For those adding Crypto as an asset class to their AA

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Prahasaurus
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

qwerty123 wrote: Sat Apr 17, 2021 1:51 pm
Prahasaurus wrote: Sat Apr 17, 2021 1:18 pm *You actually don't move Bitcoin literally onto Ethereum. Bitcoin can never leave the bitcoin blockchain. What happens is you lock the keys to your Bitcoin in a smart contract on Ethereum. These keys are now controlled by Ren node operators (not any single node, as that would be too risky, but a collection of nodes, hence decentralization). Once the nodes confirm your Bitcoin is locked, they issue ("mint") a new token, renBTC, that is Ethereum compliant, and available to you now on the Ethereum blockchain. Only you have access to this renBTC token. Now you can use your renBTC on Ethereum, and its value is the same as regular BTC. You cannot get the keys to your original BTC (which is locked away) until you relinquish keys to your renBTC ("burn" your renBTC). Both minting and burning carry a small fee. Why do this? Because you can put your capital in the form of BTC to work on Ethereum. The Bitcoin blockchain has zero options to make money off Bitcoin! This is why I'm so bullish on Ethereum. If you want to put your Bitcoin to work, you need to move it to another chain, and Ethereum is the primary chain for this. Bitcoin maximalists will tell you never fear, you will soon have many more options on the Bitcoin blockchain so you don't need to move your Bitcoin to other chains. I am highly skeptical this will happen. Why don't Ren node operators steal the Bitcoin? Because each node must post a bond of 100k REN tokens, currently valued at 110,000 USD. If any node tries to do something sinister, it will lose all or part of its bond. There are around 1800 nodes on the Ren network, facilitating these transactions (minting and burning Bitcoin).
Small correction - in the current version of Ren (phase "sub-zero"), the ren core developers run the nodes that actually hold custody of the Bitcoin deposited for renbtc.
Yes, it's a bit more complex than I presented here. I don't want to get sidetracked in the Ren roadmap (Greycore Testnet later this month, Greycore Mainnet, etc., etc.).
Asset Allocation: VT
DB2
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Re: For those adding Crypto as an asset class to their AA

Post by DB2 »

Do I sell my 8,300 shares of Dogecoin (I'm up just over 100% right now as I bought at .12 ) or hold? :)
SEAworld9
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Re: For those adding Crypto as an asset class to their AA

Post by SEAworld9 »

vanbogle59 wrote: Sat Apr 17, 2021 1:36 pm
SEAworld9 wrote: Sat Apr 17, 2021 1:23 pm
I dont believe I said anywhere that this is irrelevant.
This is like the third time it appeared that we disagreed, but we actually agreed.

This much seems clear:
your risk profile is dramatically different than mine
your confidence in this space is dramatically higher than mine
But we both seem to be looking at the same set of facts.
How very, very old-fashioned.

Good luck.
Haha us humans, so strange aren’t we :D
Cheers and good luck to you too :sharebeer
alluringreality
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Re: For those adding Crypto as an asset class to their AA

Post by alluringreality »

flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Yeah, from a United States centered perspective, I find it difficult to determine how this is anything other than limited regulation intended to profit from people with limited means while claiming it's for their benefit. The terms for a market decline at Coinbase would personally concern me.
https://help.coinbase.com/en/coinbase/t ... collateral
https://help.coinbase.com/en/coinbase/t ... lth?ref=ha
Last edited by alluringreality on Sat Apr 17, 2021 4:16 pm, edited 2 times in total.
45% US Indexes, 25% Ex-US Indexes, 30% Fixed Income - Buy & Hold
feh
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Re: For those adding Crypto as an asset class to their AA

Post by feh »

Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
I personally consider crypto a separate asset class. When I compute my asset allocation, I exclude cryptos from both equities and fixed income.

I label this chunk of money as "speculative".
decapod10
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Re: For those adding Crypto as an asset class to their AA

Post by decapod10 »

feh wrote: Sat Apr 17, 2021 2:34 pm
Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
I personally consider crypto a separate asset class. When I compute my asset allocation, I exclude cryptos from both equities and fixed income.

I label this chunk of money as "speculative".
Same, crypto is more like fun money/gambling to me. Taking a shot at the moon and hoping to hit. The rest of our portfolio will be enough without it. I am not including crypto in our portfolio management, not going to rebalance, just going to let it ride.
feh
Posts: 2011
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Re: For those adding Crypto as an asset class to their AA

Post by feh »

DB2 wrote: Sat Apr 17, 2021 2:00 pm Do I sell my 8,300 shares of Dogecoin (I'm up just over 100% right now as I bought at .12 ) or hold? :)
Sell.

I understand some folks say all crypto is an example of greater fool theory, but dogecoin most certainly is.
anthonyphamy
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Re: For those adding Crypto as an asset class to their AA

Post by anthonyphamy »

Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm
TheTimeLord wrote: Thu Apr 15, 2021 7:42 am For those adding crypto as an asset class to their AA:

How are you adding it?
--Buying crypto,
--Buying Trust instruments,
--Buying companies participating in crypto

What type of account are you using?
-- Taxable, Tax Deferred or Roth
-- Brokerage, Coinbase, PayPal, etc.

What size allocation are you targeting?
I have and occasionally still do buy tokens through Coinbase Pro. For a centralized entity, they are one of the best. I've never had any issues with Coinbase, I recommend them to friends. Link your bank account to get money in and out of Coinbase easily. Once purchased, I send them to my wallet address off Coinbase. I have a Trezor (hardware wallet), I would never store tokens without a hardware wallet, at least if you have over 10k USD or so.

I also buy using decentralized exchanges like Uniswap or 1inch (aggregator). For this you need to understand Metamask. I also use Metamask with my hardware wallet. Please, if there is one thing you take away from this, it's use a hardware wallet!

I also own shares in COIN. When an Ethereum ETF is available for US investors, I will add that to my Roth, as well. Otherwise, I have all my traditional investments in VT (Worldwide stock index ETF at Vanguard).

I have a very large % of my net worth in crypto, something I do not recommend to others. What I do recommend to others is to use these protocols and learn. These are not shiny rocks, to be bought and stored in a wallet and left alone, then sold on to someone else. If you are doing that, you are doing it wrong. We are at the start of a revolution in finance, and it's critical you understand what is happening. It's also incredibly fun and intellectually stimulating! So if you buy tokens, use them! Put them to work! Let me give you a few examples of what I'm doing:

1 - I run two Ren nodes. Ren is a project that helps bring Bitcoin and other tokens to other blockchains (actually representation of those coins, for example renBTC, since real Bitcoin can only exist on the bitcoin blockchain). Nodes make that happen, by putting up a bond of 100k REN as a guarantee. There are about 1,800 active nodes. For that service, each node is paid a small % of the value of the transactions across the network. That fee is paid in the tokens that move across the network. Long story short, each node operator made around 800 USD last month, primarily in Bitcoin. So I'm not just sitting on my REN waiting for it to appreciate, I actively participate in the network and earn monthly "dividends". Down side now is to operate a node, because of REN price appreciation, you need 120k USD or so (100k REN tokens). However, soon options will be available for people with less than 100k REN tokens to pool those tokens and still participate in earning monthly dividends, but it's not yet live.

2 - The Bitcoin I earn each month is not sitting in my wallet. I provide liquidity at KeeperDAO with the renBTC earned from my node (note: 1 renBTC = 1 BTC). Why do I add liquidity at KeeperDAO? Because I like the solution, and by providing liquidity (locking my renBTC within their protocol), I earn interest, paid in ROOK (the native token of KeeperDAO). I do this because I believe in the project, and I like earning more ROOK. Note: this is just what I earn from my nodes, I don't have my other Bitcoin here.

