Yesterday, I spent some time working on my DeFi skills. It has been a while since I have had to move HBD out. I don't have a large amount of HBD. And I would normally hesitate to cash out as you can't get a 20% return in many places. However, I just need to buy about six weeks of time for some other cash to come my way. Then I can replenish my savings. My planned route is via wrapped HBD using a Leo Bridge.
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If you have not used Leo Bridge, it is a way to convert your HIVE or HBD into a wrapped version on Binance Smart Chain or Polygon. On BSC, you get bHBD or bHIVE. On Polygon, you'll get pHBD or pHIVE. Then you can swap these for a stablecoin on Sushi. Once you are on your stablecoin of choice, you can withdraw at your preferred exchange. In this case, I can use either Coinbase or Crypto.com to access my savings.
Coinbase offers the advantage that it is set up for taxes. If I were trading or doing business with my savings, I would likely withdraw through Coinbase to report it as income. However, as this is just a transfer of savings, which I will replenish later, it is not a taxable event, the way I understand it. Rather than muddy the waters at tax time, I will withdraw the USDC via Crypto.com wallet.
All of this required refreshing my knowledge of DeFi. Something I have not tried is Aave. In future, I may use Aave for borrowing. The plan is to save up wBTC to use as collateral for personal loans. I had previously used Tectonic.finance on the Cronos blockchain for my borrowing, until I got liquidated by the bear market. I'm not against using Cronos, except that it's an extra step removed, having to bridge from Polygon to Cronos to do the same things.
I took another look at XLM, which is geared towards consumers. Using the Lobstr wallet, XLM allows users to use cash at local Moneygram locations to deposit USDC into their wallets. Unfortunately, I have not found a good bridge to go from XLM to MATIC or CRO. I'll have to come back to it later.
Of course, much of this also involved dusting off my Ledger cold wallet. I bought the Ledger with the intention of using it to store my savings. However, at this time I need to use it for DeFi. There is some comfort in knowing that I need to approve transactions from the Ledger. Of course, it doesn't protect me from Aave or Tectonic getting hacked. But I am one man and can only do so much.
During all of this rediscovery of DeFi, it occurred to me that I could combine a couple of financial shenanigans. First is the DeFi. Second is to do Core Number Compounding with my DeFi assets. I have mentioned Core Number Compounding in previous posts. In case you missed it, here's a brief explanation:
Core Number Compounding (CNC) is a strategy used in trading, particularly in the cryptocurrency market.
- Choose a Core Number: This is a specific amount of money you're willing to invest. It could be $1000, $2000, or any amount that you're comfortable with. The key is to pick a number that allows you to do quick calculations.
- Buy Crypto: You then buy a certain amount of cryptocurrency (like BTC or ETH) equivalent to your core number. The choice of cryptocurrency should be one that you believe will trend upward in the long term.
- Sell High, Buy Low: If your investment grows to more than 1% of your core number, you sell off the excess to bring it back down to your core number. If your investment drops by 4% or more, you buy more to top it back up to your core number. This way, you're always buying low and selling high.
- Adjust for Market Conditions: This strategy doesn't work well in bear markets as you'll constantly be topping up. In such cases, you might need to have cash reserves or switch to a stablecoin until the market recovers.
Remember, this strategy requires a volatile market to work effectively and it's not without risks. Always do your own research and consider your financial situation before investing.
I don't know how well all of this will work out. We have a few months to go before the next Bitcoin halving. Last time around, it was not a very exciting event. However, things picked up afterward. Personally, I'm expecting ETH to go gangster compared to BTC. Whereas BTC has a fixed number of coins to mine, ETH actually burns more coins than it creates sometimes. If I had big lump sums of money to invest, I wouldn't have to get an early start. Since I don't have big lumps of money, I have to start buying what I can afford at this time. It's in preparation for 2024.
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this just shows how DeFi gives us multiple options
True. And it runs 24/7
Yes. There have been a few instances in which I missed my opportunity to scrape off gains. But part of the value of core number compounding is the ability to walk away and check maybe once per day. It isn't necessary to catch every dip or rise.