Stablecoins are like cash equivalents in Crypto. There are the cornerstone in Crypto and the so called safe heavens in Cryptos. There are many stablecoins in the market. The more prominent “collateral backed” stablecoins are USDT, USDC, BUSD, TUSD etc. Kindly note the ” ” in my previous statement. There are many stories, FUD, reports about how much these coins are really backed. No one really know.
Of course there are also other stablecoins such as your Excellency Justin USDD algo-stable coins and the famous collapsed UST etc. Let’s look are the top 1o stablecoins in term of MarketCap.
Currently in terms of Marketcap, the biggest stablecoin is USDT.
There are many many FUD about USDT. Will USDT really collapse or depegged? If it really collapse, can you imagine what will happened to the other coins, even the “bluechips” coins such as ETH and BTC?
Of course, it may happen or it may not. No one will know for now but there are many prediction and guesses by people. Personally I think it would happen eventually. For those who have been reading my blogs would have know I am a believer of using Metaphysics to predict market (of course on top of the usual Fundamental Analysis). Remember the last point of my post on Metaphysics earlier?
Metaphysics predict that the 2nd half of the year will be bad, especially after the next eclipse. Would this be the collapse of USDT?
Look at the Marketcap of USDT since May. Would this signify the start of bank run? 80B to 65B Marketcap. In addition, why FTX don’t use USDT as USD?
Recently I saw this CT (see below). Of course many people would say that this is FUD and believe so. It is always FUD unless it really happened. However, if it really happened, would it be too late for you to run? Think back, did you manage to run Luna/UST when it collapse? How fast was the collapse?
WHAT IF THE BANK RUN OF USDT HAS BEGUN?
and nobody has bothered to tell you yet
What if the Tether critics are correct?
How can anons protect themselves from USDT bank run?
“FUD news” + “Metaphyiscs” + General Market Macro signify that 2nd half of the year will be bad. Are you prepared? Or do you believe in the recently rally in Crypto for the past few days? Think through and decide for yourself!
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Many people know and admit that they can’t beat the market. Hence, the easiest and most logical way is to join them since you can’t beat them. In Traditional Finance, people will go dollar cost average/value cost average index etf/funds. Some people buy the Vanguard World ETF (VWARA.L, VWRD, VT, VTI, IWDA, SPY etc), or in Singapore Context, dca STI ETF using DBS Invest Saver, Poems Share builders, robot investing platforms like Endowus etc.
For Crypto, it is even more volatile. We have seen drawn down in the 60-90% in the current bear, even for the more prominent “blue-chip” Crypto ETH, BTC etc. Of course one can dca ETH BTC weekly/monthly using exchange like FTX, CDC. However, there is no auto-rebalancing in these CEX. Furthermore, not your key not your coin!
What should we do if we wish to take the approach of index investing in CRYPTO?
One of the more innovative way we have now is using GLP. What is GLP?
In Short, GLP in Arbitrium is about 50% ETH/BTC with the rest in stablecoins and it will rebalance.
I have extracted the more relevant section of GMX/GLP guide from the site itself as below.
GLP consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. The price for minting and redemption is calculated based on (total worth of assets in index including profits and losses of open positions) / (GLP supply).
For Arbitrum, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in ETH. For Avalanche, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in AVAX. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.
Rebalancing?
The fees to mint GLP, burn GLP or to perform swaps will vary based on whether the action improves the balance of assets or reduces it. For example, if the index has a large percentage of ETH and a small percentage of USDC, actions which further increase the amount of ETH the index has will have a high fee while actions which reduces the amount of ETH the index has will have a low fee.
Token weights are adjusted to help hedge GLP holders based on the open positions of traders. For example, if a lot of traders are long ETH, then ETH would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins.
If token prices are increasing, then the price of GLP will increase as well, even if a lot of traders have a long position on the platform. The portion reserved for long positions can be treated as stable in terms of its USD value since if prices increase the profits from that portion will be used to pay traders, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.
If a lot of traders are short and larger weights are given to stablecoins, then GLP holders would have a synthetic exposure to the tokens being shorted, e.g. if ETH is being shorted then the price of GLP will decrease if the price of ETH decreases, if the price of ETH increases then the price of GLP will increase from the losses of the short positions.
Who say we can’t do index investing in CRYPTO?
However, please do your own due diligence before you start to invest in GLP.
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The most fundamental step before a person can starts to buy/sell any cryptos is to understand wallets.
The definitions and relationships among these terms are often very confusing to everyone.
Crypto wallet
Hot wallet
Cold wallet
Hardware wallet
Non-custodial wallet
custodial wallet
Public Key
Private Key
Recovery seed phrase
Password/Pin
Let’s demystify these terms!