3 - I'm a huge fan of Aave, one of the top protocols in crypto for lending, borrowing, etc. My belief is Aave will replace my bank one day. I invested in Aave some time back. Again, those tokens are not sitting in my wallet collecting dust. They are in the Safety Module at Aave earning around 7% interest, paid in AAVE. Paid in AAVE is the key. 7% is a solid return, but earning 7% in Aave is what I'm so happy about. Can you imagine if you could take your Amazon stock in 1995 and put it somewhere where you would earn 7% more in Amazon stock? That's what Aave is offering through their Safety Module. The risk? If there is a hack, up to 30% of your money in the Safety Module can be used to compensate victims. My assessment is this risk is very small. But not zero!

4 - When I sell and do not repurchase tokens, I move my money to USDC or DAI. I then leave it at Aave to earn interest. The interest is variable and paid in real time, and is based on supply demand. This is a decentralized protocol, lend and borrow rates are determined by an algorithm. You can expect around 8-10% on average. It's like a bank account for my dollars, but instead of earning .1%, I earn 8-10%.

5 - I invested in an index fund, $DEGEN, at Indexed Finance (NDX). I then took my DEGEN tokens, combined them with ETH, and locked them in the liquidity pool at Uniswap. Because of this, I could then earn NDX tokens, as they are offering a bonus to liquidity providers, basically handing out their tokens (equivalent to company shares) to people who provide liquidity at Uniswap on their funds. So to summarize, I purchase DEGEN, an index fund composed of mainly small to mid cap tokens. I have seen gains of about 80% over the past 2 months. By combining my DEGEN with ETH and providing liquidity at Uniswap, I earn trading fees when people buy and sell DEGEN at Uniswap. And I am also earning additional NDX tokens for being a liquidity provider. Those NDX tokens I've earned over the past two months are worth today 3,600 USD.... My initial DEGEN investment was 10k USD, but I also added 10k in ETH to the liquidity pool. If this seems complex, it's not, once you get your hands dirty and start to participate in DeFi. Had I just bought DEGEN and stored it in my wallet, I'd be up 8k USD. But because I'm active with these investments, my gain is higher.

6 - I like The Graph (GRT). I bought my tokens some time back. Again, they are not sitting in my wallet. I "delegated" my tokens to the protocol, locked them in a smart contract there for use, and earn interest, paid in GRT. I'm earning the equivalent of 35% interest on my initial investment. The money is paid out regularly (every 3-4 days or so). It automatically compounds. If I ever want to sell my GRT (probably will hold this amount long term), I can withdraw from their protocol with my interest earned, any time. I will have a "cool down" period of about 2 weeks (typical for many protocols, e.g. Aave). But then I can sell my tokens, they are back in my wallet under my full control.

I can go on, there are so many options now! My point is, you are missing out on gains if you are just sitting on your tokens. They are not shiny rocks, they are meant to be put to use. Learn how to use Metamask, get a hardware wallet, and start to learn and play in DeFi. I haven't done a total calculation, but my guess is I'm making around 4-5k USD per month on various initiatives within DeFi. And this is without yet using my Ethereum and Bitcoin at all, which is 75% of my portfolio (outside of my renBTC as noted above, but that is a small % of my Bitcoin holding).

Why not? For Bitcoin, I'm waiting for a decentralized solution I trust. For Ethereum, I plan to operate my own nodes and I'm waiting a bit to start this. But I will start soon. Will these gains last forever? Of course not. But they will remain higher than traditional finance, simply because we are eliminating the middle men who are skimming off so much value in finance.
What hard wallet do you recommend? I currently only have btc/eth, but potentially open to more coins in the future. Would you recommend trezor vs ledger, and if so, which particular model? Thanks in advance!
Prahasaurus
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Re: For those adding Crypto as an asset class to their AA

Post by Prahasaurus »

anthonyphamy wrote: Sat Apr 17, 2021 2:49 pm
Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm
TheTimeLord wrote: Thu Apr 15, 2021 7:42 am For those adding crypto as an asset class to their AA:

How are you adding it?
--Buying crypto,
--Buying Trust instruments,
--Buying companies participating in crypto

What type of account are you using?
-- Taxable, Tax Deferred or Roth
-- Brokerage, Coinbase, PayPal, etc.

What size allocation are you targeting?
I have and occasionally still do buy tokens through Coinbase Pro. For a centralized entity, they are one of the best. I've never had any issues with Coinbase, I recommend them to friends. Link your bank account to get money in and out of Coinbase easily. Once purchased, I send them to my wallet address off Coinbase. I have a Trezor (hardware wallet), I would never store tokens without a hardware wallet, at least if you have over 10k USD or so.

I also buy using decentralized exchanges like Uniswap or 1inch (aggregator). For this you need to understand Metamask. I also use Metamask with my hardware wallet. Please, if there is one thing you take away from this, it's use a hardware wallet!

I also own shares in COIN. When an Ethereum ETF is available for US investors, I will add that to my Roth, as well. Otherwise, I have all my traditional investments in VT (Worldwide stock index ETF at Vanguard).

I have a very large % of my net worth in crypto, something I do not recommend to others. What I do recommend to others is to use these protocols and learn. These are not shiny rocks, to be bought and stored in a wallet and left alone, then sold on to someone else. If you are doing that, you are doing it wrong. We are at the start of a revolution in finance, and it's critical you understand what is happening. It's also incredibly fun and intellectually stimulating! So if you buy tokens, use them! Put them to work! Let me give you a few examples of what I'm doing:

1 - I run two Ren nodes. Ren is a project that helps bring Bitcoin and other tokens to other blockchains (actually representation of those coins, for example renBTC, since real Bitcoin can only exist on the bitcoin blockchain). Nodes make that happen, by putting up a bond of 100k REN as a guarantee. There are about 1,800 active nodes. For that service, each node is paid a small % of the value of the transactions across the network. That fee is paid in the tokens that move across the network. Long story short, each node operator made around 800 USD last month, primarily in Bitcoin. So I'm not just sitting on my REN waiting for it to appreciate, I actively participate in the network and earn monthly "dividends". Down side now is to operate a node, because of REN price appreciation, you need 120k USD or so (100k REN tokens). However, soon options will be available for people with less than 100k REN tokens to pool those tokens and still participate in earning monthly dividends, but it's not yet live.

2 - The Bitcoin I earn each month is not sitting in my wallet. I provide liquidity at KeeperDAO with the renBTC earned from my node (note: 1 renBTC = 1 BTC). Why do I add liquidity at KeeperDAO? Because I like the solution, and by providing liquidity (locking my renBTC within their protocol), I earn interest, paid in ROOK (the native token of KeeperDAO). I do this because I believe in the project, and I like earning more ROOK. Note: this is just what I earn from my nodes, I don't have my other Bitcoin here.

3 - I'm a huge fan of Aave, one of the top protocols in crypto for lending, borrowing, etc. My belief is Aave will replace my bank one day. I invested in Aave some time back. Again, those tokens are not sitting in my wallet collecting dust. They are in the Safety Module at Aave earning around 7% interest, paid in AAVE. Paid in AAVE is the key. 7% is a solid return, but earning 7% in Aave is what I'm so happy about. Can you imagine if you could take your Amazon stock in 1995 and put it somewhere where you would earn 7% more in Amazon stock? That's what Aave is offering through their Safety Module. The risk? If there is a hack, up to 30% of your money in the Safety Module can be used to compensate victims. My assessment is this risk is very small. But not zero!

4 - When I sell and do not repurchase tokens, I move my money to USDC or DAI. I then leave it at Aave to earn interest. The interest is variable and paid in real time, and is based on supply demand. This is a decentralized protocol, lend and borrow rates are determined by an algorithm. You can expect around 8-10% on average. It's like a bank account for my dollars, but instead of earning .1%, I earn 8-10%.

