How the ETH-Powered Financial Powerhouse Growing Under Our Feet is Making the Buy and HODL Strategy Obsolete
When I first go into crypto (about a year ago), there was a lot of discussion about how the safest way to "invest" in crypto currencies was to simply buy and hodl. Active trading was discouraged and there were really no easy ways to leverage crypto assets in the ways we've become accustomed to in the fiat markets.
That's all changing rapidly thanks to eth-powered financial instruments that are quietly growing in strength and prominence.
Yet, the mainstream media (and many in crypto) may not aware of what is happening.
Let me outline three recent developments that provide crypto community members with the opportunity to take their assets further — while limiting downside risk.
- Increase your ETH stack by 50%: Admittedly it took me a while (about a year) to really understand the MakerDAO project. It took this year's crytpo winter and the stablecoin dai successfully weathering the storm, staying pegged to the USD and growing in utilization across the eth ecosystem, for me to really get its power.Now that we've seen eth prices decline (the current price $115 or so, seems to be well within the buying zone) we've seen an explosion in the creation of CDPs backed by eth. In fact, the amount of eth currently being locked up in cdps each day exceeds the daily eth generated by miners.
How people are doing it: What people are doing is depositing eth and extracting dai to increase their eth exposure. While there is some risk to this strategy, it appears that many have learned their lessons from the bear market and are reducing their risk by making sure the price of eth must decline to $50-$70 or less for their CDP to be at risk of liquidation.What this is enabling people to do is leverage their eth to increase the size of their stacks by 50% or more — while carefully managing their downside risk.At current eth prices — even a modest increase in eth's price (by $50-$85) — will provide these investors with a significant ROI.
Earn interest on your crypto assets: During this bear market, some investors are keeping large stacks of dai available to either reduce their risk of cdp liquidation or take advantage of sudden eth price drops. However, this dai is just sitting idly in wallets.Now, some companies have quietly launched services that allow investors to deposit their dai (and other cryptos) and earn significant interest. One of these companies is Compound Finance, which just launched support for dai last week.In just a few short days, investors have deposited more than 448,000 dai into the Compound platform.The incentive to do this is high. Currently annual interest rates on deposited dai range between 6 and 18% (anyone getting these interest rates on fiat deposited in a bank?). The demand for dai liquidity is tremendous — especially as traders can borrow against it without worrying about market volatility (see image below — supply APR). Users' dai can be withdrawn at any time — in fact the system is geared toward short- rather than long-term deposits (and borrowing).
- Earn eth for your skills: Quietly and with little notice a number of applications are being developed that allow participants to earn eth (either directly or via unique tokenomics — exchanging tokens they earn for eth) for specific skills they have such as trading knowledge, etc.One example of where this happening is with the dapp Ethorse (successful users will soon be able to earn token rewards for consistently and successfully making short-term crypto price predictions using the dapp).Using the financial instruments listed above, these individuals can increase their earnings by either leveraging them (using cdps) or earning interest (using platforms like Compound).
The best thing about these applications and platforms is that they are all decentralized — offering users with flexibility, privacy and control.
With the current bear market, these exciting developments have been overlooked. But, it's clear that some smart crypto community members are taking time to learn about and take advantage of these opportunities. The only question is whether you'll join them.
The old strategy of buy and hodl is quickly becoming obsolete — and not a moment too soon.