Firstly, how do you keep, send and receive your Cryptocurrencies? In Crypto Wallets! To put it simply, Hot Wallet is a crypto wallet that is connected to the internet whereas a Cold Wallet doesn’t connect to the internet. Cold wallet are usually considered to be safer as it is not connected to the internet.
Cold wallet example include Hardware wallet such as Ledger, Trezor etc. Hot wallet example include browser extension wallet such as Metamask, XDefi etc (if one didn’t connect ledger to it as the interactive interface).
Non-Custodial Wallets means you are holding on to the Recovery Seed Phrase (you owned the crypto) whereas Custodial Wallets means you are not holding on the Recovery Seed Phrase (example when your Cryptocurrency are in an exchange). If an exchange hacked or closed down suddenly, please say goodbye to your coins.
What are Recovery Seed Phrase/Password/Pin?
Whenever you create a crypto wallet, a Recovery Seed Phrase of either 12 or 24 words are automatically generated out of 2048 word from the BIP-39 Word List. There are so many combinations of Seed phrases that can be generated such that it is basically non-hackable and this makes them very secure. This is like the master password of your Crypto. Ledger hardware wallet, Metamask hot wallet interface is like the password manager software.
During wallet generation, you will also need to create a Password or Pin for faster access to the wallet when doing any transaction. If you lose this Password or Pin, you can still recover your wallet using the Recovery Seed Phrase. However, if you lose both the Password or Pin together with your Ledger at the same time to the same person, you have to say goodbye to your cryptos.
What are Private/Public Keys?
Public key are the public address that one use to receive the cryptocurrencies and is in the blockchain. It is paired to a Private key where it is needed to authorized any transaction for the public address. In short, if you owned the Private Key, you are the owner of the Cryptocurrency. Hence, for every address created, there will be Public and Private key.
Hence, do not share your Private Key. Anyone with this key can access your cryptocurrency. However, do note that the private key are stored in a crypto wallet (such as Ledger, browser extension wallet like Metamask etc). Always remember that storing your coins in a hardware wallet is the most secure method because unlike browser extension wallet, the private keys never leave the device and thus stay offline.
What are the differences between Private Key and Seed Phrase?
For every Recovery Seed Phrase generated from your wallets, it will always create the same set of public addresses and private keys. Seed Phrases are the mnemonic version of all your private keys. Thus even if you forgot your password/pin, lose your hardware wallet, you still can get back your coin as long as you know your Recovery Seed Phrase.
One key point to note is that Private key is usually an access key to just one address (account), while Recovery Seed Phrase is an access key to the whole wallet, which can hold multiple addresses. Thus, Recovery Seed phrases can recover all private keys but not vice versa.
A picture is worth a thousand words. Refer to the diagram below for a better understanding.
In summary, after explaining the terms above but if one still have difficulties understanding the terms, just remember these points:
If you keep your coins in an exchange, generally it should be safe for those reputable and big exchanges but do bear in mind the potential risks.
Always get a Hardware Wallet such as Ledger and generate your own Recovery Seed Phrase.
Secure your Recovery Seed Phrase and Private Keys, don’t let anyone know or lose it.
Don’t lose both password/pin together with your hardware wallet (e.g Ledger) at the same time.
How to find out the Private Seed Phrase of my Ledger? (For advance users only)
For those interested to find out what Private and Public keys will be generated from a particular Seed phrase, advance users can manually generate all private keys using software such as Ian Coleman’s BIP39 tool. Let me show you an example using randomly generated 24 words seed phrase.
You can see the random 24 seed phrases that are generated. Choose the Coin as “ETH – Ethereum” (I choose a common coin that everyone know. Of course, you can choose other coin).
Scroll to the bottom. You can see the full list of Private keys and their corresponding Public Keys.
A picture speaks a thousand words, below is the updated regression chart of BTC half a month later.
We have indeed reach -1 SD (-18K) since my last post.
Will we reach the darker green line -2SD?
Let’s look at the price of BTC from another point of view.
HISTORY! We have been learning history since we are young. Regarding of trader, investor, many people like to look at past trend to learn more about price history in order to predict the future (of course assuming the fundamental remains the same for the future). Let’s look at the history of Bitcoin.
Launched in 2009, Bitcoin is the world’s largest cryptocurrency by market capitalization.
Unlike fiat currency, Bitcoin is created, distributed, traded, and stored using a decentralized ledger system known as a blockchain.
Bitcoin’s history as a store of value has been turbulent; it has gone through several boom and bust cycles over its relatively short lifespan.
As the earliest virtual currency to meet widespread popularity and success, Bitcoin has inspired a host of other cryptocurrencies in its wake.