5 - I invested in an index fund, $DEGEN, at Indexed Finance (NDX). I then took my DEGEN tokens, combined them with ETH, and locked them in the liquidity pool at Uniswap. Because of this, I could then earn NDX tokens, as they are offering a bonus to liquidity providers, basically handing out their tokens (equivalent to company shares) to people who provide liquidity at Uniswap on their funds. So to summarize, I purchase DEGEN, an index fund composed of mainly small to mid cap tokens. I have seen gains of about 80% over the past 2 months. By combining my DEGEN with ETH and providing liquidity at Uniswap, I earn trading fees when people buy and sell DEGEN at Uniswap. And I am also earning additional NDX tokens for being a liquidity provider. Those NDX tokens I've earned over the past two months are worth today 3,600 USD.... My initial DEGEN investment was 10k USD, but I also added 10k in ETH to the liquidity pool. If this seems complex, it's not, once you get your hands dirty and start to participate in DeFi. Had I just bought DEGEN and stored it in my wallet, I'd be up 8k USD. But because I'm active with these investments, my gain is higher.

6 - I like The Graph (GRT). I bought my tokens some time back. Again, they are not sitting in my wallet. I "delegated" my tokens to the protocol, locked them in a smart contract there for use, and earn interest, paid in GRT. I'm earning the equivalent of 35% interest on my initial investment. The money is paid out regularly (every 3-4 days or so). It automatically compounds. If I ever want to sell my GRT (probably will hold this amount long term), I can withdraw from their protocol with my interest earned, any time. I will have a "cool down" period of about 2 weeks (typical for many protocols, e.g. Aave). But then I can sell my tokens, they are back in my wallet under my full control.

I can go on, there are so many options now! My point is, you are missing out on gains if you are just sitting on your tokens. They are not shiny rocks, they are meant to be put to use. Learn how to use Metamask, get a hardware wallet, and start to learn and play in DeFi. I haven't done a total calculation, but my guess is I'm making around 4-5k USD per month on various initiatives within DeFi. And this is without yet using my Ethereum and Bitcoin at all, which is 75% of my portfolio (outside of my renBTC as noted above, but that is a small % of my Bitcoin holding).

Why not? For Bitcoin, I'm waiting for a decentralized solution I trust. For Ethereum, I plan to operate my own nodes and I'm waiting a bit to start this. But I will start soon. Will these gains last forever? Of course not. But they will remain higher than traditional finance, simply because we are eliminating the middle men who are skimming off so much value in finance.
What hard wallet do you recommend? I currently only have btc/eth, but potentially open to more coins in the future. Would you recommend trezor vs ledger, and if so, which particular model? Thanks in advance!
I use a Trezor. Bought it in 2014 I believe, never had any issues, still works perfectly. I have the basic model, love it. Definitely do not get active in crypto with balances over 10k USD or so without a hardware wallet. This is the number one thing you can do to protect yourself. Number two is learn how to use your hardware wallet properly... There are many videos on YouTube. I'm actually thinking of starting to make videos targeted to an older crowd (like me) who wants to do more in crypto.

Again, to generate maximum gains from crypto, you need to put your coins to use. Bitcoin is probably the exception, where you can simply buy and hold and forget. But almost all other coins should be put to use, and you will typically need to use Metamask (browser extension) in conjunction with a hardware wallet. Both Ledger or Trezor should be fine.
Asset Allocation: VT
EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Bolded above is my emphasis.

That is exactly my point that I think is being glossed over. If all this borrowing is going on to simply buy more crypto, a good correction can and will wipe out a lot of people. Let us look at a potential pattern.

Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. With that $6,400 you leverage $5,120 ad buy more bitcoin. With $10k a person just bought $29,520 of bitcoin. Over the last few months Bitcoin price has gone up and for this example I will say double. The original $10k is up $10k which can also be leveraged to buy $8k more bitcoins which can be leveraged as above to have a total of $19,520 of additional bitcoins. Same thing happened to the first $8k leveraged, and the next $6,400 leveraged. Essentially with $10k the original owner has bought many multiples of their original investment amount without adding any additional funds. Essentially it makes it seam like there is significant demand (which there is.) But, the demand is synthetically generated through protocols like AAVE and DAI.

This is a great spiral on the way up, but what will it look like if there is a greater than 20% correction which I think each and every bitcoin owner can agree will happen one day? If on the way up this ramps up buying demand, the exact opposite will happen on the way down causing a huge drop in price because all those leveraged assets will be forcibly sold off to cover the collateral. Massive downward spiral
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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watchnerd
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Re: For those adding Crypto as an asset class to their AA

Post by watchnerd »

Valuethinker wrote: Sat Apr 17, 2021 11:25 am
More people have gone broke through leverage than any other way in financial history. Make sure you have enough time in the market to recoup your losses. And remember Long Term Capital Management.
Measured against the whole portfolio, I'm at 2.5% leverage.

I'll be fine even if it completely blows up.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
txhill
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Re: For those adding Crypto as an asset class to their AA

Post by txhill »

EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm
flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Bolded above is my emphasis.

That is exactly my point that I think is being glossed over. If all this borrowing is going on to simply buy more crypto, a good correction can and will wipe out a lot of people. Let us look at a potential pattern.

Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. With that $6,400 you leverage $5,120 ad buy more bitcoin. With $10k a person just bought $29,520 of bitcoin. Over the last few months Bitcoin price has gone up and for this example I will say double. The original $10k is up $10k which can also be leveraged to buy $8k more bitcoins which can be leveraged as above to have a total of $19,520 of additional bitcoins. Same thing happened to the first $8k leveraged, and the next $6,400 leveraged. Essentially with $10k the original owner has bought many multiples of their original investment amount without adding any additional funds. Essentially it makes it seam like there is significant demand (which there is.) But, the demand is synthetically generated through protocols like AAVE and DAI.

This is a great spiral on the way up, but what will it look like if there is a greater than 20% correction which I think each and every bitcoin owner can agree will happen one day? If on the way up this ramps up buying demand, the exact opposite will happen on the way down causing a huge drop in price because all those leveraged assets will be forcibly sold off to cover the collateral. Massive downward spiral
I don't personally know whether this CDO-type activity is going on. I don't think it can be because the asset price has been so volatile--it would have already wiped out all the synthetic positions many times over even during the latest run up (unlike the CDOs based on the housing market that led to the great recession). But I don't have any particular insight into this, so if this is indeed going on, then I guess we will have a great buying opportunity ahead of us someday :)
EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

Prahasaurus wrote: Sat Apr 17, 2021 1:33 pm
EnjoyIt wrote: Sat Apr 17, 2021 12:55 pm
Prahasaurus wrote: Sat Apr 17, 2021 12:42 pm
EnjoyIt wrote: Sat Apr 17, 2021 12:07 pm
MoeMoney wrote: Sat Apr 17, 2021 11:32 am

Loaned out as leverage, just like a traditional bank
With debt being so cheap today, who and why is someone borrowing to give you 6-8% interest. What happens to the debt if the value of their collateral (other crypto) goes down in value? What if it goes down fast as it has done in the past during corrections?
How many times do we need to explain this?

1 - Debt is cheap to whom? For 99% of people on this planet, how is debt cheap? Why do you think credit card companies charge 18% if debt is so cheap?

2 - Aave provides credit to anyone in the world, with no KYC. You only need collateral. You can have access to thousands or millions of USD (actually USDC, DAI, etc, but it's a 1:1 conversion) right now, provided you have the collateral. You could be a bank president, a house wife with terrible credit, a 16 year old in Nigeria, whatever. Aave doesn't care. You only need the collateral. You can get your loan in seconds.

3 - You must maintain collateralization ratios, which vary a bit based on what you are using as collateral. More stable collateral such as USDC require less than less stable collateral (many crypto assets). In any case, you are automatically liquidated should your collateral ratio fall into the red zone. Doesn't matter if it "goes down fast," you have lost your principal long before this becomes an issue.

4 - It's revolutionary to be able to hold onto one asset (e.g. Ethereum) and use it as collateral to finance the purchase of other assets (perhaps in USDC), with no KYC, without having to know anything about your counterparts, etc. And the entire loan is done in seconds. I can borrow a million dollars right now should I want it, with no questions asked, etc., the entire process would take 1-2 minutes. That is really amazing!

