million explanations out there for what staking actually is, but here's the easiest takeaway on it: check it out here.

In a nutshell though, staking basically means you trade transaction fees and the liquidity of your asset for really decent interest. It's like the crypto version of a CD (certificate of deposit) except instead of signing a set contract -- the length you stake your assets is dictated by how much transaction fees eat into your returns. 

And now that the merge has gone well, most major exchanges have been incentivized to offer staking as a core part of their platform. You can stake anywhere from Binance to Coinbase. 

For us, we're staking our ETH, MATIC, and SOL, on Binance because their rates are competitive, and we have concerns about keeping our assets on Coinbase in the first place: 

Binance is clearly making a big move to stay competitive while Coinbase and FTX fight it out over other parts of the crypto market.

These staking rates are really awesome, and since we anticipate being multi-year holders of our stakeable assets, putting them into long-term storage like this is just a no-brainer. 

Staking is just a way to hedge your portfolio long-term. Instead of just earning based on price appreciation, you gain more of those assets based on how long you hold them on the staking platform.

You're not getting paid 95 dollars for every year you stake $1,000 worth of Polygon on the platform -- you're getting that value in Polygon deposited into your account during that period. 

If you've been playing crypto for a long time, you might scoff at APY numbers like this -- calling it way too low compared to the gains you get from straight-up speculation.

But as the crypto industry continues to mature, the volatility and massive price swings we've seen in this space will gradually mellow out.

But we're not staking the totality of our holdings in each of these coins though. Only 50%. We want to maintain some liquidity in the market in case there's any severe volatility that may present an opportunity. 

Meanwhile, we still have 2% left in our overall portfolio which is uncommitted. Let's start to change that. 

The Emerging Derivatives Market: