Crypto investment strategies

An increasing number of institutions such as PayPal, Square, Grayscale, heck even our local bank DBS, are getting into the digital assets management space amidst growing acceptance of their utility and prevalence.

Concurrently, the price of Bitcoin – the world’s largest digital asset by market capitalization – has also recently reached new highs on record government stimulus and institutional adoption.

I wrote previously about the case for crypto in your portfolio, and I see it as a centrepiece of the future digital economy where assets will be increasingly shared and tokenized on the blockchain, powered by the Internet.

The growth of the Internet will continue to power new experiences in a digital economy with no borders.

In today’s article, I will briefly share several crypto strategies that you can utilize to build and grow my digital currency portfolio. In the future, I might do a deep dive into them.

High-yielding stablecoins strategy

Let’s start with the least risky strategy; stablecoins are digital assets that are pegged to a stable asset, like the US Dollar. They come with the benefits of being stable (i.e. less volatile) unlike traditional cryptocurrencies.

A stablecoin like USDC – issued by Circle – is a digital representation of US dollars on the blockchain, and it is supported by many digital wallets, exchanges, DeFi protocols, savings, lending and payment services.

Stablecoins are increasingly being used as a medium of exchange. Global remittances and cross-border payments are a natural use case for stablecoins given their ease of international transfer.

The Rise of Stablecoins, Coinmetrics

A high-yielding stablecoin strategy works by investing into stablecoins and parking them in a lending platform like BlockFi, Nexo, or Celsius, and earn an annual yield of between 8% to 10% on your stablecoins.

For example, BlockFi offers an 8.6% APY on stablecoins like USDC, PAX and GUSD paid monthly, which means you can get up to $860 in total interest annually on a $10,000 deposit.

BlockFi interest account calculator

Alternatives like Nexo and Celsius exist too. Nexo pays interest daily while Celsius pays interest weekly.

Regardless of which platform you choose, risks exist when using depositing any asset to such platforms, and there have been cases of fraud, theft and bankruptcy, which means you might potentially lose 100% of your funds.

Higher yields do come with higher sets of risks and the space is still relatively nascent. One way to mitigate this risk is to spread your funds out across multiple platforms, but only invest what you can afford to lose.

Stablecoin-BTC growth strategy

If you can take more risks, you might want to consider an allocation to a riskier digital asset like Bitcoin (BTC) as part of your digital asset portfolio.

Bitcoin is an open-source peer-to-peer digital currency with no central authority or banks managing it. There are 21 million BTC available in the world, ever, and you can read its whitepaper here.

An 80% stablecoin-20% BTC allocation allows you to participate in some of the upside of digital assets since most cryptocurrencies have prices that are highly correlated to the price of BTC.

If you want, you can also add a third level where you diversify into other digital assets like Ethereum, but this means taking on additional levels of risks for higher levels of potential gains.

BTC-PAXG real-world hedge strategy

If you believe that the long-term value of Bitcoin will increase because of its scarcity and increased adoption, then you might see it as a digital version of gold.

Bloomberg published a report in April 2020 about its outlook on Bitcoin and it finds that Bitcoin and Gold show price convergence with endurance and its price correlation with gold has jumped the highest since 2010.

This real-world hedge strategy utilizes BTC and tokenized Gold (PAXG) to hedge against real-world currency risks in the midst of unprecedented monetary stimulus and eventual inflation.

Momentum/trend-following strategy

The trend-following strategy basically uses momentum-based indicators to protect from losses in downtrends and capture subside on the uptrends.

There are many ways to participate in such a strategy. For example, if you want to trend-follow on the price action of ETH/USD, you could manually trade on cryptocurrency exchanges based on technical indicators or use an automated bot to do so.

There’s also a tokenized version of this strategy by Set Protocol with its ETH RSI 60/40 Crossover Set which is a tokenized strategy on the Ethereum blockchain to automatically balance between ETH and USDC based on momentum indicators.

Set Protocol’s ETH RSI 60/40 crossover set 1Y performance

Implementing such a trading strategy means you can follow larger crypto trends and reduce losses when the trend turns bearish.

Venture capital altcoin YOLO strategy

The final strategy I want to touch upon is probably the riskiest strategy illustrated here but perhaps where the biggest potential gains lie.

Where I see this strategy is like you being a venture capitalist and participating in early stage projects as an investor (through the token) and speculating on its upside potential.

Since such investments are usually loss-making, you can expect to make a heavy loss on most of them. However, there will be some investments that might pay off handsomely if you get lucky or right with identifying them.

For example, Celsius Network’s CEL has risen 3671% in 1 year and Thorchain’s RUNE has risen 1700% over the same period.

Concluding thoughts

There are many opportunities in the digital asset space, which is relatively new and niche. Most people, however, don’t understand the space nor the possibilities.

The risks are far higher compared to the traditional financial system. However, higher risks usually bring about far greater upside for those who can navigate the space well.


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