5 - Let's say you are a mathematical genius, you are a 17 year old Russian, you have earned some money in crypto, and you want to invest more with leverage. You feel you have an edge over other investors, and you want to increase that edge with leverage. How do you do that? You certainly aren't going to get a loan from your local Russian bank. You certainly aren't going to get capital from foreign banks. But you can use your existing Ethereum or Bitcoin as collateral, and now, within minutes, you have digital dollars you can use to finance further crypto purchases. No questions asked.

Does this end badly for some? Absolutely! Just like in traditional finance, where hedge funds go under. But now, thanks to crypto, we can all have access to cash. It's not just for billionaires.
1) That is exactly it, these large must be to people with bad credit. People with credit card debt at 18% for example. These borrowers are not good stuarts of their finances and therefor can't have access to cheap debt like so many others.

2) I'm pretty sure a poor Nigerian does not own crypto to be able to borrow against, otherwise they would not be a poor Nigerian, they would be a rich Nigerian. Either way, if one has collateral, the smart thing to do is to sell your cryptos if you need money, not take out more debt. But that is not the point of this discussion.

3 + 4 +5) This is actually what concerns me about this process. I have no way of proving or disproving it, but I have a strong suspicion that a significant portion of the people borrowing on these platforms are using it to buy more crypto currency with the borrowed funds, in essence they are leveraging their position. I wonder how this will play out in the next correction?
1 - It's just not true that the only people who wish to access funds and pay a high fee have bad credit. I can have access to 7 figures within minutes if I choose to do so. How can I do that in traditional finance? Sure, I could do it, but it would take me months, require a lot of time, paperwork, etc. With Aave, I could have 1 million USD in minutes. Do you see how revolutionary that is? What if I want the money for weeks only? Or perhaps just hours to speculate? How does a normal person get access to that kind of money?

2 - A Nigerian who has made money off crypto would have crypto as collateral. That same intelligent Nigerian would understand the power of leverage, and use it to his advantage to supersize his gains. How do you think hedge funds make so much money? Now that 17 year old Nigerian can be his own hedge fund. Can he fail and lose it all? Absolutely. But he can also succeed and make so much more.

3 + 4 + 5) Of course they are using crypto to buy more crypto!!! LOL!!!!! Here is a news flash: I have a strong suspicion that many hedge funds are using massive leverage to supersize gains. Want to participate in a hedge fund? You need to have millions, pass KYC, etc. Or you can do it within crypto, at much smaller scale, with similar effect.

DeFi is about giving the little guy access to the same tools that hedge funds have. That Nigerian kid can now short Tesla or gold or go long on Bitcoin with massive leverage, or whatever. Will he or she succeed? The smart ones will, long term. But now it's open to everyone. This is the revolution so many here are missing. Anyone, anywhere in the word, can participate. You just need some capital (doesn't need to be millions, a few thousand is fine to start), an internet connection, Metamask, and intelligence.
1) Interactive Brokers allows one to leverage their assets and take out cash. No, not within minutes, but neither is your example. Just cause you took out a loan does not mean you have cash to go buy a house with it. You need to convert it into fiat first which takes time. Still likely a bit faster than interactive brokers but you get the idea. Ohh, and the fee is 0.75% and not the 6-8% from the crypto loan sharks.
https://tinyurl.com/h5xfd2b2 Link to their website. BTW, other brokerages allow the same thing but this is the lowest fee I can find.

2) A Nigerian who made money from crypto already had money before they made money on crypto. You have to have money to buy some. If all they had was $10, it is not like they are rolling in it even if invested in Bitcoin that went up 600%. I also don't understand how a Nigerian is acting like a hedge fund. Maybe you are referring to something else, but the allusion does not make any sense to me. Sorry.

3-5) See post above regarding synthetic demand and spiral. Also, you do not need millions to buy into someone's hedge fund. I feel you don't fully understand how a hedge fund operates. If I'm mistaken, I'm sorry.

I do understand how bitcoin via Ren can be used to buy shares of companies that may not be obtainable to a foreign investor and the allure of that protocol.
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Freefun
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Re: For those adding Crypto as an asset class to their AA

Post by Freefun »

I’ve purchased some BTC and ETH (and REN which I regret but oh well). Using Kraken and cold wallets.

The ETH was originally to fund my NFT hobby but now just holding it.

I don’t consider it in my AA.
Remember when you wanted what you currently have?
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vanbogle59
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm Buy $10k of bitcoin and use it to leverage $8k to buy ???
This is real. But I don't think that's called leverage. I think it's just collateral in this scenario.
However, if your point is simply that now there are 2 assets that could fail, I agree. This adds risk.
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. ...
This is a scary boogeyman. Is that actually real? I've never seen it.
There is real risk (frequently unquantifiable risk IMHO) in crypto. (The paparazzi catches Elon petting a cat and $100B disappears?)

No need to invent risks that aren't there.
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

txhill wrote: Sat Apr 17, 2021 3:34 pm
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm
flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Bolded above is my emphasis.

That is exactly my point that I think is being glossed over. If all this borrowing is going on to simply buy more crypto, a good correction can and will wipe out a lot of people. Let us look at a potential pattern.

Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. With that $6,400 you leverage $5,120 ad buy more bitcoin. With $10k a person just bought $29,520 of bitcoin. Over the last few months Bitcoin price has gone up and for this example I will say double. The original $10k is up $10k which can also be leveraged to buy $8k more bitcoins which can be leveraged as above to have a total of $19,520 of additional bitcoins. Same thing happened to the first $8k leveraged, and the next $6,400 leveraged. Essentially with $10k the original owner has bought many multiples of their original investment amount without adding any additional funds. Essentially it makes it seam like there is significant demand (which there is.) But, the demand is synthetically generated through protocols like AAVE and DAI.

This is a great spiral on the way up, but what will it look like if there is a greater than 20% correction which I think each and every bitcoin owner can agree will happen one day? If on the way up this ramps up buying demand, the exact opposite will happen on the way down causing a huge drop in price because all those leveraged assets will be forcibly sold off to cover the collateral. Massive downward spiral
I don't personally know whether this CDO-type activity is going on. I don't think it can be because the asset price has been so volatile--it would have already wiped out all the synthetic positions many times over even during the latest run up (unlike the CDOs based on the housing market that led to the great recession). But I don't have any particular insight into this, so if this is indeed going on, then I guess we will have a great buying opportunity ahead of us someday :)
I don't know what CDO is. Parahasaurus feels that this is exactly what is going on. He seems to be more knowledgable than most into this space. But he can be wrong as well. Also, yes it is volatile, but it has to drop close to the 20% threshold, or whatever is decided is needed for collateral. We have not had a sell off that big since this run up has started. A good 20-30% correction and maybe then we will see some trouble. It really all depends how much of this is actually going on, and at what price points.

It is all interesting stuff.
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txhill
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Re: For those adding Crypto as an asset class to their AA

Post by txhill »

Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
I think people will eventually think of it more as 75/20/5, at least with regard to Bitcoin and any yield-generating investments in DeFi. Those should over time eat fixed income's lunch (as well as store of value's). You might even have a separate category for things like ETH, DOT, ADA, etc. Those are more like VC type investments in future platforms. High risk high reward prospects.
EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

vanbogle59 wrote: Sat Apr 17, 2021 3:39 pm
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm Buy $10k of bitcoin and use it to leverage $8k to buy ???
This is real. But I don't think that's called leverage. I think it's just collateral in this scenario.
However, if your point is simply that now there are 2 assets that could fail, I agree. This adds risk.
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. ...
This is a scary boogeyman. Is that actually real? I've never seen it.
There is real risk (frequently unquantifiable risk IMHO) in crypto. (The paparazzi catches Elon petting a cat and $100B disappears?)

No need to invent risks that aren't there.
Buying crypto by leveraging already owned crypto is very real. Does it go 2, 3, 4 layers deep? Who the heck knows. If I thought of it, that means there are way way way smarter people than me who have thought of it as well and maybe capitalizing on this recent run up. $10k going up 100% can be worth over $100k. Those are some very meaningful returns.
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txhill
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Re: For those adding Crypto as an asset class to their AA

Post by txhill »

EnjoyIt wrote: Sat Apr 17, 2021 3:41 pm
txhill wrote: Sat Apr 17, 2021 3:34 pm
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm
flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Bolded above is my emphasis.