Bitcoin is a very volatile. There are many ups and downs every few years. Going All Time High, then drawn down 80-90% to All Time Low. Many people argue that Bitcoin is worthless and useless. However, crypto enthusiastic would say Bitcoin is digital gold. But aren’t real gold useless and is ponzi too? Similar to real gold, value of Bitcoin is the perceived value by everyone. The question is in future, how will people perceived it? Personally I think Crypto will be the future – Bitcoin will likely be a the main coin with dominance dropping, all other alternate coins will die, maybe left ETH 2.0 and some other L1s L2s.
Let’s Look at the table below from history point of view.
We are currently at the 73% mark. Will we reach the 80%, 85%, 90% mark soon? Did you notice that 80% coincide with the -2SD from my regression analysis?
Adding on to the very bad macro condition, Fed tightening, hyperinflation, wars, food issue, energy issue etc, I believe that we will reach it soon.
Looking at the price pattern for this 3rd cycle of BTC, quite likely we may have a 90% drop until around 6800 BTC! By then, it would be capitulation and many would have given up, believing that Crypto is scam which will reach zero. That’s the time where big shark will come in.
Let me give a bold price prediction, I believe we will reach -2SD (or 80% drop from ATH) soon at least, with the very worst case where we will reach 6800 (90% drop from ATH). From Metaphysics/Astrology point of view, we will reach this point at the 4th quarter after Eclipse!
BTH and ETH are down more than 50% from ATH. Most Alt coins are down 70-90% from ATH and still keep going down. MarketCAP of entire Crypto Market is down from 2.3 Trillions to 1.2 Trillions.
Everyone like to quote the famous quotation from Mr Warren Buffett:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
How many keep taking profit when the crypto market is euphoric last year? I believe many did not and lost years of profits from their past hard work.
How many start Dca and keep buying in this crypto winter? I believe many did and in the end the token down another 90% again for alt coins.
How? What should do? Be Greedy when Others are Fearful doesn’t work?
In crypto, most important is risk management which I have covered in my earlier post. Next you must learn how to take profit for your blue chips (Btc, Eth) and especially for your Alt coins. Look at Jewel, Crystal, CROs, Sol, Avax, Axle, Sand, StepN, many of the “famous” coins that were kept being mentioned by influencers/media (shillers? haha) etc. How many of them are 90% down and keep doing down?
After a token is down 90%, doesn’t mean it cannot down another 90%. IN FACT, MANY TOKENS DID!
Hence, please always remember the line below:
In Crypto, all coins are alt/meme/ponzi coins unless proven otherwise. By all means and be Degen Farmers, but always take profit in bull market to protect your profits/capitals. Conversely, only stick to Stablecoins/blue chips (Eth/Btc) during bear market!If you DCA blue chips, quite likely you will win in the long runs. Most alt coins won’t be there after each Crypto Winter. Lastly, always research before you put your hard earned money in the market.
On the topics of research, one very important aspect in Crypto is Tokenomics.
Tokenomics
Tokenomics is the most basic foundation of every project. It simply means Token + Economics which is the understanding of the supply and demand characteristics of cryptocurrency.
Please research before you invest in any Crypto Project.
The questions you must ask are:
Token Usage
What is the Token use for/use as? GameFi, network tokens? Will the revenue be sustainable in the longer term or the token will be dumped after few months/few days?
Supply Metrics
How many of these tokens exist right now? How many will ever exist? How quickly are new ones being released? Some terms to learn below:
Maximum Supply – A hard cap on the total number of coins.
Disinflationary Or Inflationary – this where you get your high APY from for some inflationary projects.
Circulating Supply – The total number of coins in circulation now.
Fully Diluted Market Capitalization – The maximum supply multiplied by current price.
Distribution schedule
Distribution schedule tells you what the currently circulating supply is and the rate at which coins are being created. Distribution takes into consideration how coins are spread among addresses (especially the core team which can have a big influence on value of the token.
A vesting period is a time when a token can’t be sold by the investor or team. It is important to understand how tokens are unlocked. Sometimes high APY may not be good if the core team has no vested interest.
One good place which you can do a good initial research will be https://messari.io/
Lastly and the most important, go to the project site and read the whitepaper!
Before I end this article, let me make a bold prediction!
I am still long term bullish on Crypto. Very likely BTC will go down further to 18-20K (-1 SD) as per my earlier post before go all the way up to 50k and beyond in 1-2 years time. Best time to DCA and to accumulate would be around BTC 23k and below. Remember to grab/DCA more BTC and ETH plus some crypto coins that you have faith in after research. If not, quite likely you will regret in few years down the road!
