Metacoin

Covering Bitcoin, the Blockchain, Altcoins, and Fintech

Archives for July 2020

Liquidity Machine Go BRRRRRR

Liquidity Machine Go Brrrrrrr

If you have a hard time keeping up with the latest in crypto, fintech, or any of the other things that keep the economy moving, join the club. It seems like just yesterday we were all sharing a laugh over the Crypto Winter and lamenting how we could have gotten so many ICOs so wrong.

Then, out of nowhere, comes “DeFi.” “Decentralized Finance.” Sure, it’s Bitcoin, but it’s not, because it’s different, and decentralized, and it’s another term that you’ll pretend to understand and nod in agreement when you hear about and then move on to something else.

WELL, SOMETHING ELSE IS HERE. IT’S LIQUIDITY.

It’s Not Your Grandfather’s Liquidity

Why is Chairman Powell using what appears to be a pasta maker?

If you want to read a debrief on what is meant by these “liquidity pools” that are de rigeur now, go here: Coindesk Liquidity.

If you want *my* take on these liquidity pools, read on.

Did I Mention I’m Clueless?

I decided to jump into the pool — double entendre was intentional there — by learning what I could about a site called Yearn.Finance. $YFI is like the other liquidity pools in that meet many of these criteria:

  1. New (with many having launched in the past few months)
  2. Mysterious (names like “Compound” or “Ampleforth“
  3. Volatile (see screener below)
  4. And in Beta with warnings that “in Beta” means “could get rekt”
One month on the Great Ampleforth Coaster

How it works…in theory: you lend your coins into a pool and then those who need liquidity borrow and your pool lends your coins out at interest and you also get a share in the trading fees and it’s all dependent on algorithms and a number of variables, including whether or not there’s a need for the underlying assets and whether or not there’s a palatable interest rate and…

Liquidity in Action!

Wait, I should buy some, right?

The above screenshot is, thank goodness, not the price at which I purchased YFI. I went to KuCoin to buy some and then…it failed. I tried again and…failed again. Finally there was success at something like $2000 a coin. Next:

My first attempt
Huh?
Still waiting…
Success!

I was the proud member of a Liquidity Pool and will now be printing money like Chairman Powell. Right?

Your Guess Is As Good As Mine

This is a serious FOMO game, as far as I can tell. Stories suggest large “whales” are making upwards of 50% a month on their deposits. Several hundred percent a year — or the equivalent — can be yours if you know what you’re doing, if your timing is right, and if the prices of these random liquidity pool tokens continue to give you the thrill ride of a lifetime.

Or not.

Once again, like everything in crypto, do your own research. You could lose everything. This isn’t investment advice.

And if anyone knows what is REALLY going on, let me know.

Final Warning:

I really fear these may be like some of the passive income “high yield” schemes we’ve seen on these pages. Which is why this small experiment is, indeed, small.

We’ll keep you posted.

Balance Portfolio Continues Its Run

We’ve probably said something to the tune of “set it and forget it” for the past four years now. Unless you’re a professional Bitcoin and cryptocurrency trader, you’re likely playing with fire if you try to time the market and get in and out and back in again with the various coins.

So, here’s at least a little evidence that an approach like this *could* potentially work for your portfolio.

Let’s, as they say, go to the videotape, which, as you’ll see, shows a real highlight in the Balance Portfolio…with one of the coins up 245%.

That’s a Spicy Meatball

How we…balanced…the portfolio on 1/1/2020

Background: as opposed to the BRED Portfolio, we created this one to take advantage of the potential for asymmetric gains with a couple of coins that have (in our opinion here at HQ) tremendous potential to pop.

Last month, as you can see in our most-recent post about this portfolio, we benefited from some nice price movement in Bitcoin itself; the largest holding in this hypothetical account. Bitcoin has been stagnant in the past month but OH WOW LOOK at $VET.

When ten percent of your portfolio triples…

The basic idea: have the bulk — in this case, 1/2 — of your holdings in the two biggest coins, Bitcoin and Ethereum, and have most of the rest in coins that could have a pop. (The exception: $PAXG, which is there as a hedge.)

VeChain: An Asymmetric Jump

We follow quite a few investment newsletters and people who tweet like they know what they’re talking about. One theme that pretty much all of them follow is that the best way to make a mint is to make “asymmetric” bets and, hopefully, one of them pays off big time.

It’s not uncommon in the venture capital world, too: VC firms will have 25 portfolio companies with the hope that 1 out of the 25 has a 100,000% rise to make up for the 15 that fail and the 9 that are just moderately successful.

VeChain has the signs of a coin that COULD have an asymmetric rise and reach insane heights. It has the backing of corporate types, or, in their words, the solution is “driven by enterprise adoption.” That means things like this…

Consumer Confidence Index

…and it also means the application is potentially used in a variety of other ways, like helping track carbon emissions or driving autonomous cars.

This MAY explain this particular coin’s rise: people who are looking for the next Bitcoin or the next Ethereum and fear they may be too late to the party will often start looking for coins that fit certain criteria — call it, partially, the “Robinhood effect” — like a sub-$0.01 price, which is where VET was earlier this year. (One of the newsletters was specifically recommending a certain coin that had a sub-penny price and corporate relationships late last year; deduction brought us to VeChain as a result.)

How to Get Involved?

We need to stress that we don’t provide investment advice, you should only invest what you can afford to lose, and we’re not responsible for wins or losses. We hope you have plenty of wins, though.

Two ways we’ve recommended and we’ll provide CLEARLY MARKED AFFILIATE LINKS HERE:

  1. Sign up for a Coinbase account. You can get a bonus with qualifying purchase and we’d get one, too. *Note that $VET is not available on Coinbase just yet. To get that one in particular, you’ll need to…
  2. Sign up for a Crypto.com account. The bonus is potentially richer but the qualifying purchases are larger, too.

Happy Investing!