That is exactly my point that I think is being glossed over. If all this borrowing is going on to simply buy more crypto, a good correction can and will wipe out a lot of people. Let us look at a potential pattern.

Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. With that $6,400 you leverage $5,120 ad buy more bitcoin. With $10k a person just bought $29,520 of bitcoin. Over the last few months Bitcoin price has gone up and for this example I will say double. The original $10k is up $10k which can also be leveraged to buy $8k more bitcoins which can be leveraged as above to have a total of $19,520 of additional bitcoins. Same thing happened to the first $8k leveraged, and the next $6,400 leveraged. Essentially with $10k the original owner has bought many multiples of their original investment amount without adding any additional funds. Essentially it makes it seam like there is significant demand (which there is.) But, the demand is synthetically generated through protocols like AAVE and DAI.

This is a great spiral on the way up, but what will it look like if there is a greater than 20% correction which I think each and every bitcoin owner can agree will happen one day? If on the way up this ramps up buying demand, the exact opposite will happen on the way down causing a huge drop in price because all those leveraged assets will be forcibly sold off to cover the collateral. Massive downward spiral
I don't personally know whether this CDO-type activity is going on. I don't think it can be because the asset price has been so volatile--it would have already wiped out all the synthetic positions many times over even during the latest run up (unlike the CDOs based on the housing market that led to the great recession). But I don't have any particular insight into this, so if this is indeed going on, then I guess we will have a great buying opportunity ahead of us someday :)
I don't know what CDO is. Parahasaurus feels that this is exactly what is going on. He seems to be more knowledgable than most into this space. But he can be wrong as well. Also, yes it is volatile, but it has to drop close to the 20% threshold, or whatever is decided is needed for collateral. We have not had a sell off that big since this run up has started. A good 20-30% correction and maybe then we will see some trouble. It really all depends how much of this is actually going on, and at what price points.

It is all interesting stuff.
Well then color me impressed. You just reinvented the very mechanism that banks used in the run up to the Great Financial Recession! You could have made billions if you'd come up with this in the 2000s :) Basically a CDO is just using borrowed funds as collateral for additional borrowing, which increases the leverage in the entire system. It was fraudulent in the 2000s because they weren't factoring in risk properly. But it worked for a while because the house of cards was built on mortgages, which at the time were very stable in value. As soon as a few people started defaulting on their mortgages, the whole thing collapsed.

If this is happening right now in Bitcoin, then yes we are looking at a house of cards. However, the price has been very volatile even during this year (went from $57k to $45k in one week in February, for example). That sort of drop should have liquidated synthetic long positions (or maybe what we saw in the price action was a bunch of synthetic longs being liquidated, causing a further drop). What this indicates to me is that the system as a whole cannot be excessively levered up; the volatility is shaking off these synthetic positions constantly.

Of course I could be wrong!
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

txhill wrote: Sat Apr 17, 2021 3:47 pm
EnjoyIt wrote: Sat Apr 17, 2021 3:41 pm
txhill wrote: Sat Apr 17, 2021 3:34 pm
EnjoyIt wrote: Sat Apr 17, 2021 3:24 pm
flyfishers83 wrote: Sat Apr 17, 2021 1:52 pm It’s not clear to me how having instant access to large sums of money to buy additional speculative assets without basics like KYC is a net positive. When things go bad, it’s going to go very bad.
Bolded above is my emphasis.

That is exactly my point that I think is being glossed over. If all this borrowing is going on to simply buy more crypto, a good correction can and will wipe out a lot of people. Let us look at a potential pattern.

Buy $10k of bitcoin and use it to leverage $8k to buy more bitcoin. With that $8k bitcoin you leverage $6,400 and buy more bitcoin. With that $6,400 you leverage $5,120 ad buy more bitcoin. With $10k a person just bought $29,520 of bitcoin. Over the last few months Bitcoin price has gone up and for this example I will say double. The original $10k is up $10k which can also be leveraged to buy $8k more bitcoins which can be leveraged as above to have a total of $19,520 of additional bitcoins. Same thing happened to the first $8k leveraged, and the next $6,400 leveraged. Essentially with $10k the original owner has bought many multiples of their original investment amount without adding any additional funds. Essentially it makes it seam like there is significant demand (which there is.) But, the demand is synthetically generated through protocols like AAVE and DAI.

This is a great spiral on the way up, but what will it look like if there is a greater than 20% correction which I think each and every bitcoin owner can agree will happen one day? If on the way up this ramps up buying demand, the exact opposite will happen on the way down causing a huge drop in price because all those leveraged assets will be forcibly sold off to cover the collateral. Massive downward spiral
I don't personally know whether this CDO-type activity is going on. I don't think it can be because the asset price has been so volatile--it would have already wiped out all the synthetic positions many times over even during the latest run up (unlike the CDOs based on the housing market that led to the great recession). But I don't have any particular insight into this, so if this is indeed going on, then I guess we will have a great buying opportunity ahead of us someday :)
I don't know what CDO is. Parahasaurus feels that this is exactly what is going on. He seems to be more knowledgable than most into this space. But he can be wrong as well. Also, yes it is volatile, but it has to drop close to the 20% threshold, or whatever is decided is needed for collateral. We have not had a sell off that big since this run up has started. A good 20-30% correction and maybe then we will see some trouble. It really all depends how much of this is actually going on, and at what price points.

It is all interesting stuff.
Well then color me impressed. You just reinvented the very mechanism that banks used in the run up to the Great Financial Recession! You could have made billions if you'd come up with this in the 2000s :) Basically a CDO is just using borrowed funds as collateral for additional borrowing, which increases the leverage in the entire system. It was fraudulent in the 2000s because they weren't factoring in risk properly. But it worked for a while because the house of cards was built on mortgages, which at the time were very stable in value. As soon as a few people started defaulting on their mortgages, the whole thing collapsed.

If this is happening right now in Bitcoin, then yes we are looking at a house of cards. However, the price has been very volatile even during this year (went from $57k to $45k in one week during February, for example). That sort of drop should have liquidated synthetic long positions (or maybe what we saw in the price action was a bunch of synthetic longs being liquidated, causing a further drop). What this indicates to me is that the system as a whole cannot be levered up; the volatility is shaking off these synthetic positions constantly.

Of course I could be wrong!
Thanks for explaining CDO to me. Now let us look at your example in February. $57k at a 20% haircut is $45,600. That means that if anyone had to have 80% collateral at the very peak, they would have been forced to sell off. But that would only happen if they bought and leveraged at the peak. Maybe we got really close to seeing the house of cards fall at $45k. Maybe another $3-4k drop would have done it. Or maybe I am being a boogie man describing something that doesn't happen.

Frankly, if banks were doing it prior to the great recession, why aren't people doing it now. Crypto has no laws other than the programing.
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Ob81
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Re: For those adding Crypto as an asset class to their AA

Post by Ob81 »

I am doing about 4% of my monthly investments (just started this year). I started at 1% at the end of January. My crypto has outperformed everything. I already had about 10% going to some sector funds in my taxable, so I took from that. I have to admit that I did $700 in that doggy coin and it outperformed my last 10 years of investing based on % in about 4 hours. I don’t know what to do with it, and I haven’t sold anything outside of my retirement accounts in years.

I still wouldn’t go heavy on this stuff; I never bet against the USD.
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Re: For those adding Crypto as an asset class to their AA

Post by txhill »

EnjoyIt wrote: Sat Apr 17, 2021 3:55 pm Thanks for explaining CDO to me. Now let us look at your example in February. $57k at a 20% haircut is $45,600. That means that if anyone had to have 80% collateral at the very peak, they would have been forced to sell off. But that would only happen if they bought and leveraged at the peak. Maybe we got really close to seeing the house of cards fall at $45k. Maybe another $3-4k drop would have done it. Or maybe I am being a boogie man describing something that doesn't happen.

Frankly, if banks were doing it prior to the great recession, why aren't people doing it now. Crypto has no laws other than the programing.
That's a good point about the peak. I guess I just don't know how to analyze the risks well enough myself. You're absolutely right that people are using leverage now with cryptos; I just figured they couldn't be doing it excessively because of the volatility. But it may be the case that there hasn't been a big enough event recently to cause mass liquidations. I'll have to look into this more.
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Re: For those adding Crypto as an asset class to their AA

Post by aj76er »

TheTimeLord wrote: Thu Apr 15, 2021 7:42 am For those adding crypto as an asset class to their AA:

How are you adding it?
--Buying crypto,
--Buying Trust instruments,
--Buying companies participating in crypto

What type of account are you using?
-- Taxable, Tax Deferred or Roth
-- Brokerage, Coinbase, PayPal, etc.

What size allocation are you targeting?
I don’t have a position in crypto, but if I did I’d hold an ETF like BITW, which tracks a cap weighted index of crypto currencies. I’d probably keep the percentage at 1% or less (of my total portfolio) and hold in a tax advantaged account (preferably a Roth). I would consider this an alternative, commodity-like asset similar to Gold.

Another option would be to treat as a speculative bet. Throw 1% of portfolio at it. Once. Cash out at either a specified date (eg 10yrs) or a specified value (eg $100k).

It really depends on what your thesis is concerning crypto. Will it be an uncorrelated asset that generally tracks inflation over time while acting as a hedge against fiat currency (eg like Gold)? Or is it a speculative asset that will eventually gain mainstream adoption (eg hedge funds, financial planners, pension funds etc all holding it) and so it’s value will rise accordingly? Or some of both?
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HanSolo
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Re: For those adding Crypto as an asset class to their AA

Post by HanSolo »

EnjoyIt wrote: Sat Apr 17, 2021 9:38 am Bogleheads generally don't buy assets that do not provide a return. Gold and silver being an example. Sure, some do, but I'm speaking in generalities. I am now seeing more and more bogleheads, long timers, buying into cryptos. Does that mean we are starting to reach our peak because the last of the skeptics are getting involved or does it mean that cryptos are getting adopted by the more serious investors and there is more room to grow? Time will tell.
To respond to the above, in my opinion, you've pointed out how some Bogleheads are willing to depart from their previously-held concepts of investing in order to follow a craze. People are people.
vanbogle59 wrote: Sat Apr 17, 2021 11:26 am Either it gets accepted as a store of value by a lot of people, or it doesn't.
So far, it hasn't. I've heard of crypto being used for speculation, but not as a store of value.

I'm not seeing how this isn't a ponzi scheme. That doesn't mean you won't make money. "You can fool all of the people some of the time." If you get in on the craze ahead of a few billion other people, you'll probably make money. You just have to remember to sell to them when it's time to do that.

To answer the OP, my allocation to crypto is 0%. Then again, I'm the guy who goes to Las Vegas, and even walks through the casino, and doesn't place any bets.
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occambogle
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

Valuethinker wrote: Sat Apr 17, 2021 1:19 pm - how can something pay 8% when nothing else in the market is paying 8%? Or does that have the sort of extreme level of risk of, say, Ecuadorian bonds?
I suspect you are thinking more in developed country terms that have historically-low interest rates. I have no expertise in this matter and have not done any staking myself but how it is viable seems fairly clear to me:

https://tradingeconomics.com/india/bank-lending-rate - India 8%
https://tradingeconomics.com/kenya/bank-lending-rate - Kenya 12%
Actual personal loans are likely to be higher than those such as Kenya 14.5% https://www.sc.com/ke/loans/personal-loans/

The assumption in all that though is that people actually are able to get loans from banks etc. Many people wouldn't fulfil bank criteria.
Actually what is more competitive are mobile-money loans from mobile/cell operators (think Square, but not Square) at lower percentages and available to anyone with a phone (even a dumb Nokia phone, not even a smartphone).

Loan interest rates higher than 10% are not uncommon in the developing world. There's an element of currency risk vs USD contained in those rates I assume, and I don't really understand how that interacts with crypto staking etc. But I can see that for many people around the world who don't have access to the traditional banking system... being able to borrow at staking-level rates without all the hassle the banks enforce could be competitive.

In a way it appears to me a bit similar to currency/bond carry-trades between countries/currencies... People in low-interest rate countries are lending money at rates way higher than banks give them, to people in countries with even higher traditional loan rates. It's a win-win for both, but the difference vs traditional banking is the lending risk aspect is being taken care of (largely, I assume) by the blockchain/staking mechanism.

Disclaimer: I really don't know much about this, just pointing out that actual personal loan interest rates outside the developed world bear no resemblance to what most people here are probably used to.
And sorry to go astray from the OP's original theme but I find the discussion really interesting.
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TheTimeLord
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Re: For those adding Crypto as an asset class to their AA

Post by TheTimeLord »

decapod10 wrote: Sat Apr 17, 2021 2:45 pm
feh wrote: Sat Apr 17, 2021 2:34 pm
Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
I personally consider crypto a separate asset class. When I compute my asset allocation, I exclude cryptos from both equities and fixed income.

I label this chunk of money as "speculative".
Same, crypto is more like fun money/gambling to me. Taking a shot at the moon and hoping to hit. The rest of our portfolio will be enough without it. I am not including crypto in our portfolio management, not going to rebalance, just going to let it ride.
I would assume this is would be the majority approach at this point.
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EnjoyIt
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

TheTimeLord wrote: Sun Apr 18, 2021 6:41 am
decapod10 wrote: Sat Apr 17, 2021 2:45 pm
feh wrote: Sat Apr 17, 2021 2:34 pm
Corsair wrote: Sat Apr 17, 2021 11:43 am Do people count this towards their equity allocation or in their alternative allocation? So if you're 70% equities and 5% BTC do you consider yourself being a 75/25 or a 70/25/5?
I personally consider crypto a separate asset class. When I compute my asset allocation, I exclude cryptos from both equities and fixed income.

I label this chunk of money as "speculative".
Same, crypto is more like fun money/gambling to me. Taking a shot at the moon and hoping to hit. The rest of our portfolio will be enough without it. I am not including crypto in our portfolio management, not going to rebalance, just going to let it ride.
I would assume this is would be the majority approach at this point.
I think it probably is the wisest way to think of it. If it reaches a decent portion of one’s portfolio, rebalancing is probably a good idea.

There is bit of a sell off this morning I guess because of Turkey or some other reason.
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Jags4186
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Re: For those adding Crypto as an asset class to their AA

Post by Jags4186 »

GR8FUL-D wrote: Fri Apr 16, 2021 3:53 pm
Jags4186 wrote: Fri Apr 16, 2021 8:30 am Well folks, that’s it, top is in. I officially have purchased 1 ETH. Get out now.
LOL That's what I said to some friends when I first started buying. Thanks for the warning nonetheless.
I would just like to follow up on my earlier post. Since my purchase:

Bitcoin: Down 10%
Etherium: Down 13%
Dogecoin: Down 26%

Can’t say I didn’t warn ya
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Re: For those adding Crypto as an asset class to their AA

Post by saintsfan342000 »

I’m targeting 5% of my portfolio in NBA Top Shot, or other emerging sports-related NFTs (e.g., WWE recently released some with the Undertaker).
Already impartial now...and you have a nice day.
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Re: For those adding Crypto as an asset class to their AA

Post by Valuethinker »

occambogle wrote: Sun Apr 18, 2021 2:49 am
Valuethinker wrote: Sat Apr 17, 2021 1:19 pm - how can something pay 8% when nothing else in the market is paying 8%? Or does that have the sort of extreme level of risk of, say, Ecuadorian bonds?
I suspect you are thinking more in developed country terms that have historically-low interest rates. I have no expertise in this matter and have not done any staking myself but how it is viable seems fairly clear to me:

https://tradingeconomics.com/india/bank-lending-rate - India 8%
https://tradingeconomics.com/kenya/bank-lending-rate - Kenya 12%
Actual personal loans are likely to be higher than those such as Kenya 14.5% https://www.sc.com/ke/loans/personal-loans/

The assumption in all that though is that people actually are able to get loans from banks etc. Many people wouldn't fulfil bank criteria.
Actually what is more competitive are mobile-money loans from mobile/cell operators (think Square, but not Square) at lower percentages and available to anyone with a phone (even a dumb Nokia phone, not even a smartphone).

Loan interest rates higher than 10% are not uncommon in the developing world. There's an element of currency risk vs USD contained in those rates I assume, and I don't really understand how that interacts with crypto staking etc. But I can see that for many people around the world who don't have access to the traditional banking system... being able to borrow at staking-level rates without all the hassle the banks enforce could be competitive.
I agree on this point and there are borrowers in developed economies who face similar restrictions (new immigrants etc).

It is a good insight and not one that I had had. Thank you.
In a way it appears to me a bit similar to currency/bond carry-trades between countries/currencies... People in low-interest rate countries are lending money at rates way higher than banks give them, to people in countries with even higher traditional loan rates. It's a win-win for both, but the difference vs traditional banking is the lending risk aspect is being taken care of (largely, I assume) by the blockchain/staking mechanism.

Disclaimer: I really don't know much about this, just pointing out that actual personal loan interest rates outside the developed world bear no resemblance to what most people here are probably used to.
And sorry to go astray from the OP's original theme but I find the discussion really interesting.
Yes. And the carry trade point is really interesting.

Carry trades have this way of unravelling, explosively, though. Thinking 1997/98 and Thai Property or the Argentine dollar peg in 2003, etc.

So it is really important who is bearing the risk? Who is this money being lent to, and on what conditions, that pays 8%?
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Re: For those adding Crypto as an asset class to their AA

Post by JonnyDVM »

Jags4186 wrote: Sun Apr 18, 2021 8:05 am
GR8FUL-D wrote: Fri Apr 16, 2021 3:53 pm
Jags4186 wrote: Fri Apr 16, 2021 8:30 am Well folks, that’s it, top is in. I officially have purchased 1 ETH. Get out now.
LOL That's what I said to some friends when I first started buying. Thanks for the warning nonetheless.
I would just like to follow up on my earlier post. Since my purchase:

Bitcoin: Down 10%
Etherium: Down 13%
Dogecoin: Down 26%

Can’t say I didn’t warn ya
It’s the perfect time to buy more brother
I’d trade it all for a little more | -C Montgomery Burns
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JonnyDVM
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Re: For those adding Crypto as an asset class to their AA

Post by JonnyDVM »

My favorite part about crypto is it trades 24/7 so I have something to obsess over all weekend. I bought $250 more Bitcoin at 8 this morning. Just a little taste because I could. It’s great!
I’d trade it all for a little more | -C Montgomery Burns
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

JonnyDVM wrote: Sun Apr 18, 2021 9:06 am My favorite part about crypto is it trades 24/7 so I have something to obsess over all weekend. I bought $250 more Bitcoin at 8 this morning. Just a little taste because I could. It’s great!
I've only ever funded my crypto exchange via bank transfer so there's always a delay of a day or two between when I want to buy and can buy. How do other do? You buy with debit card, on margin, or you keep fiat cash at the exchange for times like these? Just curious.....
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Re: For those adding Crypto as an asset class to their AA

Post by JonnyDVM »

Valuethinker wrote: Sun Apr 18, 2021 8:51 am
occambogle wrote: Sun Apr 18, 2021 2:49 am
Valuethinker wrote: Sat Apr 17, 2021 1:19 pm - how can something pay 8% when nothing else in the market is paying 8%? Or does that have the sort of extreme level of risk of, say, Ecuadorian bonds?
I suspect you are thinking more in developed country terms that have historically-low interest rates. I have no expertise in this matter and have not done any staking myself but how it is viable seems fairly clear to me:

https://tradingeconomics.com/india/bank-lending-rate - India 8%
https://tradingeconomics.com/kenya/bank-lending-rate - Kenya 12%
Actual personal loans are likely to be higher than those such as Kenya 14.5% https://www.sc.com/ke/loans/personal-loans/

The assumption in all that though is that people actually are able to get loans from banks etc. Many people wouldn't fulfil bank criteria.
Actually what is more competitive are mobile-money loans from mobile/cell operators (think Square, but not Square) at lower percentages and available to anyone with a phone (even a dumb Nokia phone, not even a smartphone).

Loan interest rates higher than 10% are not uncommon in the developing world. There's an element of currency risk vs USD contained in those rates I assume, and I don't really understand how that interacts with crypto staking etc. But I can see that for many people around the world who don't have access to the traditional banking system... being able to borrow at staking-level rates without all the hassle the banks enforce could be competitive.
I agree on this point and there are borrowers in developed economies who face similar restrictions (new immigrants etc).

It is a good insight and not one that I had had. Thank you.
In a way it appears to me a bit similar to currency/bond carry-trades between countries/currencies... People in low-interest rate countries are lending money at rates way higher than banks give them, to people in countries with even higher traditional loan rates. It's a win-win for both, but the difference vs traditional banking is the lending risk aspect is being taken care of (largely, I assume) by the blockchain/staking mechanism.

Disclaimer: I really don't know much about this, just pointing out that actual personal loan interest rates outside the developed world bear no resemblance to what most people here are probably used to.
And sorry to go astray from the OP's original theme but I find the discussion really interesting.
Yes. And the carry trade point is really interesting.

Carry trades have this way of unravelling, explosively, though. Thinking 1997/98 and Thai Property or the Argentine dollar peg in 2003, etc.

So it is really important who is bearing the risk? Who is this money being lent to, and on what conditions, that pays 8%?
The money is largely being lent to people using cryptocurrency as collateral to buy other cryptocurrency. Crypto is its own unique ecosystem free from any of the normal laws of economics and logic because nothing matters anymore. Why is this so hard for you guys to understand?
Last edited by JonnyDVM on Sun Apr 18, 2021 9:15 am, edited 1 time in total.
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Re: For those adding Crypto as an asset class to their AA

Post by JonnyDVM »

occambogle wrote: Sun Apr 18, 2021 9:09 am
JonnyDVM wrote: Sun Apr 18, 2021 9:06 am My favorite part about crypto is it trades 24/7 so I have something to obsess over all weekend. I bought $250 more Bitcoin at 8 this morning. Just a little taste because I could. It’s great!
I've only ever funded my crypto exchange via bank transfer so there's always a delay of a day or two between when I want to buy and can buy. How do other do? You buy with debit card, on margin, or you keep fiat cash at the exchange for times like these? Just curious.....
Dunno. I use Coinbase which is linked to my checking account. It says I can buy up to $35,000? I buy and I get an instant email that it’s added. I’m just in this for the fomo.
I’d trade it all for a little more | -C Montgomery Burns
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

Valuethinker wrote: Sun Apr 18, 2021 8:51 am Yes. And the carry trade point is really interesting.
Carry trades have this way of unravelling, explosively, though. Thinking 1997/98 and Thai Property or the Argentine dollar peg in 2003, etc.
I don't have that historical knowledge but it seems to me that if adopted in a widespread manner it would be a push towards convergence, and therefore a good reason why governments wouldn't be happy with it, and... FWIW, I am not one of those who see governments being unable to ban crypto, I do see it as a significant threat.
In a way, it reminds me of the interest rate pressures under the European Monetary Union - policies pushing countries into some kind of artificial economic harmony, but when their economics internally are actually rather different.
Valuethinker wrote: Sun Apr 18, 2021 8:51 am So it is really important who is bearing the risk? Who is this money being lent to, and on what conditions, that pays 8%?
I don't partake in staking myself, but I had thought the staking itself was some kind of escrow enforced by the blockchain, so the risk to a lender should be minimal as the lendee had locked up existing cryptocurrency that would cover potential defaults. But I could very well be wrong on that front.....
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

occambogle wrote: Sun Apr 18, 2021 9:09 am
JonnyDVM wrote: Sun Apr 18, 2021 9:06 am My favorite part about crypto is it trades 24/7 so I have something to obsess over all weekend. I bought $250 more Bitcoin at 8 this morning. Just a little taste because I could. It’s great!
I've only ever funded my crypto exchange via bank transfer so there's always a delay of a day or two between when I want to buy and can buy. How do other do? You buy with debit card, on margin, or you keep fiat cash at the exchange for times like these? Just curious.....
Sorry, I don't have an answer. I bought 1 BTC years ago and HODL. But, I can't get past your ID.

The good friar might be surprised to see one of his acolytes trying to market time crypto!
Wiki has a great translation of his most famous words: "entities should not be multiplied without necessity"
Oh, my. How many cryptocurrencies are there? What does it take to create the next one?
It's also worth noting that he was a Franciscan. I think they all take vows of poverty.
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Re: For those adding Crypto as an asset class to their AA

Post by decapod10 »

JonnyDVM wrote: Sun Apr 18, 2021 9:15 am
occambogle wrote: Sun Apr 18, 2021 9:09 am
JonnyDVM wrote: Sun Apr 18, 2021 9:06 am My favorite part about crypto is it trades 24/7 so I have something to obsess over all weekend. I bought $250 more Bitcoin at 8 this morning. Just a little taste because I could. It’s great!
I've only ever funded my crypto exchange via bank transfer so there's always a delay of a day or two between when I want to buy and can buy. How do other do? You buy with debit card, on margin, or you keep fiat cash at the exchange for times like these? Just curious.....
Dunno. I use Coinbase which is linked to my checking account. It says I can buy up to $35,000? I buy and I get an instant email that it’s added. I’m just in this for the fomo.
When you deposit to Coinbase via ACH, they front you the money before the ACH actually clears so you can trade immediately. They do not allow you to move the crypto off of your account for several days however while they wait for it to clear.
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

decapod10 wrote: Sun Apr 18, 2021 9:36 am When you deposit to Coinbase via ACH, they front you the money before the ACH actually clears so you can trade immediately. They do not allow you to move the crypto off of your account for several days however while they wait for it to clear.
Ah ok, that's nice. I'm with Kraken and they don't have ACH only bank transfers and debit cards, but cards incur 3.75% fee. It seems they do have a margin feature - that I was unaware of until now - where you can buy on margin with leverage of 2x to 5x your balance. I'm not interested in holding positions on margin, but being able to buy quicker than a bank transfer takes could be convenient to take advantage of drops like yesterday.
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Re: For those adding Crypto as an asset class to their AA

Post by decapod10 »

occambogle wrote: Sun Apr 18, 2021 9:40 am
decapod10 wrote: Sun Apr 18, 2021 9:36 am When you deposit to Coinbase via ACH, they front you the money before the ACH actually clears so you can trade immediately. They do not allow you to move the crypto off of your account for several days however while they wait for it to clear.
Ah ok, that's nice. I'm with Kraken and they don't have ACH only bank transfers and debit cards, but cards incur 3.75% fee. It seems they do have a margin feature - that I was unaware of until now - where you can buy on margin with leverage of 2x to 5x your balance. I'm not interested in holding positions on margin, but being able to buy quicker than a bank transfer takes could be convenient to take advantage of drops like yesterday.
Yeah, Coinbase is way more convenient. Make sure to use Coinbase Pro if you do open an account with them, the fees are much lower. Kraken has some options that CB does not though, so depends what you are buying.
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Re: For those adding Crypto as an asset class to their AA

Post by watchnerd »

occambogle wrote: Sun Apr 18, 2021 9:17 am FWIW, I am not one of those who see governments being unable to ban crypto, I do see it as a significant threat.
Do you mean like the ban Turkey recently announced?
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Re: For those adding Crypto as an asset class to their AA

Post by occambogle »

watchnerd wrote: Sun Apr 18, 2021 10:05 am
occambogle wrote: Sun Apr 18, 2021 9:17 am FWIW, I am not one of those who see governments being unable to ban crypto, I do see it as a significant threat.
Do you mean like the ban Turkey recently announced?
Yes, and recent moves by India and Nigeria (though debateable what those moves actually ended up as, I haven't kept track). My wording may have been unclear though - I do see regulation/banning as a significant threat to crypto. I don't limit the risk to developing countries either. Sure it is hard to ban its existence per se.... but the weak point is the crypto-fiat infrastructure such as exchanges, payments, prohibiting banks from dealing with those entities, etc etc. Maybe you can still quietly hold some but there'd be little you can do with it and that becomes a risk in itself.
That said, I still have some money in crypto and I'm hoping that the increasing institutional involvement will more likely lead to regulation and taxation by developed countries, rather than banning it entirely.
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm I would never store tokens without a hardware wallet, at least if you have over 10k USD or so.
What if I spill coffee on it? Or lose it?

What do you think of Coinbase vaults?
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Re: For those adding Crypto as an asset class to their AA

Post by Yarlonkol12 »

What about the BLOK etf?
My posts are for entertainment purposes only.
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Re: For those adding Crypto as an asset class to their AA

Post by EnjoyIt »

vanbogle59 wrote: Tue Apr 20, 2021 2:11 pm
Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm I would never store tokens without a hardware wallet, at least if you have over 10k USD or so.
What if I spill coffee on it? Or lose it?

What do you think of Coinbase vaults?
I would bet the safest place to store your Bitcoin today would be PayPal. Of course you can’t do anything with it there other than buy and sell it. But that is what most people are doing with Bitcoin anyways so why not PayPal?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: For those adding Crypto as an asset class to their AA

Post by decapod10 »

vanbogle59 wrote: Tue Apr 20, 2021 2:11 pm
Prahasaurus wrote: Fri Apr 16, 2021 11:22 pm I would never store tokens without a hardware wallet, at least if you have over 10k USD or so.
What if I spill coffee on it? Or lose it?

What do you think of Coinbase vaults?
the device is not actually the "wallet", but it is required to approve any transactions you make with your wallet. If you lose or break it, you can get a new one and reprogram it with you seed phrase. Your actual wallet is just a file on the internet essentially.
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Re: For those adding Crypto as an asset class to their AA

Post by vanbogle59 »

decapod10 wrote: Tue Apr 20, 2021 2:26 pm the device is not actually the "wallet", but it is required to approve any transactions you make with your wallet. If you lose or break it, you can get a new one and reprogram it with you seed phrase. Your actual wallet is just a file on the internet essentially.
Ah. Makes sense. TY.
What about the Coinbase "vault".
I put my 1BTC in it.
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Re: For those adding Crypto as an asset class to their AA

Post by secondopinion »

vanbogle59 wrote: Sat Apr 17, 2021 3:39 pm There is real risk (frequently unquantifiable risk IMHO) in crypto. (The paparazzi catches Elon petting a cat and $100B disappears?)

No need to invent risks that aren't there.
This could happen if Dogecoin is misunderstood as Dog-e-coin.

Solely speculation; only a speculation allocation is applicable here. I avoid cryptocurrency and prefer to hold things that actually have a true value.
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Re: For those adding Crypto as an asset class to their AA

Post by watchnerd »

secondopinion wrote: Thu Apr 22, 2021 2:09 pm

This could happen if Dogecoin is misunderstood as Dog-e-coin.
Isn't it about a doggie?

Or do you mean dodgy?
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Re: For those adding Crypto as an asset class to their AA

Post by secondopinion »

watchnerd wrote: Thu Apr 22, 2021 2:17 pm
secondopinion wrote: Thu Apr 22, 2021 2:09 pm

This could happen if Dogecoin is misunderstood as Dog-e-coin.
Isn't it about a doggie?

Or do you mean dodgy?
Doggie.
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